By Joe Naiman
When the County of San Diego developed its 2008-09 budget, county staff anticipated a decline in state funding and in property tax and sales tax revenue and prepared a conservative budget with contingency plans and strategies.
Economic conditions have declined beyond even the county's expectations, and last month a presentation to the Board of Supervisors noted that cuts in the near future are likely.
"We here in county government must be prepared," Chief Administrative Officer Walt Ekard said. "We have fiscal concerns the likes of which we have not seen in many years."
Ekard, Chief Financial Officer Don Steuer and Health and Human Services Agency Director Nick Macchione gave the Nov. 18 presentation. "We are asking for no decisions today," Ekard said. "This is simply setting the stage for what is to come."
Tax revenues weaken
An economic downturn usually creates several pressures on a budget. Funding from state and federal sources may be reduced, local revenues from property and sales taxes and user fees also decline, and more citizens require social services.
"We'll be required to make tough choices and prioritize all of our programs and services," Macchione said.
The growth in assessed values from which property taxes are derived is projected to be 2 percent for 2009-10, down from a growth of 4.4 percent for 2008-09. Assessed values had been rising by double-digit percentages since 2004.
The UCLA Anderson Forecast projects a sales tax decrease of 3.8 percent for 2008, which would drop total revenues in 2000 dollars to the lowest amount since 2003.
The decrease in sales tax revenue means a decrease in Proposition 172 funding for public safety. The county's Proposition 172 revenues are $22 million below budget. The county expects state realignment revenue to be $31 million to $40 million below budget, and general-purpose revenue is anticipated to be $25 million below budget. The county expects a $30 million shortfall in Proposition 172 revenue for next year.
"As information becomes available, we will continue to examine the impacts on our programs," Steuer said.
Retirement fund hit
Steuer also noted that the recent stock market declines have caused $1.1 billion in losses to the county's retirement fund. That will result in a reduction of assistance advice and clinic hours, and vacant positions likely will not be filled.
"The next few months and years are probably going to be very challenging," Board of Supervisors Chairman Greg Cox said. "We are going to have to reduce services."
Supervisor Pam Slater-Price noted that the requirement to fund mandated state programs will result in cuts to discretionary programs.
"We have to cut the programs that are more forward-looking, more progressive, and more likely to work," she said.
She said cuts would likely be in the Critical Hours teen program and other intervention programs as well as to community centers, libraries, and Parks and Recreation services.
"As well prepared as we are, we're going to see some painful decisions," Slater-Price said.