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County Executive Releases Fiscal Year 2012 Recommended Budget

$220 Million in Proposed Ongoing Solutions; $75 Million in Labor Concessions Needed

SANTA CLARA COUNTY, CALIF.—Today, County Executive Jeffrey V. Smith released the Fiscal Year 2012 Recommended Budget for the County of Santa Clara. Including all services, operations, capital improvements and reserves, the Recommended Budget totals $4.0 billion and addresses a $219.6 million General Fund shortfall. The $2.1 billion General Fund budget outlines the proposed spending plan for all discretionary and many mandated services for the fiscal year beginning July 1, 2011.

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 and signals the start of budget review workshops and hearings by the County of Santa Clara Board of Supervisors. The County is facing the 10th consecutive year of significant general fund deficits and over that period closed funding gaps totaling $1.8 billion. The worst economic recession since the Great Depression has dramatically reduced local property taxes, state program revenues, and federal program revenues – three major county revenue sources.

“At this point, we do not foresee a return to the prior "normal" local governmental funding in California,” said Smith. “The next few years will actually create a "new norm" for local governments in California as the state begins to deal with the current $25 billion deficit that has been caused by many statewide factors.”

The recommended budget is a departure from past years in that it is not proposing the use of one-time funds to close the gap. In previous years, the use of such funds helped to offset cuts to services.

“There are a few reasons for this change in approach,” said Smith. “We no longer have one-time resources to cover ongoing expenses. If we use reserves to fund ongoing operations, our cash flow concerns become more serious. Also, we can no longer afford to push our deficit off to next year. We have to face the reality of living within our means.”

Smith’s recommended budget eliminates 400 positions and also assumes that the County will be able to capture $75 million in General Fund savings from labor concessions.

“We have to reduce the unit cost of service,” continued Smith. “The current benefit levels are not sustainable into the future. We are looking to work cooperatively with labor to identify how we can achieve this goal.”

When the major labor contracts were last open in 2009, the contracts were rolled over with no change in salaries or benefits. The administration signaled at that time the need for restructuring the County’s compensation plan. The recommended budget also includes deficit solutions totaling $145.1 million from County departments.

“There are many proposals in this budget that are difficult to recommend,” he said while acknowledging county managers for doing everything they can to generate savings. “The truth of the matter is that we have no choice if we are to comply with state law that requires the adoption of a balanced budget.”

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.

Departmental Reductions

In-custody-related reductions: Closure of three units in Juvenile Hall result in the elimination of 28 Full Time Equivalent employees (FTEs) in the Probation Department, and reductions at Elmwood Minimum Camp result in 19 fewer staff there. These recommendations are possible due to the decline in population at Juvenile Hall and at Elmwood that has occurred over an extended period of time.

Public Safety Direct Service Reductions: Elimination of the West Valley Patrol and Rural Patrol will eliminate 4 FTEs and save nearly $600,000. This action will result in significant declines in response times in these geographic areas.

Maintenance, Property Management, Capital, and Accounting Function Reductions: The elimination of 33 FTEs (17 in Facility Operations and 16 in various oversight and administrative areas) totaling $6.5 million in the Facilities and Fleet (FAF) Department will result in a decline in the ability to respond in a timely manner to facility issues across the County, as well as the ability to provide adequate oversight of the myriad of infrastructure-related projects and operational activities in the County.

Elimination of General Fund contracts and contract administration: This reduction in the Social Services Agency has a value of $2.2 million. Much of this expense has been funded with one-time funds in the past few years. Although these funds support important Community Based Organization (CBO) services, the loss of state assistance and the need to reduce net county cost in the Social Services Agency make this recommendation necessary.

Services to the Public: Service reductions in the Tax Collector, the Clerk Recorder, Veterans Affairs, the Office of Emergency Services, the Office of Human Relations, and the Public Guardian, among others, reduce 25 FTEs who provide direct services to the public.

Internal Service Reductions: Elimination of 13 FTEs in the Employee Services Agency results in a savings of $1.5 million. This reduction will impact the ability to address the demands of County departments in the areas of recruiting and classification.

