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
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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.
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Prop 172 combined public safety sales tax revenues were up compared to the same months in 2013. This is due mainly to the one-time countywide adjustment of $2,443,255 due to a State allocation error. The County's sales tax consultant continues to project positive growth for FY 2015/16 and it is expected that budget will be exceeded in the current year even though the County's pro-rata share of the State pool decreased marginally in FY 2014/15 and will decrease again in FY 2015/16.
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AB109/Public Safety Realignment revenue is budgeted at $24.0 million and is being allocated by the State on a monthly basis as anticipated.
Expenditures
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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.
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Employee benefit costs are understated at mid-year because the budget includes appropriations for health insurance cost increases that do not become effective until the end of the second quarter, December 31, 2014. Actual expenses for employee health insurance will increase the second half of the year. It should be noted that the second quarter transfer to the County's OPEB trust did not occur until January in fiscal year 2013/14 therefore this year’s figures appear slightly higher in comparison to last year.
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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 $351.9 million spread over 29 accounts. These revenues consist primarily of $291.2 million in taxes for current property. Of the taxes for current property, $173.3 million is current secured, $3.5 million is supplemental, $8.5 million is unitary, $98.7 million is Property Tax in Lieu of Vehicle License Fees (from non-realignment vehicle license fees) and $7.2 million is current unsecured. The current year budget included a 5.0% property tax growth rate. The actual growth rate was 9.09%. Other significant budgeted revenue is real property transfer tax ($5.0 million), sales tax ($13.9 million), and interest income ($750 thousand). Based on six months of experience, General Purpose Revenues are expected to exceed budgeted amounts, due to the 9.09% growth in assessed valuation.
In summary, the over-all County General Fund budget is balanced. The following is more detailed information on individual departments that were projecting over-expenditures at mid-year. If appropriate, these departments were given correction action memos to correct the expenses in the second half of the year.
Clerk-Recorder
Due to a requirement to conduct one, and potentially two, unscheduled elections this fiscal year, the Clerk-Recorder Department is expected to exceed its budget allocation by an estimated $2.1 million. A special election was called by the Governor to occur on May 19, 2015 for California State Senate District 7. The vacancy is due to former State Senator Mark DeSaulnier being sworn into Congress, leaving the Senate position vacant midway through the term. Since more than two candidates filed to run for the Senate vacancy, a Primary Election will be held on Tuesday, March 17. If none of the candidates receive a majority of votes in the March election, then the top two candidates will compete during a run-off on May 19. These elections were neither budgeted nor does the State provide reimbursement for the additional County costs. A fiscal year-end transfer from other County departments will likely be necessary to fund the special election(s).
District Attorney
At mid-year the District Attorney’s Office is projecting a straight-line department-wide over expenditure of approximately $300,000. The department’s expenditures are currently projected to exceed the budget for temporary salaries by $880,000 and for contracted temporary help by $317,000; however, the impact on net County cost is offset by a significant number of vacancies within the department. The County Administrator has recommended reductions in spending in a variety of accounts and expects the department to achieve a balanced budget by year-end.
Public Defender
At mid-year the Public Defender’s Office is projecting a $129,000 department-wide over expenditure. The department’s expenditures are currently projected to exceed the budget for temporary salaries by $218,000; however, the impact on net County cost is offset by a number of vacancies within the department. The County Administrator has recommended reductions in spending in a variety of accounts and expects the department to achieve a balanced budget by year-end.
Treasurer-Tax Collector
Although the Treasurer-Tax Collector is showing expenditures of 51.9% at mid-year, mainly due to increased Bankruptcy attorney services for unsecured tax objections filed, it is balanced by increased revenues from Levy collection fees. The department is expected to maintain a balanced budget.
Conclusion
As noted, the overall County budget including the General Fund budget is balanced. While a hiring freeze remains in effect for a department or two, only one lay-off is expected at this time. County department heads have been provided 2015/16 budget direction that includes compensation increases due to negotiated wage increases. A portion of the increase will be covered by increased revenues. The County Administrator will return to the Board of Supervisors on April 21 with the Recommended Budget for FY 2015/16 and the Planning Budget for FY 2016/17. It is anticipated that the Board will adopt a Final Budget on May 12.