BACKGROUND:
On February 24, the County Administrator presented a mid-year report to the Board of Supervisors, which described the County’s current fiscal condition and a schedule of reports/actions that would be presented in the coming months to bring County expenditures in-line with anticipated revenues. One was a report on recommendations for developing a County Core Service Policy. The following is that report.
Mission/Vision/Values - Contra Costa County has previously defined its Mission, Vision, and Values, which should be considered while developing, and/or redefining policies and guidelines. They are:
Mission – Contra Costa County is dedicated to providing public services which improve the quality of life of our residents and the economic viability of our businesses;
Vision – Contra Costa County is recognized as a world-class service organization where innovation and partnerships merge to enable our residents to enjoy a safe, healthy and prosperous life; and
Values – Contra Costa County serves people, businesses and communities. Our organization and each one of our employees value:
- Clients and communities
- Partnerships
- Quality Services
- Accountability
- Fiscal prudence
- Organizational excellence
Budget Policy
The County adopted a County Budget Policy on November 14, 2006 (Resolution No. 2006/677) and has attempted to follow that policy since that time. The policy requires that:
- Contra Costa County shall annually adopt a budget that balances on-going expenditures with on-going revenue.
- Contra Costa County shall adopt a budget each year early enough (and no later than May 31) to allow all impact on programs and/or revenues to be in effect by July 1.
- Contra Costa County shall prepare multi-year (3-5 year) financial projections as part of the annual budget planning process.
- Contra Costa County shall at a minimum prepare formal mid-year budget reports to the Board of Supervisors detailing actual expenditures and projections through the remainder of the fiscal year. This report will include through December 31 of each year:
- Actual net County cost by department by fund
- Actual and budgeted expenditure by major object by department
- Actual and budgeted revenue by major object by department
- If a particular cost center is projected to be over-budget, a report clearly indicating planned corrective action will be presented to the Board of Supervisors within 30 days of the mid-year report. If necessary, this report will include appropriation and revenue adjustments.
- The County will not directly allocate a specific General Purpose Revenue source to specific programs/communities. The policy would not apply to mitigation revenue that is derived from a project and intended to offset the environmental impacts from the project on the “host” community.
- Short-term funding sources shall be used for short-term requirements, one-time uses, or contingencies.
- Revenue windfalls not included in the budget plan will not be expended during the year unless such spending is required in order to receive the funding.
- Fee-for-service and federal/state revenue offsets will be sought at every opportunity.
- As part of the annual budget process, each department shall analyze its fee structure in order to maintain maximum offset for services.
- The Board of Supervisors shall make reserve funding available for venture capital to be used to increase efficiencies and economies in departments, which do not have resources available within their normal operating budgets for such expense. Requests for these funds will be included as part of the annual budget process.
- The year-end practice of “use it or lose it” shall be changed to “save it and keep it”. The County Administrator’s Office will continue to refine the concept of fund balance sharing as an incentive to departments to maximize resources. Some portion of fund balance credit may be used by operating departments for one-time expenditure. These one-time expenditures shall be used to maximize economy/service delivery/efficiencies/employee satisfaction. Unless specific arrangements are made with the County Administrator’s Office, fund balance credit will be spent/encumbered within the following fiscal year.
- The annual budget process will include funding decisions for maintaining the County’s facility assets, allowing the Board of Supervisors to weigh competing funding decisions using credible information.
- Beginning in FY 2008/09, the annual budget process would include a strategic planning and financing process for facilities renewal and new construction projects (short and long term capital budgets) and establishment of a comprehensive management program for the County’s general government real estate assets relative to acquisition, use, disposition, and maintenance.
The County’s strong Budget, Investment, Reserve, and Debt Management Policies have earned it a ‘Strong’ Financial Management Assessment Rating from Standard & Poors. A score of “Strong” indicates that practices are strong, well-embedded and likely sustainable; and that the County maintains best practices that support credit quality and are used in daily operations. One area for improvement that the County has not formalized is that of departmental cash management.
Departmental Cash Plan/Management Policy
Recent State delays and deferrals of payments, reduced availability of tax revenue anticipation notes and the impact of those items on the County have emphasized the need for prioritizing payment obligations. The County needs to begin to define guidelines on how to triage financial obligations, salaries and service obligations.
