The County of Santa Clara Board of Supervisors heard a sobering presentation about the County’s finances. The most troubling revelation was that the county could be facing a year-end budget deficit of $46 -$67 million dollars.
By law, the County is required to end the fiscal year with a balanced budget.
“There are a few things extremely troublesome on the horizon,” said County Executive Jeffrey V. Smith. “The projected negative fund balance has far-reaching consequences. It affects our ability to issue Tax and Revenue Anticipation Notes (TRANS) to cover short-term cash needs to make payroll when the revenue owed the County hasn’t come in yet.”
Despite spending below budgeted levels, several factors have complicated the county’s fiscal outlook. Revenues have fallen $79.3 million (or 3.8%) short of expected levels. Various taxes and fees are not keeping pace with budgeted projection: the most substantial shortfalls are $5 million less in property tax revenues, $3.3 million less in court related fines and fees and $3 million less in State Motor Vehicle funds.
Today, the County Executive is issuing a “STOP” memo instructing department and agency heads to: “STOP Spending, STOP Procuring, STOP Hiring, and STOP Expanding Operations in any Manner.” Now as much as fifty percent of all unspent non-personnel funds in departments are being held back to ensure that the year ends in a positive cash position.
The projected shortfall does not include the impact that the Governor’s realignment proposal or other budget solutions may have on county resources.
In a December review of the County’s cash position, there were concerns about the organization’s ability to make payroll due to cash flow.
“We might not be able to pay our bills or employees because the San Jose Redevelopment Agency owes us money,” said Supervisor Liz Kniss. “The failure to pay the funds owed might also result in our having to cut services, many to residents of San Jose who depend on County services.”
The County has been in settlement discussions with the San Jose Redevelopment Agency (SJRDA) for some time. The SJRDA is in arrears in the amount of $62.9 million, 3 years of back payments owed by contract.
“With an unlikely redevelopment repayment and a cloudy State budget future, we cannot afford to waste a single penny,” said Supervisor Ken Yeager. “We have to delay every project or purchase we can, so we are better prepared for what is yet to come.”
The Board also approved moving forward with a comprehensive attrition plan, developed at the request of Supervisor Mike Wasserman. The goal is to preserve jobs for as many employees as possible and avoid layoffs, maintain crucial public services, and reduce labor costs.
“In the past when an employee retired or resigned, there was the presumption that the position would be filled. That will not be the case moving forward,” said County Executive Jeff Smith. “Departments can expect that many positions will be left vacant for deletion. We will be asking departments to find ways to continue to provide services without positions being filled.”
Under the new attrition plan, administration will review vacant positions, as well as positions that departments request not be frozen or deleted. The County Executive’s Office will determine whether a vacant position is mandated by law or critical to County operations, as well as the service consequences if the position were to be deleted.
Any non-mandated positions that become vacant and can be deleted from the budget will be formally eliminated as part of budget process, resulting in ongoing salary savings. An estimated 1,000 positions annually will be subject to review.
President Dave Cortese requested that staff provide this report in light of the County’s very thin cash margin this year.
“We are responsible for providing life and death services to extremely fragile populations in Santa Clara County,” said Cortese. “When the state or federal government lessens or eliminates our funding but not the responsibility, the County has to work extra hard to help families from falling through the cracks.”