A five-year forecast for the county budget sees a structural deficit continuing but supervisors say that adjustments can be made to avoid plunging into the red.
Budget forecasting was up for discussion at the Feb. 2 Board of Supervisors meeting. A five-year forecast that assumes “moderate” cost/revenue conditions was described by Interim County Administrative Officer Cheryl Dillingham.
Dillingham said under the moderate scenario, the county budget will have a negative fund balance of $7.3 million at the end of the five-year period. The budget’s contingency or emergency account will amount to $1.25 million and reserves will total $4.32 million.
The county has used reserve funds to offset deficits in the past and Dillingham said that if reserves are again used for that, the deficit at the end of the five years will only amount to $3 million.
She told supervisors that having a $3 million negative balance in a budget of over $100 million is “a doable adjustment.”
She added that insurance costs will increase by $2 million annually and result in a larger budget deficit in 2016 than the county saw last year. Insurance rates for 2016 went up 12 percent and the increase was projected to be only 6 percent, said Dillingham.
The rate of the increase might not stay at the 12 percent level in near-future years but Dillingham said that “to not use a higher estimated number for insurance over the five-year period didn’t seem prudent.”
There are also some positive cost trends. Public Employee Retirement System (PERS) payments will continue to increase, said Dillingham, but not by as much as seen now.
She said PERS administrators have provided a five-year forecast of contribution rate increases. In five years, the county’s annual PERS contribution increase is projected to be 1.3 percent, compared to the 5 percent annual increases seen now.
Dillingham added that recent state-level PERS reforms are beginning to have effects, driving cost increases down over the next few years.
County employees have also agreed to contribute an extra 3 percent to their PERS payments. But they’ll also get a 7 percent annual salary increase by next year.
Dillingham said that if the county doesn’t make annual contributions to contingency and reserve accounts, the structural deficit will be removed as revenues from property taxes increase and PERS cost increases slow down.
Supervisor Ryan Sundberg emphasized that supervisors would make budget adjustments to prevent deep deficits.
“I don’t think a lot of people got that this is without changing anything and these are the assumptions if we just continue the status quo,” he said, adding that “if it started looking like this, we would adjust so that the numbers would not turn out looking like this, there’s no doubt in my mind.”
Supervisor Estelle Fennell agreed, saying, “This is not budgeting — this is just helping us to budget.”
Detailing projections for other funds, Dillingham said the county’s road fund is predicted to improve due to increased tax revenue but the cash-strapped Aviation Fund will see its deficit worsen — increasing from $300,000 to $500,000 — due to increased salaries and benefits and decreased airport revenue.
Funding from Measure Z, the county’s half-cent public safety sales tax, went into effect on April 1 is expected to amount to $9.4 million in its first year. Measure Z revenue is assumed to be spent on public safety-related services throughout the forecast period.