The County Administrator’s Office has begun discussions with the County Auditor-Controller and Treasurer-Tax Collector on guidelines to more effectively manage cash. As we begin to rely more heavily on loans from the County Treasury Pool (and pay associated interest costs), it becomes more and more important to efficiently manage our obligations. The County cannot simply perform Interfund transfers – use funds designated for one purpose or program to pay for other underfunded or deferred programs. Instead it must borrow from the Treasury Pool and pay interest for those funds. In order to borrow as little as possible, the County Administrator is recommending that he continue to refine the list of guidelines below and distribute those refined guidelines to departments for implementation. Departments will be asked to:
- Review their department's revenue and expenditure patterns for opportunities to accelerate cash receipts and defer significant cash outflows with minimal impact to clients and direct services to the public
Review equipment replacement plans – now is a good time to prepare and refine plans to prioritize needs
Prioritize capital and technology projects and other major purchases – now is not a good time to purchase equipment
Review contracts for need and for flexibility in timing of payments
Review travel for meetings/conferences - opt for webinars, carpool, sending fewer people on in-state travel and only one for out-of-state, and teach employees how to effectively transmit what they have learned to other employees upon their return
Review authorization practices for use of extra help and overtime
Take inventory of existing supplies and exhaust existing supplies before making new purchases – choice may not be as important as it once was
Discuss with the Auditor ways to assign a certain number of days past the invoice date before a check is cut to our vendors – considering potential pitfalls such as penalties and interest for some delayed payments
All of these actions will help Departments to be more efficient and effective with appropriations available to them. Right now, the first priority of all departments is to work with the
County Administrator to develop balanced budgets for FY 2009/10 and beyond. In order to develop a strong fiscal strategy, we must use our existing Mission/Vision/Values, and strong fiscal policies; however, in the current economic environment we need more than that.
Contra Costa County needs to develop and adopt strong core service definitions, guidelines for priority setting, and a Budget Strategy statement.
Core Services and Guidelines for Priority Setting
Classification of County Services to Set the Stage for Priority Setting
The nationwide economic downturn, which has exacerbated the County’s already significant fiscal challenges of OPEB and retirement costs, is projected to last several years. Limited help for counties is to be expected from the federal and state governments. On the contrary, it is more likely that additional budget cuts will be passed down to counties from higher government levels, with no corresponding relief from legal mandates. If
Contra Costa County is to survive the current fiscal crisis, it must save itself. County leadership should aim beyond survival and use this crisis to galvanize its determination to emerge from the crisis as a stronger and more focused organization. Now is the time to resolve the structural budget problems and build a better foundation for all of the County’s stakeholders.
This will present difficult choices and require commitment and fortitude to be successful. The County is no longer able to maintain its current level of services. We must acknowledge that we will be unable to stretch fewer staff and other resources to continue to provide the broad array of public programs and services currently and historically offered. The County has been in a cutback mode since 2002 and staff has been stretched to the breaking point. In the current fiscal year, the County has used one-time solutions to cushion the impact as it reduces programs to fit within available ongoing revenues. However, multiple years of cost cutting has led to reduced morale and productivity, and deterioration in the quality of public information and services. In order to emerge from this crisis as a sustainable, high-performing organization, we must pare those enhanced and discretionary services that we can no longer afford to provide and focus our resources on maintaining and strengthening core and other top-priority services. As we retrench, we must also look for opportunities to consolidate and/or centralize programs and processes and eliminate layers or levels of management.
In order to accomplish the magnitude of reductions required to balance the County’s budget in fiscal year 2009/10 and beyond, County management – the
County Administrator and County Department Heads – will need to rethink how it classifies core County services. This will require a critical examination of discrete County programs and services based on a set of agreed upon characteristics. Correct classification of core services will simplify the identification of enhanced (or value-added) core services and discretionary services. Once County programs and services are distilled into the proper categories, the County management can then recommend funding priorities under the guidance of policies and principles established by the Board of Supervisors.
What are core County services?
Over time, many services offered by the County have been labeled as core or mandated services. However, a program or service – no matter how desirable, important, or economical – is not a core service unless it meets the following criteria:
- Mandated by state law or the judiciary at the mandated level
- Mandated regulatory services
- Mandated services above the mandated level only when funded from outside revenue
- Essential state-funded services that the county administers as an agent of the state
- Essential to the health and safety of County citizens and for which there are no other organizations or institutions able to provide them (safety net services)
- Infrastructure to support core services
During the budget development process for the current fiscal year, County management is updating the County’s Mandatory/Discretionary Listing, which attempts to classify core (mandatory services at mandatory levels), enhanced core (mandatory services at discretionary levels), discretionary services provided by the County, and the gross and net County costs for providing those services. County management will continue to refine this listing as a tool to help guide the development of funding recommendations for Board of Supervisors’ consideration.
The County may be able to enhance core services or provide discretionary services, but only if it makes adequate provision to provide core services and the infrastructure to support core services.
