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County Belt Tightening Underway in Response to Continuous Challenging Economic Conditions

Mid-Year Budget Review and Adjustments Outlined

SANTA CLARA COUNTY, CALIF.— Today, the County of Santa Clara Board of Supervisors approved suspension of a number of capital improvement projects and reallocation of $17.7 million from the County’s Reserve Funds to keep the Fiscal Year 2010 budget in balance. It is customary for the Board to make Mid-Year Budget adjustments to ensure it meets its legal obligation to have a balanced budget by June 30. The Board’s action followed a presentation by County Executive Jeffrey V. Smith and Budget Director Leslie Crowell on the status of the current budget; actions underway to balance the budget; and an assessment of revenue shortfalls projected for next fiscal year, which begins on July 1.

“During the past two fiscal years we have had to reduce the budget by about $600 million,” said Smith. “That is a huge amount of money and it doesn’t look any better for the next five years.”

Referring to the impact of the continued recession on county revenue projections, Smith indicated that it usually takes four to five years following an economic recovery for local governments to see improvement in revenues.

“We have to fundamentally change the way be operate,” Smith continued. “Change is difficult for people to tolerate, but we have very few options. Five years from now we will be a completely different organization

“Nearly twenty-five percent of mortgages are underwater, driving foreclosures and depressing real estate values and the property taxes the County would normally receive,” said Crowell. “Consumer spending is down as well, and that affects sales tax revenue.”

The County Executive has already taken a number of steps to mitigate the negative projected balance, including ensuring that procurement controls are in place to curb departmental spending; tightening the freeze on hiring; and reclaiming unspent balances that would normally rollover for department use in the year ahead. In addition, Smith has begun an entirely new budget preparation process that requires departments to develop cost-saving ideas by changing the way they conduct business and submitting those ideas for review and prioritization by executive managers across departmental lines. Smith plans to meet with unions and community based organizations as well.

“So far a few good ideas have surfaced,” said Smith. “We will be working over the next several weeks to put together innovative strategies to address the budget.”

Both Supervisors Don Gage, District 1 and Liz Kniss, District 5 decried the San Jose Redevelopment Agency’s failure to live up to its obligation to provide $21.4 million in Pass Through funds owed to the County.

“I want the public to understand exactly how this loss of revenue is impacting our residents,” said Gage. “These are funds that the City of San Jose agreed were to come to the County, and without them we are forced to cut services.”

Kniss remarked, “Part of the Redevelopment Agency funding was earmarked for the new hospital. I find it very troubling that this failure to live up to its contractual obligation means services will be lost.”

Projects that were to be supported by the Redevelopment Agency funds and now will be suspended are:

  • Timpany Center - $2.5 million
  • Purchase of Vacant VTA Parcel at First/St. James streets - $1 million
  • Sheriff Evidence and Record Storage - $1.7 million
  • Main Jail Security Upgrades - $730 thousand.

Suspension of these RDA funded projects will be combined with savings from other suspended capital projects for a total savings of $9.1 million. Although these projects are being suspended, the County intends to pursue legal remedies for the Redevelopment Agency’s failure to protect its financial interests.

Modifications for Current Needs

The Board also approved the addition of $223 thousand to the Public Defender’s budget to provide for the legal representation of defendants accused of misdemeanors. The ongoing cost will be $800 thousand annually.

Among the modifications approved today to fund ongoing needs are increases to the Social Services Agency which is experiencing increased demands for services from families and individuals affected by the recession - $614 thousand; additions to the Public Health Department to focus on health disparities and health inequities - $233 thousand; Center for Leadership and Transformation to position the County for the type of organizational change that will be required - $196 thousand; and payment of $2.2 million to the Courts to complete the transfer of facilities to the state required by law.

“The state’s dismal fiscal outlook continues to be of concern to the County as it continues to raid county revenues,” said Supervisor Dave Cortese, District 3. “I have the same feeling I had as a child playing the ‘lights out’ game. It’s like walking around in a dark room waiting for something to hit you.”

“Our current year outlook would be worse if we hadn’t put aside reserves in anticipation of the State budget reductions,” said Supervisor Ken Yeager, President of the Board of Supervisors. “Otherwise, we would have to face laying off hundreds of employees, as so many other counties now must do.”

Looking Ahead to FY 2011

The forecast for FY 2011, as in the previous eight years, continues to be grim due to the impact of the recession on the economy. The County is projecting a General Fund deficit of between $230 and $250 million, and the County Executive is leading a budget process asking for deficit reductions from County Departments. Budget workshops are planned for May 18 - 20, 2010.

Media Contact: Gwendolyn Mitchell, Office of Public Affairs, (408) 299-5119 
Posted: March 2, 2010