El Dorado County budget under scrutiny | TahoeDailyTribune.com

El Dorado County budget under scrutiny

Griffin Rogers
griffin@tahoedailytribune.com

An elected financial expert with El Dorado County is calling the county's new spending plan irresponsible, and one that will likely lead to layoffs next summer.

Three out of five supervisors at the Sept. 23 board meeting voted to approve the financial plan, or fiscal 2014-15 budget, which was recommended by the county's Chief Administrative Office.

However, in disagreement with other finance specialists in the county, Auditor-Controller Joe Harn says the budget is not balanced and does not reverse an adverse financial trend of dwindling general fund cash and combined unreserved fund balances.

That downward trend, according to Harn, is in large part due to higher salary and benefits costs brought on by the addition of several positions, as well as a number of employees receiving a 15 percent raise over an extended period.

Those costs from June 2013 to June 2014 increased by about $13.6 million, while the general fund's cash balance and combined unreserved fund balance decreased by about $9.3 million and $8.3 million, respectively.

In other words, payroll costs are rising much faster than revenues in El Dorado County.

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"With this large of a budget gap, it's my opinion that some positions are going to have to be eliminated," he said Friday.

Chief Budget Officer Laura Schwartz presented the spending plan at the September meeting and said Monday that the budget is in fact balanced — the opposite of what Harn claims.

The budget has been balanced due to an immediate 3 percent forced salary savings, which essentially reduces appropriations within department budgets, she said. The savings translate to about $3.7 million for the current fiscal year.

Essentially, staff bumped up savings that are typically found at the end of the year, when the county gets money back from vacant positions that were budgeted for, but never filled.

It's a strategy that helps the county now, Schwartz said, but the savings won't do much to curtail a $17 million shortfall expected in fiscal year 2015-16.

"The deficit that we're looking at in fiscal year 15-16 is a real deficit," she said. "That's why we are trying to jump on that right now, to look at how do we solve the next-year problem."

"So the 3 percent has balanced us for the current year, but that does not help us next year. In fact that kind of makes that $17 million figure a little more real because we're already taking away some of those year-end savings that we typically see."

According to Harn, however, the forced salary savings are a "budget gimmick" that "doesn't take the problem head on."

"I don't know what forced salary savings really means," he said. "The bottom line is if you have employees and they've been given 15 percent raises, and if you don't have any (position) vacancies, you're going to not have any savings at all."

Harn sent an email to county board members on Sept. 15 expressing his opposition to the CAO's budget recommendation. In it, he mentions the need to cut spending now to avoid "drastic cuts and drastic layoffs" next year.

Schwartz, on the other hand, remained tight-lipped Monday on the likelihood of layoffs.

"I really can't comment on that," she said.

Despite Harn's concerns, the majority of the board chose to adopt the budget with the forced salary savings and direction to staff to establish an ad hoc budget advisory committee to work on funding sources.

Supervisors Norma Santiago, Brian Veerkamp and Ron Briggs were in favor of the adopting the budget. Supervisors Ron Mikulaco and Shiva Frentzen were opposed.

The board also authorized aid to fire in the amount of $815,000, which was paid out of the general fund contingency appropriation.

Harn said based on the board's actions, the contingency fund is at its lowest point in 10 years — just below $3.9 million. The fund was at $10.2 million one year ago.

Harn warned the board about this drop after the budget was passed in a Sept. 25 email.

"Further, because of the King Fire, if there was ever a year when we needed a large contingency, this is it," he wrote in the email. "Further, the Forced Salaries Savings budget balancing gimmick will also lead to a much lower general fund carry-forward at June 30, 2015."

Schwartz said the county's financial situation is dire if action isn't taken, but staff is working on solutions to its deficit problem.

"We're getting ready to implement a priority-based budgeting system now that's going to take probably 18 months to really get to where we're trying to get with that," she said. "But, you know, I think the board has time, but they need to make some decisions."

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