Some examples of core County services are: conservatorship/guardianship, handicapped children services, in-home supportive services, child welfare monitoring and intervention, foster care, CalWorks and general assistance, jails, prosecution, indigent defense, indigent medical, indigent burials, County financial management and reporting, tax assessment and collection, Local Agency Formation Commission, road maintenance, personnel administration, vital records, public information compliance, fire investigation, court subsidy, public health immunization and infectious disease control, land use controls, licensing, elections, medical examiner, grand jury, animal care and housing, emergency dispatch and response, narcotic treatment, and county surveyor.
What are enhanced or value-added County core services?
- Core or alternate core services provided at a higher level than mandated
- Support services that increase the efficiency of the delivery of core services
Some examples of enhanced or value-added County core services are: County hospital, pesticide enforcement, Sheriff and Animal Services patrol, custody alternatives and probation camps, lower poverty threshold for citizens served by Health & Human Services Programs, code enforcement, community planning and development, regulatory inspection services, Zero Tolerance for Domestic Violence Program, crime investigation, mental health services, special crime enforcement (Westnet), and risk management.
What are discretionary services?
- Services that are neither core nor enhanced core services
Some examples of discretionary services: administration, fire suppression, airports, library, arts and culture programs and events, parks, nuisance abatement, animal spay and neuter, family services, adoptions, elder services, Welcome Home Baby Program, Service Integration Program, community liaison, regional planning, certain advisory boards and commissions, revenue earmarks (community mitigation and project earmarks), financial analysis, economic development, homeless services, capital projects and facility maintenance, waste water recycling, cooperative extension, staff training, workforce services, certain aging and adult services, County health plan, narcotics/vice investigation, veterans services, information technology and automation, low-income utility bill payment assistance, county vehicle fleet, public health clinics, community wellness and prevention, family/maternal/child health, substance abuse recovery, marine patrol, forensics, toxicology, and controlled substance analysis, emergency preparedness, and homeland security.
To return and remain on the path to fiscal solvency and sustainability, we must also adopt additional policies that will help us to avoid supporting unsustainable program that result in:
- Committing to match intergovernmental funding to carry out state and federal priority programs to the detriment or exclusion of local priority programs
- Increasing spending (new programs and new salaries and benefits costs) before making a commensurate increase in the level of fiscal reserves
- Spending down one-time reserves for ongoing costs
- Permitting interest groups to drive fiscal decisions that affect fiscal stability and countywide services
- Creating long-term local “earmark” programs that reduce flexibility within the County General Fund
- Creating new administrative bureaucracy that hinders productivity and cost efficiency
Budget Strategy Statement
With these tools and overall approach, the Board of Supervisors needs to develop a Budget Strategy statement. The Statement should provide an overall approach that the
County Administrator will use for the FY 2009/10 Recommended Budget and future budgets. The overall approach refers to the Board developed mission statement for the County in combination with a Budget Strategy Statement. For instance, the Board may choose to use its mission statement of dedication to providing public services which improve the quality of life of our residents and the economic viability of our businesses. That Statement points out that in moving towards this mission at a sustainable level; the Board will have one service priority. It will seek to first maintain public services which improve the quality of life of our residents and the economic viability of our businesses.
The Budget Strategy statement should incorporate long-term strategies, such as:
- Generating revenues by selling services to other governmental agencies.
- Reducing State mandates that have less value to the community without losing reimbursements through legislation.
- Exploring process and efficiency improvements.
- Evaluating ways to reduce rates for workers’ compensation, liability and health insurance.
- Achieving a more stable financial situation for the County Hospital.
Another area of the County ripe for organization/policy development is that of real estate and other asset management.
Real Estate & Asset Management Program (RAMP)
Contra Costa County does not have a mechanism for periodic thorough review of all facilities and use. The County Administrator is working with the General Services Director to develop a formal Real Estate and Asset Management Program (RAMP). It is anticipated that savings can be achieved through a thorough review of all facility use and the resulting elimination/consolidation of under used properties/leases. A RAMP report including implementation recommendations will be forwarded to the Finance Committee in the spring.
Conclusion/Next Steps
Because of the magnitude of the projected budget over-runs in the current fiscal year, the County does not have the luxury of time in developing a balanced budget. Instead, the County Administrator will use the Mandatory/Discretionary List as one tool in combination with the input of excellent department heads, informed staff, strong fiscal policies, a firm mission statement, and a Board defined Budget Strategy statement to make recommendations to the Board regarding program/position elimination for the remainder of the 2008/09 fiscal year.
The County Administrator is recommending that the Board define its Budget Strategy Statement and direct his office to apply this County Core Service Policy/Budget Strategy Statement to possible program/service reductions and return to the Board with recommendations for a balanced Budget on March 17.
