Merced County facing $4.6M budget shortfall, leaders say future projections ‘murky’
The proposed $752.3 million 2021-22 Merced County budget was unveiled this week, marking the second fiscal year that the COVID-19 pandemic will cast a shadow over the region’s finances and staffing.
The long-term economic uncertainty incurred by the virus was underscored on Tuesday when the Board of Supervisors repealed three local COVID-19 emergencies that had been declared since the pandemic’s start.
But despite the emergencies being formally terminated, COVID-19’s effects still play a central role in the handling of the county’s present and future finances.
County leaders say those impacts are partially to blame for a $4.6 million shortfall that’s projected between the budget’s revenues and expenditures.
County staff said they will be working to close that gap through one time adjustments so that by the time the budget is officially adopted by the Board of Supervisors in September, it is balanced.
“(The pandemic) impacted and challenged us both operationally and fiscally,” County CEO Jim Brown told the Board of Supervisors on Tuesday.
While the economy appears to be recovering in the short-term, the future is still unclear and the pandemic is not yet over, he said. “As we look forward, the crystal ball in front of us is murky still.”
Last year, emotions ran high when financial hardship triggered at the beginning of the pandemic led to eight county workers’ jobs getting cut, while 70 vacant positions were eliminated. Two county supervisors voted against the decision at the time.
County jobs for this fiscal year’s proposed plan stayed at the 2,181 total positions they were reduced to during the 2020-21 budget cycle.
Some department’s feeling stressed
Merced County District Attorney Kimberly Lewis addressed the Board of Supervisors on Tuesday to discuss how staffing reductions have left her office stretched thin. Stressing the severity of the matter, she noted that it was only the second time since taking office that she had publicly approached the Board as a whole.
Lewis described how the DA’s staffing remained stagnant throughout 2018 to 2020, only to see cuts during last fiscal year’s hardship. DA personnel have been working stressed, overwhelmed and short-staffed, Lewis said.
This year’s budget again includes no staff increases for the DA’s Office despite the department’s request for five additional personnel.
Lewis on Tuesday asked the Board for an additional $350,000 for her office to be included in the final budget. “I do ask that the Board give serious consideration to the requests that we’ve made,” Lewis said.
The cost of county workers’ salaries and benefits have expanded by 4.9% over the past year, according to the proposed budget’s message by CEO Brown. That’s a $13 million increase to at least $282.6 million in total. Local revenue growth and one-time revenues can cover some of that cost, but not all of it, Brown wrote.
The county’s budget was presented on the heels of the City of Merced unanimously passing its new financial plan. After several adjustments spurred by public discussion at preceding council meetings, the city’s budget came to $320.4 million with revenues exceeding expenses by $380,000.
More on proposed Merced County budget
The $752.3 million budgeted for Merced County’s next fiscal year represents an increase of $25.7 million from the prior budget. The increase is largely on account of growth in federal and state revenue for health and human services programs, according to county documents.
The county’s general fund — a portion of the overall budget that pays for essential county services and holds discretionary funds that the Board has significant control of — is estimated at $585 million.
The general fund increased by $27.5 million, or 5.5%. growth was due in part to a $24.6 million increase in aid from other government agencies.
The general fund contingency, which secures dollars for unforeseen expenses or emergencies, stayed at $9.5 million after being raised by $2 million last budget cycle to account for unexpected pandemic-related costs.
At $348.2 million, about 60% of the general fund is allocated for health and human services. Public safety and the justice system is receiving $127.8 million, or 22%, of the general fund’s dollars. Other county services account for the remaining 18%.
Local revenue from sources like sales tax and other taxes dropped during the last budget cycle, but revenue as a whole is projected to be up slightly by $2.4 million this fiscal year, bringing it to to $102.3 million. Property taxes, sales tax and other charges account for the growth.
County officials and economy experts have touted the Merced region’s strong and stable agricultural industry as helping to buoy the local economy during the pandemic, while counties that rely heavily on nonessential businesses like tourism and entertainment felt the jarring strain of economic shutdowns to a more painful degree.
The high amount of regional jobs considered “essential” caused Merced County’s unemployment numbers throughout the pandemic to be on par with — or even better — than the state average. Historically, the county’s unemployment has often doubled that of California’s.
Also aiding Merced County is the $28.9 million it received via the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
However, the money represents one-time revenues. County staff urged elected officials to use the funds cautiously and refrain from relying upon them in the long-term.
“I really do want to stress the fact that we spend one time monies on one time things, not ongoing expenses,“ said Supervisor Scott Silveira in agreement. “We have all this money coming in . . . it’ll lull you into a false sense of security, the local revenues haven’t grown that much.”
The proposed budget is available to review on the county’s website and is open to public comment until adoption at the final budget hearing on Sept. 22.
This story was originally published June 25, 2021 at 5:00 AM.
