Orange County supervisors Tuesday will consider a $7.7 billion budget for the fiscal year 2021-22, about the same level as last fiscal year.
But with state officials eyeing a variety of new programs and increasingly encouraging sales-tax revenue trends, the county may be able to restore some of the hundreds of positions eliminated last year.
It is unclear, however, how the newly proposed state programs will affect the county’s budget, Orange County CEO Frank Kim said.
“One of the things I suspect most people in Orange County are interested in are these new state programs the state has been doing a lot of media on, but you won’t see those in our budget because the state has yet to approve its budget,” Kim said.
The supervisors have scheduled time to consider the budget on Tuesday as well as Wednesday, if necessary. What’s unknown is how much longer the meeting will be when factoring in public comments.
Hundreds of critics of the COVID-19 emergency authorization and social distancing restrictions as well as vaccines have been coming to all of the board of supervisors meetings, calling on the supervisors to do things that they cannot legally do or would be impractical to do. But officials have taken all COVID-19-related topics off the agenda to limit that public commentary so they can focus on the annual spending plan.
The general fund budget, which reflects spending that is more discretionary and outside of legally required programs, is proposed to be $4.1 billion.
Federal relief packages during the COVID-19 pandemic have helped prop up the county’s economy, Kim said.
The county is relying on economic forecasts of 3.5% growth in property-tax revenue. A booming housing market helps explain that, Kim said, but he added that county officials were surprised by the resurgence in sales-tax revenue, which can likely be chalked up to COVID-19 relief packages.
“It did fall significantly” last year, Kim said in an interview last month when the proposed budget was unveiled. “But then it did recover. It has been volatile.”
The stimulus checks from the federal government and unemployment extensions likely helped bolster sales-tax revenue.
“Not only did we get stimulus checks, but there were business grants, a moratorium on evictions. … There’s been a variety of state and federal programs that have held up the economy,” Kim said. “And that is reflected in consumer spending activity.”
The county is forecasting $358 million from the half-cent sales tax that funds Prop. 172, which funds law enforcement. The Orange County Sheriff’s Department gets 80% of that money and the District Attorney’s Office receives the rest. That represents a 12.7%, or $40.3 million, increase over last fiscal year.
The county is also anticipating a 16.2%, or $13.1 million, increase in state funding for realignment programs aimed at reducing the population of prisons.
“That funding is strong, so we’re really happy about that,” Kim said of the AB 109 and Prop. 172 revenue.
Shawn Nelson, assistant Orange County district attorney and former Orange County supervisor, attributed the increase in sales taxes in part to more cash-less transactions during the pandemic.
“There is a huge underground economy with cash,” Nelson said in an interview last month. “Cash almost disappeared as a way to do transactions, and guess what happens when you get credit card payments? You have to pay taxes. … Everything they did from a consumer standpoint all suddenly got reported.”
Also, there was a lot less travel as people stayed closer to home, so many of the dollars were spent locally, Nelson said. The surge of sales-tax revenue is good news for an agency that has been relying on officially retired prosecutors who return to work for various assignments.
“We have 26 or 27 retired attorneys carrying a big workload,” Nelson said.
A continuing challenge is new post-conviction litigation that stems from changes in state laws, Nelson said.
The county deleted 548 vacant positions in last fiscal year’s budget to help cover shortfalls from the pandemic. The county also offered retirement incentives that 617 employees took advantage of to help delete 212 vacant jobs.
The elimination of those jobs has affected the delivery of services in the county, Kim said. But with the increased revenue expected from sales and property taxes and the state’s goals of new programs, officials may restore some of those positions, he said, adding that they would know by this fall.
The recommended budget is $152.1 million higher than last fiscal year with a decrease of 512 positions.
The budget is expected to be adopted June 22.
That’s a stark contrast to last year, when supervisors did not adopt a fiscal year budget until September due to uncertainty caused by the pandemic.
The county is expecting to receive $308 million from the most recent federal COVID-19 relief package in the coming fiscal year. That matches what it received for the current fiscal year. OC’s cities are expected to receive $715 million over a two-year period as part of $130.2 billion in local government funds from the relief package that must be spent by the end of 2024.