Financial Summary

The Proposed 2022-23 Budget incorporates the Board’s priorities for the coming year based on the adopted Strategic Plan and the two-year Operational Plan. This budget also continues the strong and prudent financial practices that have allowed the County to achieve our AAA bond rating and maintain minimum level of budget reserves to help assure the continuity of public services during economic downturns.

General Fund Forecast

Developing a forecast serves two purposes: (a) assessing the medium-term financial sustainability of the County’s services and (b) understanding the impact of today’s decisions on the future. The County forecast of net discretionary resources in Chart C shows estimated expenses outpacing estimated net remaining revenues over the next five years ending at $9.7 million in FY 2025-26. This assumes existing levels of staffing and services but before factoring in the risk of an economic slowdown, required investments in aging county facilities, or response to climate change-related hazards or other emergency events.

Although revenue growth is projected to increase and has returned to pre-pandemic levels, it is not increasing at the pace of expenses, especially salaries and benefits (See below for further discussion of specific revenues and expenses).

Net discretionary resources compare the total amount of General Fund Discretionary Revenue (General Fund Financing) that is available to finance the likely level of future County operations, capital investments or reserves costs (General Fund Uses).

This forecast, if left unchanged, would require service reductions and/or additional revenues to be sustainable.

Salaries and Benefits

County expenses are driven primarily by the personnel costs required to deliver the programs and provide the services our community needs. The Proposed Budget increases funded staffing by 48.30 positions for a total of 2,723.21 positions, or a 1.8% increase. The largest increase of 45.50 positions is within Public Safety and Justice, where the creation of a new Public Defender’s Office will bring more transparency and accountability to local indigent defense.

Chart D shows the increase in salaries and benefits over time, increasing between 7-9% per year. These increases are predominantly driven by the growing costs of healthcare and pensions, in addition to the County’s current memoranda of understanding with employee bargaining units that include general wage increases.

Federal and State Allocations

Between March 2020 and March 2021, the federal government provided nearly $5.8 trillion in aid to the U.S. economy, including the $1.9 trillion ARPA signed into law on March 11, 2021. As included in the ARPA plan update to the Board on February 1, 2022, the County has received $26,534,211 of its total ARPA allocation of $53,068,442. However, counites, unlike many other agencies, are mandated to fund expanded pandemic response services. For our County, this resulted in less ARPA uses for internal pandemic costs.   

On October 19, 2021, the U.S. Senate unanimously passed the bipartisan State, Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act (S. 3011) that provides flexibility for use of unallocated ARPA funding. Subsequently, the U.S. House of Representatives introduced companion legislation (H.R. 5735). While this act would not provide any new funding, and the County is expected to fully use all its ARPA allocation, should the County end up with unallocated ARPA funding, this act would provide additional flexibility in using any un-allocated funds. 

Reserves

County General Fund Reserves allow the County to weather events such as the COVID-19 pandemic and increasingly frequent wildfires. Financial stability also allows the County to borrow at better interest rates to invest in current community services. The County has a stated Fund Balance of Committed and Assigned target that is 7% of General Fund revenues. For FY 2022-23 that target is $46.2 million. The proposed budget plans for a Fund Balance of Committed/Assigned of $71.0 million, or 10.8% of General Fund revenues. However, after deducting for Fund Balance dedicated for health services Medi-Cal service delivery, the remainder of available General Fund reserves would be $40.9 million. This amount as compared to General Fund expenditures would be 6.0% or would be equivalent to 2.8 pay periods.

The County continues to be committed to its 7% Fund Balance target, but has learned from the dual emergency response of the COVID-19 pandemic and August 2020 wildfires, this reserve was insufficient and the calculation should be based on operating expenditures. The County anticipates updating the Fund Balance and reserve policy during FY 2022-23. Chart G details the County reserves and their designations.

Enterprise Funds

The County’s biggest enterprise fund activity is garbage disposal through County Service Area 9C, which provides for garbage collection in the unincorporated area of the county, as well as operation of the Buena Vista Landfill and Ben Lomond Transfer station. Key projects within this fund include the permitting of an organic waste processing facility, and planning for the eventual closure of the Buena Vista Landfill. 

Smaller enterprise funds include the Freedom Sanitation District, the Davenport Sanitation District, and several other sanitation funds that ensure small systems and individual septic systems are functioning properly. Chart H shows a breakdown of County fund expenses.