Valley News -

By Paul J. Young
Special to the Anza Valley Outlook 

County steering manageable course for now, CFO says

 

Last updated 5/3/2018 at 12:02pm



Reserves are larger than expected, and all but a few Riverside County agencies are operating within budget, Chief Financial Officer Don Kent said, but unresolved “issues” remain, namely almost $50 million in red ink which the board of supervisors decided to address during budget hearings in June.

“Departments are doing what they can,” Kent told the board Tuesday, April 24, during a snapshot analysis of the county’s financial strengths and weaknesses in the final quarter of the 2017-2018 fiscal year. “They are making use of internal resources (to decrease pressure on the general fund).”

The CFO delivered good and bad news, noting that “targeted cut scenarios” appeared to be unavoidable in preparation for the 2018-2019 budget process, though he did not define exactly what those scenarios might involve.

“There are issues that still need to be worked out,” Kent said.

According to the Executive Office presentation, the Riverside County District Attorney’s Office is anticipating a revised $9.3 million deficit, while the Sheriff’s Department is staring down a $15.8 million hole – most of it carried over from 2016-2017 – and the Department of Probation is struggling to pare down a $7 million overage. On the public safety side, the Office of the Public Defender’s gap was the smallest – about $700,000.

The Riverside University Health System is contending with a $15 million deficit, and the Economic Development Agency is trying to close a $1 million gap.

“There are still significant issues,” Supervisor Kevin Jeffries said. “There are challenges that don’t seem to be fully reflected in the projections. We know there are still a ton of other decisions to be made.”

One of Jeffries’ main concerns was pension obligations.

California Public Employees’ Retirement System data show that in the public safety category – covering sheriff’s deputies, District Attorney’s Office investigators, probation agents and others – the county will need to commit the rough equivalent of 32 percent of payroll in 2018-2019, about $118 million, exclusively to cover defined-benefit plans. By 2024-2025 that figure jumps to 47 percent, based on projections.

In the miscellaneous category – covering clerks, custodians, nurses, technicians and others – the county will need to commit a sum equal to 19 percent of payroll in 2018-2019, about $226 million, to cover pension obligations. By 2024-2025 that amount spikes to 29 percent, according to CalPERS.

County CEO George Johnson acknowledged that “future obligations” are not on the front burner, but he and Kent felt the budget picture coming into focus for 2018-2019 was reasonably good.

“We have improved financial capacity,” Johnson told the board. “We have not fully addressed outlying cost pressures, but we will bring them forward on an ongoing basis.”

Charts presented by Kend indicated county finances are on a relatively even trajectory in the years ahead, all things being equal.

The executive office’s multi-year forecast stated budget reserves will total $203 million at the end of the current fiscal year – more than $40 million above the original forecast, thanks to savings netted from departments’ reductions and “untapped contingency” funds set aside this fiscal year.

The budget outlook noted that while baseline reserve requirements will be satisfied over the next four years, so-called “unassigned” allotments will be drawn down by $67 million to cover a number of growing expenses, including those tied to the phased opening of the John J. Benoit Detention Center in Indio.

The outlook highlighted the fact that discretionary revenue is steadily rising, from $748 million now to an estimated $781 million in 2018-2019 and roughly $800 million in 2019-2020.

The latter projection excited Supervisor Marion Ashley, who pointed out that the last time discretionary revenue topped $800 million was at the start of the Great Recession in 2008.

“The work of staff is starting to pay off,” Ashley said.

The board decided against delving into budget structuring, delaying any action until the first scheduled budget hearings in the second week of June, a move retiring Supervisor John Tavaglione deemed best.

“This is going to be fluid,” he said. “We’re going to be coming back and making changes.”

During the midyear report in February, much of the talk centered on the work of KPMG, a Netherlands-based professional services firm, and whether the company would be able to deliver on vaunted savings of tens of millions of dollars throughout county government in the future.

The board has authorized up to $40 million for KPMG to fashion reforms that streamline agencies’ operations and curb expenses.

Sheriff Stan Sniff has expressed doubt that KPMG’s efforts will yield anything substantive. Tavaglione has been the firm’s biggest booster and has criticized the sheriff for his posture. There was no talk of KPMG during the April 24 meeting.

 

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