Ending the current fiscal year with a deficit signals the need for financial belt-tightening in 2019-20, so spending cuts are in order, Riverside County CEO George Johnson told the Board of Supervisors Tuesday.
“Our shortfall will continue,” Johnson said during a review of third-quarter finances for 2018-19. “We need to position ourselves to be in a strong financial position. There will be targeted budget reductions in some departments, and there will be some anticipated reduction in services. These are not easy decisions for any of us.”
Most county agencies are in the black as the fiscal year nears its close, June 30. However, red ink blotting the books of several agencies has produced a $22 million hole that the board will have to address, according to the Executive Office.
Johnson noted that multiple agencies have also come forward with requests for expanded spending authority — approaching $50 million — that would add significantly to cost pressures.
“There are hard discussions and difficult decisions ahead,” he told the board. ” But we are committed to the long-term fiscal sustainability of this county.”
Agencies with the greatest red ink as the fiscal year concludes are the Department of Public Social Services and the Riverside University Health System, according to the Executive Office.
DPSS’ General Assistance program was budgeted at $2.2 million at the start of 2018-19, but its spending has ballooned over 550 percent to nearly $14.5 million in the last nine months, according to the county.
General Assistance includes some unemployment relief, cash for undocumented immigrants and other county-funded obligations.
The Executive Office said DPSS’ overages are being covered with general fund allocations.
Meantime, RUHS was projecting a $16 million deficit due to ongoing losses at the 10 county-run public health clinics. The shortfall was first noted in the Executive Office’s midyear report, which warned that no quick fixes were available to stem the flow of red ink.
Officials blamed the losses mostly on inadequate federal reimbursement rates for health care delivered to the indigent and uninsured, as well as rising labor and pension costs for employees. A restructuring plan is in the works.
Public safety agencies, often the most challenging for the board to sort out each fiscal year, were largely operating within spending constraints by the close of the third quarter, according to the Executive Office.
Sheriff Chad Bianco indicated that he would end 2018-19 with $6 million to spare, while District Attorney Mike Hestrin said he had narrowed his previously projected $4.3 million deficit to $1.7 million, with hopes of further reductions by the time of budget hearings in mid-June.
Hestrin was netting savings through attrition and delays in personnel replacements.
Despite the positives, Bianco and Hestrin are among agency heads seeking additional funding in 2019-20 that’s above spending thresholds set by the Executive Office.
County fire Chief Shawn Newman was confident of achieving fiscal balance, and for the first time since his appointment in 2013, Public Defender Steve Harmon projected no fiscal year deficit.
However, Department of Animal Services Director Dr. Allan Drusys estimated a $1.3 million shortfall for the agency, mainly stemming from a drop-off in fee collections.
Supervisors Kevin Jeffries and Karen Spiegel both expressed concern about the cost of lawsuits and what impact that will have on finances going forward. In March, Auditor-Controller Paul Angulo submitted a report showing the county’s liability payments over the last five years totaled $137 million, second only to Los Angeles County in Southern California.
Johnson said a detailed look at liability payouts will be the subject of a presentation later this month.
According to the CEO, the county is likely to end 2018-19 with a reserve pool just over $200 million, but discretionary revenues will shrink to backfill agencies’ deficits.
According to Executive Office staff, composite revenues, which include property tax receipts, sales taxes, collections from fines and penalties and other components, will top out at $1 billion — $20 million more than predicted last June.
Johnson warned that growing expenses lay on the horizon, including swelling pension obligations and costs to complete the John J. Benoit Detention Center in Indio, making it vital for the county to enforce discipline.
The Executive Office further noted that, at some point, the economy will “turn,” and a recession of unknown duration will hit, resulting in unplanned changes to payrolls and outlays.
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