Agenda

Return

D.6

To:	Board of Supervisors
From:	David Twa, County Administrator
Date:	February 25, 2014

Contra

Costa

County

Subject:

2013/14 FY MID-YEAR BUDGET STATUS REPORT

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 02/25/2014

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

AYE:

John Gioia, District I Supervisor
Candace Andersen, District II Supervisor
Mary N. Piepho, District III Supervisor
Karen Mitchoff, District IV Supervisor

ABSENT:

Federal D. Glover, District V Supervisor

Contact:	Lisa Driscoll, County Finance Director 925-335-1023
cc:	Robert Campbell, Auditor-Controller

I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown.
ATTESTED: February 25, 2014
David Twa,

BY:	, Deputy

RECOMMENDATION(S):

ACCEPT report regarding the mid-year status of the 2013/14 County Budget.

FISCAL IMPACT:

This report is informational and will be used for planning purposes and budget development. Additional recommendations will be presented to the Board during Budget Hearings on April 22, 2014.

BACKGROUND:

The Administrator’s Office annually reports the status of the Budget as of December 31 to determine whether departmental expenses and revenues to date are consistent with the spending plan adopted, and amended from time to time, by the Board of Supervisors. Mid-year reviews provide an opportunity to identify variances from anticipated expenditures and revenue receipts, and permit budget staff to confer with departments regarding the potential need for budgetary adjustments. The following report is a status of the current year.

BACKGROUND: (CONT'D)

The mid-year budget status report is important in that it is based on a sufficient amount of experience during the budget year to permit a reasonably accurate assessment of how closely actual expenses and revenues are likely to track with the approved budget.

Our review of departmental budgets at this mid-year juncture suggests that departmental expenditures and revenues are performing in accord with expectations and are not projected to exceed the FY 2013/14 Adjusted Budget in any major area. However, as noted later in this report, there are several variables which are affecting this projection. The Board is not being asked to take any corrective action at this time. Recommendations, if needed, will be made as part of the Budget Hearings on April 22. This assessment could change based on intervening factors – e.g., revenue curtailments or program shifts by the State – that could affect current year costs and revenues and negatively impact our outlook for the ensuing fiscal year.

This report provides an overview of the status of the County’s FY 2013/2014 Budget as of December 31, 2013. Included in this report are tables that summarize the County’s mid-year fiscal condition (Attachments A, B, and C).

As of December 31, 2013, with 50% of the fiscal year having passed, actual expenditures for all County funds totaled 43.6% of planned spending, while actual revenues totaled 38.1% of amounts anticipated for the year. Although not significant, expenditures are higher and revenues the same as the same period last year (42.6% and 38.0% respectively). Comparison data for the same period in prior years are 41.5% and 39.1% in fiscal year 2011/12, 42.9% and 42.8% in fiscal year 2010/11, 45.3% and 44.5% in fiscal year 2009/10, 45.6% and 43.6% in fiscal year 2008/09, 44.5% and 47.9% in fiscal year 2007/08, 43.8% and 45.5% in fiscal year 2006/07, and 42.6% and 44.2% in fiscal year 2005/06.

For the General Fund alone, actual expenditures totaled 43.0% of planned spending, and actual revenues totaled 34.4% of amounts anticipated for the year. Expenditure and revenue figures compare favorably to the same period last year (45.5% and 31.7% respectively). Comparison data for the same period in prior years are 46.1% and 32.5% in fiscal year 2011/12, 47.0% and 36.3% in fiscal year 2010/11, 47.7% and 36.9% in fiscal year 2009/10, 50.1% and 37.7% in fiscal year 2008/09, 47.5% and 39.0% in fiscal year 2007/08, 47.0% and 39.7% in fiscal year 2006/07, and 46.4% and 38.6% in fiscal year 2006/07. The specific dollar amounts were as follows:

As noted above, County expenditures and revenues at mid-year were within acceptable parameters given the Board approved budget. The difference between budgeted expenditures and revenues are due to prior year encumbrances, restricted reserves, and other carry forwards. The variances in anticipated expenses and revenue receipts are noted at the mid-year.

Revenues

Revenue from State and federal sources are typically late in being realized because much of it is based on expenditure claims paid in arrears. Normally departments that rely on State and federal revenue experience a two to three-month lag in revenues.
Prop 172 Combined public safety sales tax revenues were up compared to the same months in 2012. The County's sales tax consultant continues to project positive growth for FY 2013/14 and it is expected that budget will be exceeded in the current year. Additionally, the County's pro-rata share of the State pool increased marginally in FY 2013/14.
AB109/Public Safety Realignment revenue is budgeted at $22.9 million and is being allocated by the State on a monthly basis as anticipated.

