As the economic downturn tightens its grip, Merced County might be forced to tap reserves

Sun-Star illustration by Alex Putzeys

Despite Merced County's $50 million piggy bank, a host of economic troubles could force hard choices and more cuts on an already slimmed down county government in the coming fiscal year.

The good news is that because of fiscal prudence and planning, the county looks to emerge stronger from this recession than the one in the '90s after Castle Air Force Base closed.

The massive loss of tax dollars from plummeting property values, the falling sales taxes from a faltering economy and an unpredictable state budget may deplete the county's hard-earned savings.

At least that's what the county's fiscal outlook looked like as presented to the Board of Supervisors at Tuesday's board meeting.

"It's not going to be fun," said Supervisor Jerry O'Banion of the coming year's budget.

The projected shortfall for the coming fiscal year, which begins in July, is roughly $21 million, according to the county. So come June, when the county starts to figure out its working budget, there'll be some tough decisions to make.

"We've had budget gaps of this size or greater in other years, and we got through those years," said Scott De Moss, deputy county executive officer. "It won't be easy, but we've been working with the departments for more than a year to make sure we are getting ready for this budget year."

The 2009-2010 fiscal year begins July 1, but the operating budget will not be finished until September, when, by law, the county must have an official balanced budget, said De Moss.

De Moss estimates that the county's major loss in revenue will come from property taxes. He said they project a loss of $5 million in taxes from sinking property values. On top of that loss, sales taxes are shrinking because of the weak economy.

Another factor in the near future is the state budget, said De Moss. In July, a $950 million cut in social services will go into effect, further burdening the social service staffs at the county with ever larger caseloads as the recession puts more people in need.

Still, Merced stands in a much better place than it did during the downturn in the '90s.

"The only difference between now and back in the '90s is there were no reserves," said Supervisor O'Banion. "The board has been very stern."

Compared to other counties in the state, Merced looks fairly healthy financially, said Paul McIntosh, the executive director of the California State Association of Counties. Most of the other Valley counties, such as San Joaquin, Fresno and Sacramento, are being forced to make deep cuts, he said.

And since most counties spend about 70 percent of their discretionary budget on public safety, when times are tough the cuts really make a difference, said McIntosh. Some unprepared counties, he said, are already shutting down libraries and limiting electricity at their fire stations.

Merced hasn't had to take such drastic steps yet. But with no real sign of an economic turnaround in the near future, Merced probably won't emerge unscathed, despite its savings.

Reporter Jonah Owen Lamb can be reached at (209) 385-2484 or