Next budget could bring good news, challenges
Starting deficit is small, but there are concerns about savings and spending
Riverside County’s next budget is expected to start with a $3 million shortfall — far smaller than previous deficits — but there are concerns about the health of the county’s savings account, its executive officer said.
Also, county departments have requested $117.4 million in new spending, far more than the county can afford, Jeff Van Wagenen told the Board of Supervisors during a Tuesday workshop on the budget for the fiscal year that starts July 1.
Economic fallout from the coronavirus pandemic at one point was expected to tear a $100 million hole in the current $6.5 billion budget. Those fears were allayed when the county used federal coronavirus aid to offset COVID-19-related expenses. The county received $431 million from the CARES Act.
More COVID-19 relief from the federal government is coming to the county through the American
Rescue Plan enacted in March. But Van Wagenen warned those dollars are “not necessarily a budget solution for the next fiscal year.”
What will help are increases in property taxes and other revenue that will give a $10 million boost to
county coffers. Discretionary revenues are expected to be $919 million in the next budget.
As a result, the structural deficit in the new budget is projected to be $3 million instead of $13 million. In past budgets, the county started with shortfalls in the tens of millions of dollars and the current budget had a $62 million gap last September.
The rise in revenue has gone on longer than expected, Van Wagenen said, adding: “We anticipate there’s a plateau coming.”
What worries Van Wagenen is the county’s reserves, which are projected to stand at $244 million by the end of June and fall to $215 million by June 2022. The county had $275 million in the piggy bank in 2019.
The CEO shared a chart showing that, per capita, Riverside County lags behind other Southern California counties in the size of its reserves and is only ahead of Orange County. That comparison alarmed Supervisor Jeff Hewitt, who noted that Orange County once filed for bankruptcy.
“One good natural disaster that’s not a pandemic and we’re done,” Hewitt said. “… $200 million is not that much over a $6.5 billion overall budget.”
But as much as supervisors want to avoid using savings, they’re once again faced with ongoing revenues that don’t keep pace with looming needs such as pension obligations and the desire to bolster and expand public services in a growing county of roughly 2.5 million.
Van Wagenen said the next budget sets aside $3 million for the Unincorporated Communities Initiative, a new effort to address long-standing infrastructure needs in areas outside of cities.
Another $16 million is ticketed for a fund to address supervisors’ priorities. But Van Wagenen warned that using this fund to pay for ongoing costs — salaries and benefits for new permanent hires, for example — could add to the budget shortfall.
There’s also the $117.4 million in new spending sought by departments.
According to Van Wagenen, the Sheriff’s Department leads the way with $71.1 million in requested new spending, followed by the District Attorney’s Office at $16.3 million. The Department of Public Social Services is requesting $8.7 million and the Registrar of Voters seeks $6.5 million.
Van Wagenen speculated the county might be able to devote as much as $30 million to tackling those requests and that supervisors will have to prioritize departments’ competing needs.
“We anticipate that there will be a situation where a department needs something, another department needs something, and we just do not have the funding to pay for those,” he said.
Supervisors are expected to hold hearings on the new budget in mid-June and are scheduled to adopt the budget June 29. By law, the budget must be adopted by June 30.