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Supervisors approve $108.4 million budget on 3 to 1 vote

A cloud of impending doom seemed to hang over members of the Plumas County Board of Supervisors as they approved the new fiscal year 2019-20 budget of more than $106.5 million. The budget also includes another $1.9 million for special districts and other agencies for a total of $108,477,774 million.

This year’s budget increase is $9,968,136 over last year’s.

The year’s estimated shortfall is $2,945,801, according to Auditor Roberta Allen.

“I don’t like this budget,” said Supervisor Sherrie Thrall, who also served on the budget committee. “We’re literally three years away from being broke if we don’t do something.”

Three other supervisors agreed that they don’t like this year’s budget, but at the same time, some thought the budget committee led by County Administrator Gabriel Hydrick and Allen had done what they could by this point.

Hydrick assured supervisors and all of the county department heads present at the Tuesday, Sept. 17, meeting, that he’s sure a lot can be accomplished during a retreat he wants to schedule.

Hydrick is also looking to other cities and counties around California and what they are doing to cut costs as he seeks viable solutions.

In a role call vote, supervisors passed this year’s budget 3 to 1. Supervisor Jeff Engel was the lone no vote.

Budget highlights, comparisons

In comparison, for 2017-18 Plumas County’s budget was $103,934,781. This included dependent districts, Allen explained. No general fund reserves were budgeted.

“We budgeted $2.4 million of the available fund balance in 2017-18. The reserves have not been touched since 2014 when the balance was increased to the $2 million required by our GASB 54 policy,” she said.  GASB stands for Governmental Accounting Standards Board of the Financial Accounting Foundation established in 2009.

In 2018-19, the budget for all county departments and dependent districts was $98,509,638. The deficit that year was covered by available fund balance of $3.6 million, according to Allen.

Nothing is taken from reserves this year. “We are not budgeting general fund reserves,” Allen explained. “We are using $3 million of available fund balance to plug the gap. This is cash available for operations after we set aside an amount sufficient to cover two months of operating expenses,” Allen said.

Considering the anticipated shortfall for this fiscal year, Allen said that at the end of the last fiscal year, June 30, there was $7,572,226.

“We set aside enough to cover two months of general fund expenditures (not including transfers) which equals $4,559,348,” Allen explained. “The remaining fund balance is $3,012,878 and will just barely cover the shortfall of $2,945,801.”

“At this point we would need to cut the budget or dip into our set aside (also known as best practices),” Allen continued to explain.

“If no cuts were made, in roughly two years the best practices set aside would be tapped out and then we would need to cut the budget or use reserves,” Allen said.

“The reserve can only be used in the event of a bona-fide disaster, so the best practices set aside is the only safeguard against an interruption in the inflow of resources,” Allen explained about budget considerations.

And this has happened in Plumas County. “Such a situation happened during the recession 10 years ago and the general fund was barely able to cover expenses,” Allen said.

“Economists predict a downturn within the next two to three years. When that happens it is not uncommon for payments from the state to be delayed and the general fund could become responsible for funding services provided by the grant-funded departments (Social Services and Behavioral Health are two examples) until the funding resumes,” Allen said.

“At our current rate of spending the county will not have the resources to fund daily operation, let alone weather an economic downturn,”Allen concluded.

Discussion

“We are coming to the end of a kind of wrinkly bumpy little road,” Hydrick said as he began an overview of the 2019-20 budget with updates.

Budget Consultant Susan Scarlett then went over some of the budget highlights.

According to Scarlett, in considering three of the five areas under major general fund revenue sources, Use Tax was estimated at $2,110,500, but was at $2,051,024 as of June 30.

Anticipated Use Tax was down from 2018’s $2,278,178 actual amount received. In 2017, the actual amount was $2,047,067. By the end of the 2020 budget another $59,476 should become available.

Transient Occupancy Tax, better known as TOT, was also down. It was anticipated that the county would receive $1.5 million, but in reality received $1,441,899. In 2018 the county anticipated receiving $1,450,000 but revenues were up at $1,517,871. The previous fiscal year it was anticipated the county would get $1,350,000 and it was up by $98,117. The budget committee is hopeful that the fully anticipated amount of $1.5 million will be realized.

And considering one other area, property taxes, Plumas County anticipated $8.6 million and actually received $8,912,261. That amount is up from what was actually received in 2018-19, which was $8,471,731. The actual amount was also up in fiscal year 2017-18 by $394,602. The budget committee believes this amount will increase to $9,268,000.

In looking at totals for the major general fund revenue, as of June 30 the county received $15,917,653. By the end of the 2020 budget year, an anticipated $16,516,109 should be realized.

Looking at contributions for fiscal year 2019-20, the original amount is $9,267,036, with $712,306 in increased requests, totaling $9,979,342 for the year.

Last year’s contingency fund began at $250,000 and $226,000 was used during the year. This year’s contingency fund is again at $250,000 and no requests have been made to date.

Scarlett said that supervisors requested a complete list of all departments or programs within the initial budget shortfall, “So here they are.”

Scarlett’s budget shortfall covered two pages and ended up on a third page containing budgetary facts and figures. She also provided details on the fund balance going back to 2012-13.

Looking at Scarlett’s information, Hydrick said that in assessing the numbers he was looking to see if a trend is continuing. “And I see that it is,” he said. He added that there are tough decisions for next year to minimize costs.

