The Placer County Board of Supervisors bolstered county budget reserves by more than $5.5 million last week, gaining more flexibility in dealing with state budget impacts and potential revenue fluctuations during the 2011-12 fiscal year.
The decision to increase county reserve funds was made during budget workshops held Aug. 18-19. The workshops set the stage for the board to hold a public hearing on the proposed 2011-12 budget Sept. 13 and to adopt a final budget Sept. 27.
Last week’s actions were in keeping with the board’s long-standing approach of preserving the county’s core services and fiscal stability while setting aside money for costs that arise after the fiscal year begins. The board’s approach is a key reason Placer County is better shape financially than most counties and cities in California.
Some of the more than $5.5 million set aside during the workshops may be needed to help deal with two impacts from the state budget signed by Gov. Jerry Brown June 30:
A potential revenue gap of at least $1.7 million created by a new state realignment program that will shift responsibility for many adult parolees and criminal offenders from the state to counties beginning this fall.
$1 million in extra costs Placer County will face if state revenue falls below projections.
The state’s 2011-12 budget contains two tiers of cuts that will automatically go into effect next Jan. 1 if state revenue falls below specified trigger points. Placer County estimates its costs will increase about $1 million if the tier-one cuts go into effect.
The board approved a plan proposed by Supervisor Kirk Uhler to put most of the more than $5.5 million into the county’s General Fund reserve, rather than set up separate reserve accounts to deal with expected state budget impacts.
“We know it’s there,” he explained. “If we need it for the realignment costs associated with public protection, we can draw it down at that point.”
At Friday’s workshop, the board also approved a variety of final budget adjustments with a total General Fund savings of over $1 million.
During the workshops, Graham Knaus, Finance and Budget Operations Manager, emphasized the county remains financially strong because of the board’s early and continued efforts to control costs while focusing on preserving the county’s core services. Actions approved by the board over the last few years in response to the state budget crisis and economic slowdown include having a hiring freeze in place since 2007; having employees pay larger shares of their pension and health insurance costs; and creating a two-tier retirement system that will scale back benefits to new employees, but help ensure that benefit costs are sustainable in the future.
The budget workshops also highlighted that the 2011-12 budget will maintain critical operations and services, maximize savings where possible, and continue planned infrastructure projects.
During the workshops, board members learned the county ended the 2010-11 fiscal year with a fund balance of $32 million, $5 million more than the county conservatively assumed in the interim spending plan adopted in June. The larger-than-anticipated fund balance was carried over to the new fiscal year that began July 1 and was a critical factor behind the board’s ability to set aside more money in reserve funds.
The size of the fund balance largely resulted from the hiring freeze, the decision to have employees pay a larger share of health insurance costs and long-standing board policies to budget conservatively to ensure short-term and long-term sustainability of service levels.
At the Aug. 18 workshop, board members reviewed a chart that shows counties with larger fund balances tend to have fewer layoffs. The chart looked at Placer County and seven other counties in Northern California.
Since 2007, Placer County has laid off 19 employees, which is equal to just 0.7 percent of its workforce, far lower than other comparable cities and counties in the region. Most of Placer County’s layoffs have been due to reduced workloads or insufficient state funding.
Placer County develops its budget in two phases each fiscal year.
On June 7, the board adopted a $720 million proposed budget so the county had a spending plan in place when the 2011-12 fiscal year began July 1. The proposed budget is down 4.9 percent from the county’s final 2010-11 budget because of revenue losses caused by the economic slowdown and state budget crisis.
The two-phase approach allows Placer County to wait until September to adopt a final budget that includes updated revenue and expenditure estimates.
Placer County learned recently that property tax rolls are down less than anticipated, meaning that property tax revenue will be approximately $1.8 million higher than projected in the proposed budget adopted in June.