Supervisor: County Needs a 'Culture of Savings' to Rectify Budget Deficit

• By PAUL J. YOUNG, City News Service:

RIVERSIDE, CA - Riverside County government needs a cultural change to make saving money paramount, a supervisor said Monday, as the county approaches a new fiscal year grappling with the same long-term structural budget deficit.

"I would argue that a culture of savings has to start sooner rather than later," Supervisor Kevin Jeffries said during the Board of Supervisors' first hearing on the 2016-17 budget. "When I hear about requests for additional funding, I have to wonder, 'Are we really serious about this?"'

County Chief Financial Officer Paul McDonnell presented a summary assessment of the county's position in the last quarter of the current fiscal year, indicating several agencies remain in the red and that at least 15 departments are seeking funding commitments in 2016-17 that exceed their baseline funding levels in 2015-16.

"We'll be rolling over existing spending levels with limited exceptions," McDonnell told the board. "We need to control our headcount. There's a lot of work to do in this arena. Departments want flexibility with respect to hiring. But we're going to have to ... come up with a regime of control to meet the mission, while at the same time keep spending under control."

County CEO Jay Orr said a soft hiring freeze was implemented for the weeks remaining in 2015-16, during which agencies are prohibited from adding new employees "unless they have firm, ongoing departmental revenue sources" to meet payroll.

According to McDonnell, the county has 7,400 vacant positions, which appear on the county's books but do not require appropriations until they're filled, exposing the county to potentially higher wage and benefits obligations during the year. Board Chairman John Benoit suggested the time had come for the Department of Human Resources to begin disestablishing those jobs.

McDonnell underscored the importance of capping spending, or the county's "reserves will fall through the floor" in the next few years.

"Where we need to find savings is in the public safety arena," the CFO said. "I'm not saying we shouldn't look at other county operations, but the big dollars are in public safety."

Public safety agencies consume two-thirds of discretionary revenue.

The Riverside County Sheriff's Department's previously estimated $65 million shortfall -- a product of labor costs -- was whittled down to $25 million, and the board voted Monday to plug that hole. However, the supervisors did not cover the lingering $5 million budget gap in the District Attorney's Office, which will be addressed again during the next budget hearing on June 20.

Agencies' requests for boosts in discretionary funding in 2016-17 totaled $159 million above 2015-16 thresholds, but McDonnell said Monday that unrealistic figure had been chopped considerably. He said a sum closer to what the county might be able to afford is $50 million.

Sheriff Stan Sniff is asking for $51.5 million in additional discretionary revenue for 2016-17. District Attorney Mike Hestrin is seeking the next-highest amount -- $18.9 million over the current fiscal year's target allocation. Department of Public Social Services Director Susan Susan von Zabern wants $11.2 million more, and Riverside University Medical Center Director Zareh Sarrafian has requested another $10 million.

Officials in the Economic Development Agency, Department of Animal Services, the Office of the Public Defender and other agencies are seeking smaller amounts.

In February, the Executive Office projected a $100 million budget deficit in 2016-17 as a result of structural deficits in several departments and an estimated $40 million in new spending obligations to address mental and physical health needs of inmates in the county's five detention facilities.

The encumbrance stems from a legal settlement last year with a San Francisco-based prisoner advocacy law firm that went after counties throughout California over alleged failures to meet detainees' health needs.

Supervisor Chuck Washington urged caution, saying the "long-run goal should be to contain costs and build a better model going forward that is sustainable."

"We need the staff that's necessary for the services we provide," he said.

Jeffries insisted the county could elevate its revenue base through a combination of streamlining and cost-cutting. He reiterated the need for a smoother permitting process, which is causing business interests to "pull their hair out" in frustration. He also could not understand why the EDA's real estate and parking services divisions were losing money.

"If we don't start cutting now, then when?" the supervisor wondered. "I'm not saying we need severe, grotesque elimination of departments. But when does the culture of saving actually begin?"

Supervisor John Tavalgione opined that "we're still pulling ourselves out of the (financial) hole" that cut reserves 75 percent during the Great Recession. However, he said he felt confident the county was on the right path, citing the recent financial turnaround at the Riverside University Medical Center.

Supervisor Marion Ashley was dead-set against drawing down reserves, which currently total $201 million, to close budget gaps.

In February, he put forward a multi-point plan for keeping reserves intact by implementing tactical cuts and efficiencies. The full board supported the concept and two months later entered into a two-year contract with Netherlands-based KPMG to aid public safety agencies in enacting money-saving reforms spotlighted in an audit conducted by the firm.