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County Executive Releases Fiscal Year 2011 Recommended Budget

Proposes Strategies to Balance $223.2 Million Shortfall

Today, County Executive Jeffrey V. Smith released the Fiscal Year 2011 Recommended Budget for the County of Santa Clara. Including all services, operations, capital improvements and reserves, the Recommended Budget totals $4.2 billion and addresses a $223.2 million General Fund shortfall. The $2.2 billion General Fund budget outlines the proposed spending plan for all discretionary and many mandated services for the fiscal year beginning July 1, 2010.

The County is required by law to balance its budget each year. The County Executive’s Recommended Budget represents the culmination of the first round of budget planning activities that began in December 2009, and signals the start of budget review workshops and hearings by the County of Santa Clara Board of Supervisors.

Like many California counties, the County of Santa Clara suffers from an ongoing structural imbalance in its budget. The current methods used to finance county government are inadequate to cover the cost to maintain the existing level of services. When the economy is strong, there is more tax revenue to support programs and services. When the economy is weak, as it has been for the past several years, the demand for County safety net services is greater – at the same time that revenue shrinks.

Smith warns that the County continues to be challenged by crippling declines in discretionary revenues that have lead to a ninth consecutive General Fund deficit. Since Fiscal Year 2003, the County will have closed cumulative gaps between revenues and expenditures of $1.8 billion.

“Local governments struggle everyday to provide needed services with dwindling resources, a situation that has grown astronomically during the current economic crisis,” Smith said. “The impact of the current economic recession has been devastating to families in Santa Clara County, the State of California, and across the country. Local governments are teetering on the edge of insolvency because of a staggering decline in revenue. The most optimistic forecasts do not see significant improvement in the near future.”

To meet the $223.2 million shortfall, Smith’s budget combines net reductions of approximately $84.8 million from programs and services, and use of one-time revenue of $138.4 million. Included are 193 full-time equivalent positions proposed for elimination from the General Fund.

Departmental Reductions
Almost $700 million of the solutions used to meet shortfalls from Fiscal Year 2003 through Fiscal Year 2011 have come from department reductions. For the ninth consecutive year, departments will make reductions to help close the budget gap. For FY 2011, County departments are contributing from either expenditure reductions or new revenues of $48.5 million and Santa Clara Valley Medical Center (SCVMC) is contributing $35.7 million. A majority of SCVMC’s solutions is revenue related and does not reduce services.

The Social Services Agency is implementing strategies throughout the agency to reduce costs while maintaining core services during a time when the number of clients is increasing dramatically due to the economic recession. The Agency will cut $27.8 million primarily in the Department of Family and Children’s Services which includes a reduction of 45.5 positions. Other major reductions include the closure and decentralization of the Clover House Visitation Center and the elimination of 16.5 positions. Visitation services for children in out-of-home placement and their families will be integrated into other service locations. A State adjustment to group home rates allows for a reduction in the County’s Wraparound contract expense for Foster Care programs, saving the general fund $3 million.

The Probation Department will contribute $2.9 million through the reduction of 23 positions and the restructuring of the Juvenile Electronic Monitoring/Community Release Program. The Probation plan also recommends the elimination of the Informal Juvenile and Traffic Court which will redirect clients into the Court system.

The Capital and Technology Plan has identified $25 million in capital projects but will fund just $8.8 million. Since 2002, the County’s Capital Plan has built three Valley Health Clinics, the Valley Specialty Center, the Morgan Hill Court House, a new Crime Lab, and has acquired and improved the Charcot facility and a new fleet facility.

New Initiatives
The Recommended Budget also identifies new initiatives in health and law enforcement programs. “Based on a very challenging short and long term forecast, we have no choice but to bring forward ideas and proposals that require us to move in new directions that can reduce costs and mitigate impacts on direct service,” Smith said.

The budget proposes a new relationship between the Sheriff’s Office and the Department of Correction that could result in an estimated $5 million savings through lower operating costs. In 1987, the Board of Supervisors removed the jails from the Sheriff and created budgetary savings. However, since then court decisions and new statutes have significantly contributed to inefficient processes and operational work-arounds. The proposed change eliminates duplication between the two departments in Personnel, Internal Affairs and Administration. With some limited staffing changes, this new plan will generate significant savings without compromising safety. Correctional officers will continue to receive specialized training. The Sheriff will exercise additional authority in providing correctional officers the right to carry weapons.

For the first time in several years, the Public Health, Mental Health and Drug and Alcohol departments are not being asked to reduce services. Smith is recommending adding $8 million back into health programs.

The Public Health Department will receive $3 million in new funding along with an additional $2 million to backfill programs, such as HIV/AIDS and Adolescent Family Life Program, which are no longer funded by the State. The Department of Drug and Alcohol Services will receive $500,000 in new funding and the backfill of lost State Proposition 36 funding of $2.5 million.

“We must start rebuilding these health programs to avoid any further fraying of the safety net,” Smith said. “These investments will help us stabilize critical safety net services and eventually generate an even greater return by reducing the flow of clients into the health care system.”

