LAKEPORT – The Board of Supervisors voted Tuesday to approve the county's $185 million preliminary 2010-11 budget, which the county's chief administrative officer designed to avoid laying off employees while remaining balanced in the challenging economic times.
However, Tuesday's budget vote wasn't unanimous. Supervisor Anthony Farrington voted against the budget, citing what he called philosophical disagreements with County Administrative Officer Kelly Cox's proposal to keep staff cuts at bay with a three-year plan for borrowing from one-time funds.
Cox, who has produced budgets that have resulted in Lake County being one of only two of the state's 58 counties to remain without a deficit, said his one-time fund borrowing proposal was short-term, and could be reevaluated at any time.
Farrington said he didn't want to delay the inevitable, pointing to the fact that the county's number of employees in the proposed budget is 930, the same as last year.
Cox said some positions were cut while others were added in the Social Services Department, with those new positions being grant-funded. The number of employees funded by the general fund is less this year, Cox added.
The proposed budget is $185,051,534, down from this year's $194.3 million budget and down by $16 million from the $201 million 2008-09 budget, the county's largest ever, which Cox previously said was a function of numerous one-time county projects being included in that year's budget. The general fund this year would total $50.8 million.
The final document is expected to be formally adopted Sept. 8 following public hearings, Cox told the board.
However, the county is required by law to approve the document before June 30. That allows the county to continue conducting business between July 1, the official beginning of the fiscal year, and the formal adoption date in September. He said the budget can be adopted no later than Oct. 2 by law.
Cox pointed out that the country and the state's continuing financial crisis have resulted in “extraordinary difficulties” for local governments like Lake's.
To give context to the situation, Cox read headlines about county budgets around the state, where thousands of government jobs are being cut or furloughs implemented, along with deep service cuts.
Riverside County alone is looking at cutting $68 million, Santa Barbara County is considering closing the Santa Maria jail, Mendocino County has approved 10-percent department cuts and a shelter closure, and Sonoma County is to cut 177 jobs, according to the headlines he shared.
Cox said discretionary revenues such as property tax, sales tax, transient occupancy tax and property transfer taxes have been declining while, at the same time, public service demands have continued to increase.
“This presents a budgetary challenge to all local governments but it is a challenge that our county is prepared to effectively address,” he said.
The new budget would see the general fund remaining debt-free, Cox said.
Several significant unknowns remain, from the shape of the state budget for the coming fiscal year to not having the current budget year's final fund balance carryovers until after July 1, he said.
Potentially more significant, said Cox, is that the property tax roll values for the coming fiscal year isn't known, although he's projecting a 5-percent decline based on county Assessor Doug Wacker's current projections.
Cox said all of those factors could require that the county's budget undergo significant modifications before its September adoption.
He said the county's unemployment and foreclosure rates remain high. To prepare for the challenges ahead, Cox said the county has eliminated unfilled positions and reduced other expenses. At the same time, they're working to preserve the county's reserve while avoiding negative impacts to employees through layoffs and furloughs.
While the county has traditionally used one-time revenues for one-time purposes, Cox proposed a short-term departure from that course in order to bridge a projected funding gap and to maintain critical services during the economic downturn.
In past years the funds were set aside in reserves and contingencies to create a “rainy day” fund, Cox said.
“That rainy day is here,” he added.
With that proposal, Cox presented a three-year plan to phase out use of those one-time funds for anything other than one-time uses.
He said he didn't believe it was advisable to count on an economic recovery earlier than three years from now. If an economic recovery starts earlier, the funds can be retained for the future.
Cox said the 2010-11 budget proposes $1.5 million in one-time funding to finance the current year’s general fund with another $1 million in the reserve for economic uncertainties to be used in fiscal year 2011-12 and $500,000 to be used in fiscal year 2012-13. The funds to be used were set aside in past years for contingencies or special projects that, for various reasons, didn't move forward.
Cox said the county also has created an “at risk” designation for the county's position allocation list, which is meant to encourage employees to look for other job opportunities and to flag department heads about positions that, if they become open, will not be filled.
The county has a solid financial condition that enables it to use a phased approach to workforce reductions, Cox said. He suggested that course is more appropriate than implementing large layoffs.
“The county has gone to extraordinary efforts to recruit highly qualified employees in recent years and should make every reasonable effort to retain those employees during this temporary economic downturn and until such time that the economy recovers and ongoing revenues are again sufficient to fully support our ongoing operational expenses,” he said.
He pointed to the most recent report from state Controller John Chiang that showed the state's revenues in May rose above the governor's May revision estimates by 9.8 percent. Personal income tax also is up, sales tax is showing an increase, foreclosures are down 40 percent and cigarette sales have risen.