Service Cuts Mitigated by Creative Solutions

A major initiative underway is a re-examination of how the County does business. The Center for Leadership and Transformation engages middle managers and executives to work across functional lines to find solutions. Among the savings recommended which are the result of new ways of operating and creating efficiencies are the following:

  • New procurement procedures and processes which are saving $1 million in the health and hospital area alone.
  • Revising the emergency system notification contract to reduce costs and focus only on emergency messaging for the region, eliminating non-emergency messaging and reducing annual contract costs by $710,000.
  • Shifting staff from operating departments to the Information Services Department to leverage expertise and resources.
  • Business process changes taking effect in the Social Services Department of Employment and Benefits in FY 2012 should result in a decreased need for overtime expenditures, saving $3.5 million.
  • Recognizing the impact of vote by mail balloting is a major factor in the ability of the Registrar of Voters to reduce staff by seven people, or 15%.

State and Federal Impacts

The recession of 2008-2009 has had a major impact on all levels of government. Both the State of California and the Federal Government are grappling with monumental deficits that will impact Santa Clara County in FY 2012. The possibility of an "all cuts" budget at the state level that would require reductions of over $25 billion would have impacts on local government that are difficult to comprehend. At the same time, the political dissension in Washington D.C. about how to reduce the federal deficit adds a new and disturbing dimension to the financial challenges for the near future. The combination of state and federal actions could translate into millions of dollars in lost revenue and have a devastating impact on the County’s service delivery systems. At this point, we aren't ready to define the impacts due to the inability of both entities to reach consensus on how to address their respective financial problems.

Concurrent with the development of this recommended budget, contingency plans to deal with the potential impacts of additional state and federal decisions are being developed. After release of the State’s May Revise, a plan will be available for discussion with the Board in June. A subsequent contingency plan will be prepared to address the impact of the Federal budget, which will not be known until the fall.

Investment in the County Organization - Use of One-Time Funds

In 2012, use of one-time funds drops to a very low level and negatively affects the County’s ability to invest in infrastructure and technology improvements to make our employees more efficient. Of a total of $112.6 million in available one-time funds, 81 percent, $91.6 million are allocated to the contingency reserve.

Capital Budget: Only $8.6 million is recommended for capital projects and $5 million of this allocation will be used for major maintenance projects; $2 million is recommended as a match for a state grant to remodel the James Ranch, and $1 million is set aside for options regarding the Old City Hall site obtained from the City of San Jose in the Redevelopment Settlement.

Technology Needs: Only $3.2 million is allocated for technology projects. One of the sources of one-time funds is the rebate of retained earnings from the Information Services Department.

Other One-time Needs: Reduced payment to the Retiree Health Trust fund for the San Jose Medical Center site from $8 million to $5.3 million, for a total repayment as of 2012 of $13 million of the $24 million that we borrowed to acquire the site; an allocation of an additional $1 million for the final six months for Alvarez and Marsal (A&M) to complete its contract pertaining to operations of Valley Medical Center.

Cash Flow: Maintaining the contingency reserve at 5% is critical for cash needs.

County Outlook

The County’s local deficit necessitates a recommended budget that is filled with service reductions and predicated on labor negotiations to reduce the cost of a unit of service. These proposals will be difficult for the organization and community to accept.

A greater concern is the need to plan for additional reductions based on what the State must do to address its $25 billion deficit and what the Federal government will do to reduce the massive Federal deficit? “…I believe we have the will and the ability to implement the types of change needed to streamline and create a more efficient operation. This is the only way that we can keep our service delivery system viable and stay true to the County's all-important mission,” remarked Smith.

“As dire as the circumstances are that we face, I continue to have confidence in the talent of County employees, as well as our partners in labor and in the community, and their resilience during this time of crisis,” Smith said. ”We have very committed, capable and hard working employees and political leaders. We are in the seat of innovation. And, we have proven that we can overcome adversity. I look forward to working with all parties in Santa Clara County to implement the strategies that will assure our place as one of the most innovative and progressive counties in the country.”

# # #

Next Steps – Board Budget Workshops (schedule attached)

Board of Supervisors Budget Workshops

Board Chambers, 70 W. Hedding Street, San Jose

Tuesday, May 17, 2011 – 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 17, 2011 - 6:30 p.m.

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

Wednesday, May 18, 2011 - 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 19, 2011 - 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,
  • Housing, Land Use, Environment and Transportation: Measure B, Planning and Development, Agriculture and Environmental Management, Parks and Recreation, and Roads and Airports Department.

Tuesday, May 24, 2011 – 6:30 p.m.

Special public session for members of the public to speak on the FY 2012 Recommended Budget.

Budget hearing meetings to make final decisions on the FY 2012 Budget will take place June 13-17, 2011.

County Executive’s FY 2012 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 2, 2011