CLERK'S ADDENDUM
David Twa, County Administrator, presented the staff report as outlined in the Board Order, emphasizing that at this point in time no budget decisions have been made yet.
Chair Bonilla asked if the County Budget Policy needs to be updated to reflect a two-year cycle rather than an annual one, and recommended that item number 3 “Contra Costa County shall prepare multi-year (3-5) financial projections as part of the annual budget planning process” be referred to the Board’s Finance Committee for consideration.
Lisa Driscoll, County Administrator’s Office, said that at this time the State Budget Act does not accommodate a two-year plan the County adopted a formal one-year budget with additional projection information on the second year. Ms. Driscoll confirmed that strategic planning and financing processes for facilities renewal and new construction and establishment of a management program for the County’s real estate (item No. 13) require no updates at this time as they are being discussed at the Finance Committee.
Supervisor Uilkema requested the term “venture capital” be explained, as used in the context of County government and inquired what the impact of the state deferrals might be, especially in light of drawing on the County’s cash reserves.
Ms. Driscoll said the term refers to allowing end-of-year reserves to be used by departments for technological advances such as paperless filing systems. Ms. Driscoll said that the State deferrals of funds resulted in a loss of general purpose County revenue.
Mr. Twa said it appears that not only were property tax revenues down for this year but they are expected to be down through 2012. He said the loss of Proposition 172 funds derived from state sales taxes presented a large loss of funding, primarily to the Sheriff and District Attorney’s offices. He said in the past, the average increase was 3% per year but it is not expected that will be the case again for a least a decade. Mr. Twa noted that further cuts are expected from the state and said money from the federal recovery plan is years away.
Supervisor Piepho asked if the third criterion to define County core services, “Mandated services above the mandated level only when funded from outside revenue,” should be assigned a percentage amount for clarity; she suggested 100%.
Supervisor Gioia cautioned against being inflexible and possibly losing an opportunity for programs that might provide significant benefit while requiring a very small County match, such as 5%. He said he would not be in favor of setting outright exclusions.
Chair Bonilla requested the bullet item “infrastructure to support core services” be more detailed. She also emphasized that the listed criteria are to be guidelines and are the subject of ongoing discussion. She requested the Finance Committee get a report on the list’s developments and department reactions at some time in the near future.
Supervisor Gioia acknowledged that the guidelines would need further discussion at the Finance Committee and said he didn’t want to commit to any permanent language at this point.
Mr. Twa explained that enhanced or value-added County core services encompass those support services that increase the efficiency of delivery of core services provided, above the strictly mandated levels. He said in the past the County had much more flexibility to provide those things that were felt to be very important, both to the citizens as well as everyone in our communities, but the dollars to fund them is shrinking rapidly.
Supervisor Uilkema noted that many items listed as discretionary services, such as the County health plan, serve to aid the County in performing its mandated services more efficiently and cost-effectively.
Ms. Driscoll said the lists of service categories was provided to clarify what is mandated versus what is discretionary for information purposes, not to imply what should or should not be funded.
Mr. Twa said the County’s Administrators Office will return to the Board on March 17, 2009 with a proposal that provides as many options from which to choose as possible to aid the Board in developing a comprehensive strategy.
The Supervisors requested that the issues of increases to fees and creation of fee structures, the possible shifting of cost from one department to another as a result of cuts, and all possible avenues of revenue be explored for the long-term budget strategy.
Chair Bonilla called for public comment. The following people spoke:
Soren Chernell, Community Clinic Consortium, regarding reduction of health services in community clinics;
Mariana Moore, Contractor’s Alliance (handout provided); regarding the impact of reduction of health services in community clinics on non-profit organizations;
Liz Callahan, CBO Center, regarding leadership and the holding onto the values of the County.
The following people spoke on concerns regarding proposed budget cuts in the District Attorney’s Office:
Joan Monroe, resident of Orinda;
Mary Klotzbach, resident of Livermore;
Beverly McAdams, Mothers Against Drunk Drivers (MADD);
Colby Shore, resident of Contra Costa County;
June Shore, resident of Contra Costa County;
Max Shore, resident of Contra Costa County;
Devon Bell, District Attorney’s Office;
Lucinda Simpson, DA Office Association;
Paul Graves, District Attorney’s Office;
Kate Wharton, District Attorney’s Office;
Dan Cabral, District Attorney’s Office;
Lynn Darst, District Attorney’s Office.
Supervisor Gioia clarified for the public that the Board was not proposing lay-offs. He said that each department had been asked to draft a proposal to meet a targeted goal of reductions in their department. District Attorney Robert Kochly and Health Services Director William Walker had publicly announced their approach to meet those targets, but he noted that no specific proposal has yet been presented to the Board for consideration.