Despite years of belt-tightening that have resulted in consecutive balanced budgets, rising costs and sluggish revenue threaten to send the county back into multi-million-dollar deficits over the next few years, according to a budget forecast.
County budget officials are set to deliver a three-year budget forecast to the Board of Supervisor on Tuesday warning that increased spending on everything from filling vacant positions to rising retirement costs and health insurance premiums under the Affordable Care Act could result in a deficit of more than $8million by 2015-16.
The report states the county spent four years chopping its spending, reducing its overall budget from about $1.1billion and 4,848 full-time positions in 2008-09 to $939million and 4,515 workers this fiscal year. Those cuts — combined with employee concessions, including an agreement to pay a portion of pension benefit costs — managed to avoid layoffs and resulted in the county becoming "a more lean, cost-effective service provider," according to the report.
As a result, the county managed its first structural balanced budget in 2011-12, and is projected to finish the current year with a surplus of nearly $1million.
However, the forecast suggested that spending could begin to outpace revenue by about $3.8million starting next fiscal year, when general fund expenditures are projected to grow by $11.6million, or about 2.4percent. Meanwhile, the forecast predicted general fund revenues
Major cost drivers
The forecast outlined major cost drivers that could send the county back into deficit, including:
· Plans to fill nearly half the 267 vacancies in various departments at a cost of up to $10million. The report acknowledged that county departments are facing "increased pressures" to fill vacant positions after years of budget cuts and growing service demands. Some of the increased spending could be offset by reimbursement from state and federal government sources.
· Projected increases in pension costs of $1.9million next year and $3.1million the following year, based on both filling vacancies and rising CalPERS rates. While the county's share of pension costs has actually fallen due to employees agreeing to pay a portion and a reduction in staffing levels, the costs are expected to start rising again starting in 2013-14, the report said.
· An expected increase in the county's employee health care premium costs starting in 2014 with the major implementation of the Affordable Care Act. The budget forecast cited an August 2012 California HealthCare Foundation report that predicted health care spending would increase by $2trillion nationally from 2014-20, contrary to claims that the legislation would cut costs, and health insurance premiums would rise an average of 6.2percent per year starting next year. If the county's premiums rise by a more conservative 5.6percent rate per year — the average annual increase from 2000-10 — it would cost the county an additional $6.2million by 2015-16.
According to the report, eight county departments can expect to face deficits of at least $1million by 2015-16, led by the Sheriff Office's projected $4.78million shortfall. Other departments in that category include Probation ($1.67million), the Resource Management Agency ($1.6million), Social Services ($1.58million), District Attorney ($1.46million), Human Resources ($1.35million), Public Defender ($1.2million), and Elections ($1.02million).
The forecast, which does not predict future impacts of state or federal budgets or the county board's own potential budget policies, will be used go help build the county's 2013-14 budget. County budget hearings are set for early June.
Jim Johnson can be reached at firstname.lastname@example.org or 753-6753.