Growing deficits projected in county
Supervisors get grim outlook; $7.3M shortfall in 2020-21
Marin County officials are estimating general fund shortfalls over the next five years ranging from $7.3 million in fiscal year 2020-21 to $55.6 million in 2024-25.
Marin County Administrator Matthew Hymel and Budget Manager Bret Uppendahl presented the grim scenarios to county supervisors on Tuesday.
“We certainly face a number of challenges,” said Supervisor Damon Connolly.
Supervisor Judy Arnold said, “All you can say is, it is what it is, and now we have to go forward.”
In their written report to the board, Hymel and Uppendahl wrote, “Never before have the local, regional, national and global economic balances been so abruptly altered. Now, the question is not whether the country will be in a recession, but how deep the recession will be and how quickly we might rebound.”
Uppendahl said 8,868 unemployment claims were filed in Marin during March. The new claims are expected to boost the county’s unemployment rate from 3% to 10%.
Uppendahl told supervisors that economists are evenly split between those who expect a sharp rebound of the economy and those who expect a more prolonged downturn.
Under an optimistic scenario in which the economy returns to a degree of normalcy by the fall, Uppendahl said, Marin County could see a general fund shortfall of $7.3 million in fiscal 2020-21. If the recession is more prolonged, it would increase to about $10.9 million, he said.
Under the more optimistic outlook, Uppendahl projects the shortfall will increase to $20.7 million by 2024-25, while under the more pessimistic scenario it would balloon to $55.6 million.
“A big piece of the recovery will be dependent on what kind of social distancing measures are taken here at the county and across the state and nation,” Uppendahl said.
He said the longer that populations stay home, the more they will suppress the outbreak but worsen the recession.
Signs that segments of the public are growing impatient with the “shelter in place” strategy were evident in several of the emails submitted as public comment during Tuesday’s meeting.
“Please take a hard look at the serious economic hardships that have occurred because
of the shutdown and move towards re-opening quickly,” wrote Ken Gallardo of Mill Valley. “Far more people are being hurt by the shutdown than are being protected by it.”
Faye Bourret of San Rafael wrote, “Citizens will not tolerate this house arrest against our civil rights. Your current plan is killing our businesses forever and killing citizens with depression.”
But opinion on this issue also remains split.
Mimi Willard of Kentfield wrote, “Please do not move too quickly to ease shelterin-place restrictions. Models show that we risk having 2,000 deaths if we are not careful. Prioritizing nearterm economic growth over public health will not end well for either our local economy or our citizenry.”
The county’s 2019-20 budget is about $631 million. The county is losing nearly $6 million per month in revenue while the economy is restricted. At the same time, it is having to spend more on
emergency operations and community support services.
Nearly 40% of the county’s revenue comes from state and federal sources. The state has a $21 billion reserve fund, but Uppendahl said that is unlikely to mitigate impacts because the state relies heavily on volatile revenue sources such as income tax and sales tax.
The drop in the stock market means that Marin County’s pension costs will rise, but not until 2022. Typically a one-year lag in adjusting contribution levels, Uppendahl said. Beginning in 2022, however, the county could see pension costs rise $5 million to $8 million per year.
County managers have been preparing for a modest downturn in the economy by stashing cash in various reserve funds. The county has a $6 million budget stabilization fund, a $10 million pension stabilization reserve and a $4.8 million reserve to offset changes in state and federal revenue.
Uppendahl expects the county to end the current fiscal year with a $31.1 million surplus; the economy was relatively strong before the pandemic. Of that amount, $20 million is needed for next year’s budget and $11.1 million is available for one-time allocations.
Hymel recommended Tuesday that the supervisors put $6 million of the surplus into the budget stabilization fund and decide how to spend the remaining $5.1 million in the fall, when a clearer picture of the nation’s economic future might have formed.
Supervisor Kate Sears said when work begins on the 2020-21 budget in June, supervisors and managers will need to look at ways of doing business differently, such as “increased telecommuting and other changes as well.”
Marin has had 237 coronavirus cases, 13 deaths and 43 hospitalized (0 currently), with 178 recovered and 3,573 tested.