Supervisor Lori Simpson said she was on the board in 2013-14 when the county had to implement furloughs for employees. At that time, the county didn’t have any reserves, she remembered, and furloughs were a way supervisors hoped to cut financial corners.

And did the furloughs work? From the audience, Allen said they didn’t work.

Following the meeting, Allen explained why furloughs didn’t work. “The general fund is reimbursed from the non-general fund departments through the cost allocation plan,” she said.

“The general fund is made up of central service departments, which provide services to the other county departments,” Allen said. For example, the auditor, treasure, human resources and a wide variety of other departments, now including the new county administrator, all provide services to other county departments.

“When the salaries and benefits for these service departments is reduced, fewer costs are allocated out to the non-general fund departments,” Allen explained. “The result is that the general fund saves money in the current year, but two years from now when the cost plan allocation is done, the general fund has less reimbursement from the other departments.”

Simpson also turned to the rest of the board and included other members of the budget committee asking if there were any solutions?

One suggestion is to eliminate all unfilled positions. But then that’s a tough decision because so many of the positions are vital.

Thrall referred to a list of department-to-department salaries and benefits that were provided to the board. She too mentioned eliminating unfilled positions, “but that doesn’t work, although it looks good on the budget,” Thrall said.

What the budget committee tried to do is “come as close as we could to a balanced budget without being draconian.”

After stating that she didn’t like the budget, Thrall said, “It’s not a good position to wake up at 3 in the morning and say ‘Oh my God!’”

That’s when Hydrick said he was counting on a retreat when supervisors, the auditor and himself could look at options and make a decision on those options for the next year. (Hydrick didn’t mean that they would vote during the retreat.)

This year, Hydrick said he is examining everything. He’s even tackling leases. He knows that some of them haven’t been updated.

Allen said that $1.4 million is now in the budget for unspent wages and benefits. She said it isn’t something where she can just look at the numbers “and say, ‘oh this is bad.’” She said she has to take a look at what’s really going on.

Allen was also able to explain the $1.4 million. For the 2018-19 fiscal year budget, the unspent wages and benefits totaled $1.4 million for the general fund. This amount represented the unfilled positions.

“These unfilled positions must be included in the general fund budget even though they will most likely not be filled by the year end. However the county cannot arbitrarily decide to eliminate these positions because there are many different reasons that positions are not filled,” Allen explained following the budget meeting.

In order to consider eliminating a position, Allen said that each department must be evaluated independently before a decision is reached. “If staffing is below adequate levels, the quality of services will be affected,” she said.

Allen also pointed out that there is $1.6 million in the non-general fund. “The non-general funds had unspent salaries and benefits of $1.6 million, but there are various reasons why this happens. It can sometimes take a year or more to fill a position, depending on the position,” she added.

  “I’m anxious to see how it comes out in the new year.” She added that what supervisors were looking at was the cushion and she was hoping it didn’t get spent. “We won’t have that comfort zone next year.”

Allen explained that many of the vacancies county departments saw, have been filled. “So we expect there to be less unspent budget next year.”

Allen further explained that what she meant earlier was that the county budgeted every available general fund dollar each year (after the reserve and best practices amount had been set aside).”

If the county went ahead and spent exactly what was budgeted, the fund balance would have been spent in a few years.

“The fund balance has been healthy in part because there was more budgeted than was spent,” Allen said. “And there were few windfalls over the past couple of years such as the unexpected $1.3 million in PILT that was received in 2018-19.” PILT is California’s Payment-In-Lieu-of-Taxes program. This was set up in 1949 to help offset impact to a county’s property tax revenues when the state acquires private property for wildlife management areas.

“We cannot balance the budget on unspent wages, but it does create a cushion,” Allen further explained. However, if departments are successful in their recruiting, the comfort zone will not be as large by the end of this current fiscal year.

As discussion continued, Allen also pointed out that the county’s larger departments were now spending their own reserves. That hasn’t happened in the past.

Hydrick also touched on the “cost of doing business,” and what is necessary. He is looking for ways to address those costs.

He said that they also needed to consider how younger generations are viewing jobs. Most aren’t looking at retirement, but at the same time Hydrick believes there needs to be incentives that attract and retain people.

And in considering ways to attract people who want to stay here, Hydrick said that Plumas County is often a stepping-stone. People start here, gain some experience and move on.

Supervisor Jeff Engel, often known as the lone no vote on many requests, was encouraged to share his views.

Engel said that he looks at the budget all year long. “I’ve been the ‘no’ man up here for a reason,” he said. And that’s because he sees what’s coming, he added.

Engel said he owned and operated a successful business for 40 years. What he’s learned is that the board can’t make commitments without the money to back it up. One of the examples he indicated from the past year is when the board of supervisors approved $100,000 for a special cannabis task enforce. “It’s all those little ‘yeses,’” he said.

But Simpson sees it differently, she said. “They put it all back into the community,” she said about the wages people are paid. She doesn’t see that as wasted money.

Engel also stands firm on Plumas County’s longstanding notion that people will come here to live because of the environment. “People want to get out of these cities,” he said. “This is a great place to live. I’ve been here my whole life.”

And considering his many no votes, Engel said, “I didn’t run for this job to win a popularity contest.”

Although the board of supervisors offered a public comment period for the budget hearing, no one spoke.

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