The Board of Supervisors on Tuesday got a glimpse of the county’s preliminary budget for the 2014-15 fiscal year, a plan which reflected a potential deficit of $9.3 million.
The county projects a total budget of $457.9 million, with most of those dollars earmarked for the various county departments. About $90 million in revenue and other funds remain, but the county projects additional costs of $99.4 million – leaving a $9.3 million shortfall.
County Executive Officer Jim Brown said during the board meeting that the projected numbers could change between now and the proposed budget in June. He said there could be an increase in the county’s fund balance.
“Revenues are up. We caution you, our expenses are up as well,” Brown said during the meeting. “It’s a balancing act … we’ll still have a deficit.”
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Brown could not be reached for further comment Tuesday.
The county’s costs climbed almost $10 million in a year – going from $89.9 million last year to a projected $99.4 million in 2014-15. Brown attributed the increase to several factors: a spike in health care costs, higher contributions to the retirement system and employee furloughs coming to an end.
Brown also warned the supervisors about the impact of the drought on economic activity next year.
“Many of the crops out there may not be available next year,” he said. “If they’re not able to keep their crops going because of the drought, that will impact jobs.”
Other issues to consider include the expiration of a federal grant that paid the salaries of five deputies at the Sheriff’s Department, dealing with poor jail facilities and the implementation of Assembly Bill 109, the state’s prison realignment law.
But as Merced County officials enter into labor negotiations with many of the county’s employee unions this week, Brown stressed that employee benefits and salaries are the biggest cost drivers.
Salaries and benefits accounted for 62.1 percent of general fund expenditures in February, according to the documents.
District 2 Supervisor Hub Walsh said it’s unclear if layoffs will be necessary to close the $9 million gap, but said county administrators may have to consider all options.
“I’m sure it’s not the first option, but all options are on the table,” Walsh said. “I think we’ll wait and see if the end-of-the-year fund balance changes or the revenue picture changes a bit. Then we’ll be talking with managers and employees about ideas and ways to save money and cut costs.”
Walsh said he knew the county would face a shortfall in next year’s budget, but didn’t realize it was almost in the $9 million to $10 million range.
District 3 Supervisor Linn Davis, also vice chairman of the board, echoed the same sentiment. Davis said he expected the deficit to be less, estimating it to be around $4 million or $ 5 million.
“I think the retirement packages and furloughs are what put us higher this year,” Davis said. “It will depend on if the revenues continue to go up a little bit. I hope the revenues increase more than we predicted.”
Davis said he doesn’t believe the numbers will change drastically in the next few months, but the county could use some of its one-time reserves to help offset the deficit. “I’m not projecting any layoffs. We do have some reserves, but as Mr. Brown said, we need to use that sparingly,” he said.
County administrators are expected to bring a proposed budget to the June 17 board meeting. A final budget is expected to be adopted at the Aug. 26 board meeting.