After hearing the annual mid-year budget review at its Tuesday meeting, the Board of Supervisors decided that a combination of spending cuts and low-cost, long-term investments was the best approach to balancing the county's books.
Before the board voted unanimously to approve the list of staff recommendations to balance the budget by the 2015-2016 fiscal year, 3rd District Supervisor Mark Lovelace said that the county must look to future savings.
”Recovery isn't going to be a matter of getting back to where we were, it's going to be figuring out what the new normal is,” Lovelace said. “We're looking at long-term issues. We're not looking at getting by year to year and hoping that next year is going to magically be better.”
County expenditures for this fiscal year are currently exceeding revenues by $2.9 million and will reach $3.6 million for the 2014-2015 fiscal year, should the county take no action, according to County Administrative Officer Phillip Smith-Hanes.
While the county will have to reduce expenditures across several departments, Smith-Hanes said that it should also set aside funding for department requests that have short-term costs and yield long-term savings.
Smith-Hanes said that while it would be “far easier” to put this money toward the deficit, he added that it would be “more valuable in the long run that we make some targeted investments ... to developing a capacity for long-term savings.
”We have a financial imbalance for (the 2014-2015 fiscal year), but it's not what I'd determine to be a crisis point,” he said. “We have an opportunity to do things right and position ourselves in the long-term, rather than just reacting in the way that we have in the past.”
Some of the short-term investments include upgrading accounting software and county-owned infrastructure to allow for increased efficiency.
”We're trying to align some of those structures with an existing culture of cooperation,” Smith-Hanes said.
To determine the feasibility of the improvements, the board voted to form a debt capacity ad hoc committee made up of the current budget subcommittee members, including Lovelace and 2nd District Supervisor Estelle Fennell.
According to the mid-year budget report, the county has $250 million in deferred maintenance to its infrastructure.
Along with redistributing and refunding money from county funds to various departments to offset costs, the board also approved the recommendation to lower the county's self-insured retention limit from $500,000 to $100,000 for its general liability insurance. Smith-Hanes explained to the board that having a smaller limit would be better suited for the county due to the fact that its liability fund has had a negative balance for the last three years due to consistent litigation losses.
”Self-insured retention is like the deductible on your car insurance,” Smith-Hanes said. “Having that higher self-insured retention results in a lower annual premium, but also results in more risk exposure.”
Fifth District Supervisor Ryan Sundberg said that reducing the limit and paying a higher premium would likely be much less costly to the county, as it would shift more of the risk to the insurance company.
”When you bring it down to $100,000, you start to shrink the risk,” Sundberg said.
Along with investments, the board also approved several recommendations for finding ways to reduce expenditures.
Fennell said that allowing the county department heads to determine where the cuts should be made would be more beneficial than an overall cut.
”The idea of the departments all working together and coming up with a proactive solutions is really attractive to me,” Fennell said. “The across-the-board cut just doesn't work in terms of the needs of various departments.”
While expenditures for the 2014-2015 fiscal year would still be $1.6 million over county revenues, if the cuts were implemented, Smith-Hanes said it allow the county the chance to get the budget “completely into balance” by the 2015-2016 fiscal year.
The board also voted to continue to leave 12 county positions vacant, which would have opened back up in June. The positions were vacated in 2011 as part of the Voluntary Separation Incentive Program, which rewarded employees who voluntarily left their positions in order to minimize layoffs.
”I think it would be an extremely dangerous precedent for this board to set to start funding positions at mid-year,” Smith-Hanes said during the meeting. “I think that you would be opening up a a can of worms if you start doing that twice a year, instead of once.”
Though she and the other board members sympathized that the departments have already undergone extensive cuts, Fennell said she agreed with Smith-Hanes.
”We're all dealing with unforeseen consequences,” Fennell said. “It's a sign of the times that we have to really say no to a lot of people at this point.”