That was the news from county Chief Administrative Officer Kelly Cox at a Lucerne community town hall meeting on Saturday.
This Tuesday, Cox – widely respected for his budgeting acumen – will present the midyear budget review to the Board of Supervisors. The item is an untimed discussion.
In a short “state of Lake County update” on Saturday, Cox explained that the county is going to need to make some adjustments to its $201 million budget to address revenue declines in some areas.
Nevertheless, Cox estimated that the county will still be able to beef up its contingencies by more than $800,000, which will act as a cushion for the coming budget year.
He estimated that it may take several years for the economy to recover, but in the mean time he's especially concerned about what's happening with the state government.
“Talk about not having a structurally balanced budget,” he said.
California's government, he said, “is in a state of absolute chaos” because of its budgeting mess.
That, Cox said, could soon hit counties like Lake in devastating fashion if some state budgeting proposals are accepted.
The county must help fund many state-mandated programs, Cox explained. In tough financial times like these, “We're left holding the bag.”
But, there are bigger problems on the horizon. “I can't handle some of the things that may be coming our way,” he said.
The state is considering withholding payments to counties for seven months – the original proposal was for eight – in support of mental and health services, and roads and transportation, he explained.
Cox said despite the fact that the county has an enviable reserve – which it has built up through careful financial management – there's no way the county could cover just mental health, much less the rest of those financial responsibilities the state wants to pass along.
That, in turn, could force the county to go out and borrow money, something the state can no longer do. It's also something Cox said the county hasn't done in the 30 years he's worked for local government.
The proposal to withhold the funds “is seriously being discussed,” Cox said. “If that happens, all bets are off for our budget.”
The county has chosen not to borrow money because having debt service doesn't serve local taxpayers, said Cox. But if the state withholds the money, he said he doesn't know what choice the county will have.
“Everything is wrong in Sacramento,” Cox said.
He went so far as to suggest that the state should throw out its current constitution and start over to create a new one that offers a better working framework for counties and the state government. “You couldn't dream up a worse way to do it.”
Cox also is concerned that the state may try to go after the county's reserve funds, saying just about anything could happen.
“These are the kinds of things that keep me awake at night,” he said.
But Cox promised that the county's government is going to do everything it can to keep things straightened out and operating responsibly here at home.
Supervisor Denise Rushing echoed Cox's concerns and frustrations Saturday.
“We in the county have been willing to put up with potholes in our roads to keep a structurally balanced budget,” she told Lake County News.
It would be a real shame, she added, if the state penalized responsible counties like Lake for the poor management and performance of other government entities.
She added, “Kelly Cox could balance the state budget.”
Advocacy group sounds the alarm
Cox's fears about the state withholding payments appears to be well-founded.
The California State Association of Counties (CSAC) sent out a letter to county leaders around the state in mid-January, citing State Controller John Chiang's Jan. 16 announcement that he would withhold payments of state obligations beginning Feb. 1 due to cash shortages.
Chiang's office stated that he initially will stop payments for 30 days.
CSAC's January alert said the withheld payments will impact Social Security, CalWORKS, mental health and social services, alcohol and drug programs, drug court funding, and, as Cox mentioned, funding for county administration of social services programs, Medi-Cal and mental health programs, and gas tax subventions.
Paul McIntosh, CSAC's executive director, estimated in the January letter that the payment deferrals could cost counties across the state between $3 billion and $4 million.
CSAC also is concerned about the further impact of the seven-month payment deferrals.
Midyear budget review shows declining revenue
Cox's midyear budget review report to the Board of Supervisors notes that several county departments are noting shortfall revenues, requiring adjustments to keep the budget balanced.
Those adjustments also will allow approximately $877,988 to be added to the county's contingencies budget, which will then total more than $2.8 million.
“These adjustments, along with the ability to maintain a healthy general fund reserve, will assist in preparing us for some of the financial challenges that lie ahead,” Cox states in the report.
Looking ahead, Cox estimates that next year's budget reductions will be impacted by the state's finances.
At the midyear point, Cox said the “single most significant revenue shortfall” is the county's investment earnings, due to a significant decline in interest rates. The final budget has estimated $1.5 million in revenue earnings, but will realize less than half that amount. The state also is requiring the county's redevelopment agency to pay more than $157,000 to a state fund.
County departments that generate revenue from construction and land use permits are still seeing big declines as they did last year, said Cox, with declines ranging from 14 to 43 percent.
The Building and Safety Division, which has a $34,000 revenue shortfall, is facing one layoff, according to the report.
So far, however, there are no other layoffs planned in other departments, unlike the massive layoffs and furloughs that have been reported in cities and counties across the state.
E-mail Elizabeth Larson at
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