Cox said the county and its redevelopment agency have taken aggressive actions to stimulate the economy and support private investment.
Several important projects are moving forward in the budget, Cox said, including the new library and senior center in Middletown, hiking trails opening up on Mt. Konocti, significant capital improvements planned for the county’s water and wastewater systems, numerous county road improvement projects and the newly created Water Resources Department, which will support one of the county's highest priorities – protecting and managing Clear Lake and county water resources in general.
“With every challenge, comes an opportunity,” said Cox, explaining that the county is reexamining how it does business to find greater efficiencies and serve the community more effectively, as well as assist with creating locally owned and operated small businesses, which create jobs.
He said the county has lived within its means for many years and “during times of economic recession we can be particularly thankful for having done so.”
Cox briefly summed up changes in funding sources, noting that federal funds into the county's budget have grown from 16 percent in the current budget year to 20 percent in the proposed budget, thanks to stimulus funding.
A chart he presented showed that the largest 2010-11 appropriations were for social services, 25 percent; criminal justice, 21 percent; public works, roads, airport and flood, 14 percent; water, sewer and lighting, and health services, both at 9 percent.
A second chart showed that the county's largest revenue sources included the state, 28 percent; federal government, 20 percent; fund balances and reserves, and taxes, both at 15 percent.
Pessimism about plan to bridge gap
Farrington said he was pessimistic about Cox's plan, believing layoffs were going to be needed, and wondering if the county would be able to phase out the spending if the economy didn't recover.
Cox said those concerns are always there. If the board didn't want to follow the borrowing plan, $1.5 million needed to be cut from the general fund, which meant layoffs, he said.
“I think that would be the worst possible thing to do,” with further negative impacts on the economy likely, said Cox.
The borrowing phaseout plan allows the board to make adjustments. “I think this is a very responsible budget,” Cox said, asking why they would want to do layoffs if they had the money to avoid doing so.
Farrington asked if the budget takes into account the expected restoration of geothermal royalties. Cox said his office has been in contact with Congressman Mike Thompson, who anticipates legislation giving funds back to the county will soon be passed.
However, “It's going to be up for grabs again after Oct. 1,” Cox said.
Supervisor Denise Rushing said she appreciated the new “at risk” category for employees. She also was concerned about having to make those employee cuts.
“The budget's a living document, you're going to have to keep looking at it and making adjustments,” said Cox.
Regarding county investments, Rushing said she hoped they were in funds that did not include British Petroleum. She said it might be worthwhile to consider local investments, an idea that Farrington said was good “out-of-the-box thinking.”
Supervisor Jeff Smith said he also was reluctant about using the one-time funds, and asked how much money the county saved in the 1990s when it went to four-day work weeks.
“I would never recommend doing that again,” said Cox, who noted that practice was stopped about a month after it started.
Cox said that, following a recent marketing workshop on Cobb, he felt that now more than ever it was important to promote the county, so he put more one-time funds into an advertising and promotional campaign.
In response to Farrington's urging that layoffs start being considered right away, Cox said if the county lays off employees, it won't necessarily see a savings, because it will have to pay unemployment benefits for an extended period of time.
Rushing said of the budget and the way it seeks to hold things together during tough times, “There's a real genius in the way this has been set up.”
She admitted it's an “uncomfortable step” for the board to consider using the one-time revenues for operations. Farrington compared it to using a credit card.
“As tough as this is, I think it's a good plan,” said Supervisor Rob Brown.
Brown jokingly suggested that the board should refrain from using words like “wisdom” and “genius” in describing Cox's budget. “He already can't wear a hat,” Brown quipped.
The board also quickly reviewed a list of fixed asset requests, deciding against a paint striping truck for the Department of Public works for the time being.
Brown also would congratulate Cox for his work on the budget, noting, “A lot of jobs are going to be saved as a result of this.”
Farrington wasn't convinced. “We're putting off the inevitable,” he said, pointing out that layoffs had been discussed last year.
Although he felt the budget was solid, he said the board needed to make employee cut decisions now.
Rushing said they may have to do that still. “We've been given the plan to do that and I feel it's a solid plan,” she said, moving to approve the budget document.
The board approved the budget 4-1, with Farrington voting no. Supervisors then voted unanimously on a second request for fixed asset purchases and the filling of new positions.
The board also passed a resolution approving the Lake County Air Quality Management District's budget and heard a report from the Lake County Winegrape Commission regarding successful marketing outreach over the past year.
E-mail Elizabeth Larson at This email address is being protected from spambots. You need JavaScript enabled to view it. . Follow Lake County News on Twitter at http://twitter.com/LakeCoNews and on Facebook at http://www.facebook.com/pages/Lake-County-News/143156775604?ref=mf .
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