One-time Revenue Solutions
The County will rely on one-time funds to prevent cutting too deeply into services to the community. “Times are uncertain and our nation is trying to climb out of a recession,” Smith said. “We don’t want to drastically reduce services to vulnerable people when they are trying to recover and may be relying on County services to get by.”

One time solutions will rely on three major revenue sources totaling $110 million, which represents 79% of the one-time solutions included in the Recommended Budget.

Over the past two years, the American Recovery and Reinvestment Act (ARRA) revenues have enabled the County to cope with a devastating economic situation. For Fiscal Year 2011, ARRA funds will be extended for six-months specifically through increased reimbursements for the Federal Medical Assistance Percentage (FMAP) formula. The additional funding to local governments for Medi-CAL services will provide an additional $33.8 million for the County and prevent the elimination of hundreds of positions. Many residents are turning to the County for assistance after having lost their jobs and health insurance. Unfortunately, if ARRA is not extended beyond Fiscal Year 2011 it will result in the loss of $56.2 million in revenue to the County.

Santa Clara Valley Medical Center will contribute $49 million in Medi-Cal revenue through the Hospital Fee. Assembly Bill 1383 takes advantage of the ARRA extension by enacting a hospital fee whereby the State will tax hospitals in order to gain an additional $4.3 billion in federal funding to increase State Medi-Cal resources.

The County has reached a tentative agreement with the San Jose Redevelopment Agency that will provide $27 million in one-time funds and a timetable that will define when regular payments will resume. Between Fiscal Year 2009 and Fiscal Year 2010, the Agency owed the County a total of $42 million. The loss of both prior year and ongoing revenue would have been devastating to County services and programs.

County Outlook
Finding solutions to a $223 million deficit has challenged the County to make tough decisions, and although the budget plan could have been more severe, Smith has chosen a path that mitigates the most difficult service reductions now.

“The County has been successful over the past few years in putting enough resources together to maintain the majority of services. This form of living ‘paycheck to paycheck’ has been necessary to preserve a viable ‘safety net’ that represents one of the Board’s highest priorities,” Smith said. “However, the magnitude of the Fiscal Year 2011 deficit and use of reserves and one-time funds to maintain service in prior years provides no flexibility to create a reserve for likely State reductions.”

The combination of these factors will require additional budget actions when the State completes its budget process in the summer or fall. The County will maintain a 5% contingency reserve but will not have additional reserves to bridge the organization through impending State reductions.

As for the next fiscal year, Smith hopes that Healthcare Reform and a new 1115 Medicaid Demonstration Waiver to fund hospitals and indigent care, coupled with an improving economy, could provide offsets to the looming deficit in Fiscal Year 2012. However, the County faces challenges ahead with no immediate reserve for State reductions for Fiscal Year 2011, and anticipates that pension costs will increase in the next fiscal year along with other pension benefit costs in Fiscal Year 2013.

“The national economy may be improving but the fiscal challenges awaiting us over the next five years are daunting,” Smith said. “These challenges will require a new level of collaboration and cooperation to survive this crisis.”

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Next Steps – Board Budget Workshops (schedule attached)

 

Board of Supervisors Budget Workshops

Board Chambers, 70 W. Hedding Street, San Jose

Tuesday, May 18, 2010 - 1:30 p.m.

  • Budget Overview
  • Children, Seniors and Families: Department of Child Support Services, In Home Supportive Services
  • Health and Hospital: Children’s Shelter and Custody Health Services, Drug and Alcohol Services, Community Health Services, Valley Health Plan, Public Health, Mental Health

Tuesday, May 18, 2010 - 6:30 p.m.

  • Children, Seniors and Families, continued: Social Services Agency
  • Health and Hospital, continued: Valley Medical Center

Wednesday, May 19, 2010 - 1:30 p.m.

  • Finance and Government Operations: Special Programs and Reserves, Contingencies, Board of Supervisors, Clerk of the Board, County Executive’s Office and LAFCO/ Affordable Housing, Assessor, Procurement, County Counsel, Registrar of Voters, Information Services Department, Three Year Technology Plan, County Communications, Facilities and Fleet, Capital Programs, County Library, Employee Services Agency, Finance Agency

Thursday, May 20, 2010 - 1:30 p.m.

  • Public Safety and Justice: Office of the District Attorney, Office of the Sheriff, Medical Examiner-Coroner, Office of the Public Defender, Office of Pretrial Services, Department of Correction, Probation, Criminal Justice System-wide Costs, Measure B, Planning and Development, Agriculture and Environmental Management, Parks and Recreation, and Roads and Airports Department.
  • Housing, Land Use, Environment and Transportation: Measure B, Planning and Development, Agriculture and Environmental Management, Parks and Recreation, and Roads and Airports Department.

Budget hearing meetings to make final decisions on the FY 2011 Budget will take place June 14-18, 2010.

County Executive’s FY 2011 Recommended Budget is located at www.sccgov.org under Hot Items

Media Contact: Gwendolyn Mitchell/Laurel Anderson, Office of Public Affairs (408) 299-5119
Posted: May 3, 2010