Expenditures

Normally salary costs are understated at mid-year. Some reduction in permanent salary costs is anticipated in the second half of the fiscal year due to additional retirements, which tend to occur in March, however, the majority of these savings will be spent in retiree pay-outs.
Employee benefit costs are understated at mid-year because the budget includes appropriations for health insurance cost increases that did not become effective until the end of the second quarter, December 31, 2013. Actual expenses for employee health insurance will increase the second half of the year. Additionally for this year, it should be noted that the second quarter transfer to the County's OPEB trust did not occur until January and therefore is not included in the second quarter figures. The General Fund wage and benefit percent spent would have been 45.24% had the transfer occurred. [The addition of this transfer increases total expenses to 43.8% for all funds and 43.23% for the general fund.]
Service and supplies costs are generally understated throughout most of the fiscal year because of the time required to process payments to vendors and contractors. This payment cycle averages one month in arrears. Additionally, departments tend to wait later in the year to make purchases to ensure that resources are not needed elsewhere.

General Purpose Revenue
General Purpose budgeted revenues total $330.5 million spread over 42 accounts. These revenues consist primarily of $270.9 million in taxes for current property. Of the taxes for current property, $163 million is current secured, $2.5 million is supplemental, $7.4 million is unitary, $91.0 million is Property Tax in Lieu of Vehicle License Fees (from non-realignment vehicle license fees) and $7.0 million is current unsecured. The current year budget included a 2.0% property tax growth rate. The actual growth rate was 3.45%. Other significant budgeted revenue is real property transfer tax ($5.0 million), sales tax ($14.0 million), and interest income ($750 thousand). Based on six months of experience, General Purpose Revenues are expected to exceed budgeted amounts.

In summary, the over-all County General Fund budget is balanced. The following is more detailed information regarding Employment and Human Services, the Probation Department, and the Contra Costa County Fire Protection District.

Employment and Human Services
The Employment and Human Services Department is currently anticipated to meet its financial targets by the end the 2013-14 fiscal year. Because non-general purpose revenues offset 95.5% of the budgeted expenditures, minor shifts in the various funding sources can significantly impact the financial picture for the Department. The Department continues to experience high caseloads for CalWORKs, CalFresh, and Medi-Cal Programs largely due to the economy. The Affordable Care Act implementation has impacted the caseload for Medi-Cal intake workload. General Assistance eligibility and assistance payments account for approximately 50% of the Department’s General Fund allocation. The year-to-date expenses appear to be within the budget parameters and, barring any unusual fluctuation in caseload, the Department will end the fiscal year very close to the allocated funding level. Although the intake of cases remains close to 1,000 new cases each month, the cases are being granted within the 30 day timeframe required. Realignment revenue is slightly lower than anticipated when the 2013-14 Budget was adopted, but is sufficient to cover expenditures due to a higher than anticipated level of salary savings.

Probation Department
The loss of Title IV-E revenue has created a significant hardship for the Probation Department but the Department remains committed to successfully navigating this difficult challenge. Currently Probation has received one quarter of revenue. The Employment and Human Services Department (EHSD) has received the second quarter revenue but has been instructed not to transfer the funds at this time by the California Department of Social Services at the direction of the U.S. Department of Health and Human Services. If the second quarter funds are released in FY 2013/14, the Probation Department's share will be approximately $980,000.

As part of the FY 2013-14 budget Probation was directed to maintain a staffing vacancy of approximately 4 positions. The department has maintained vacancies of approximately ten (10) positions. This increased vacancy factor will allow the department to absorb most of the potential FY 2013/14 revenue shortfall caused by the loss of Title IV-E.

If the Probation Department receives the second quarter Title IV-E reimbursement, then the department is projected to have a fund balance of approximately $312,000. If the reimbursement is not received, then the budget shortfall is projected to be approximately $668,000. In order to meet this shortfall, the Probation Department has identified 12 vacant positions (in addition to the original vacancy factor identified above) that will be held vacant for 5 months (February-June 2014), which will result in a cost savings of approximately $601,000. Also, the department was recently notified of two retirements effective 2/28/14. These positions will be held vacant for an additional savings of approximately $70,000. These two actions will ensure that the department meets the FY 2013/14 budget.


Special Districts

Contra Costa County Fire Protection District
The Contra Costa County Fire Protection District’s general operating fund is projected to have an operating deficit this fiscal year due to a continued structural deficit in the department, which will result in the utilization of $4.0 million from fund balance. Of this figure, $2.6 million reflects a transfer from the Contra Costa Fire general operating fund to the Pension Obligation Fund pursuant to the District’s 2005 Pension Obligation Bond indenture. For this reason, the District began the year with $20.7 million in reserves and is projected to end the year with $19.3 million. The District continues to work diligently to minimize expenditures and identify alternative service delivery options. In addition, the operational study conducted by Fitch & Associates, LLC, for the past several months is complete and will be presented this afternoon to the Board. With the Study complete, County and District staff plan to work closely together on solutions that will benefit the District in the short and long term.

Conclusion

As noted, the overall County budget including the General Fund budget is balanced. While a hiring freeze remains in effect in several departments, no lay-offs are expected at this time. County department heads have been provided 2014/15 budget direction that includes compensation increases due to negotiated wage increases and increased pension costs. A portion of the increases will be covered by increased revenues. The County Administrator will return to the Board of Supervisors on April 22 with the Recommended Budget for FY 2014/15 and the Planning Budget for FY 2015/16. It is anticipated that the Board will adopt a Final Budget on May 13.

CONSEQUENCE OF NEGATIVE ACTION:

None.

CHILDREN'S IMPACT STATEMENT:

None.