Merced County looking at ways to deal with $18.5M shortfall

In the face of ongoing home foreclosures, plummeting tax revenues and a looming financial meltdown in Sacramento, Merced County will probably be forced to make drastic spending cuts in the coming months.

The county must decide this summer how to close an estimated $18.5 million budget shortfall, budget analysts told the Board of Supervisors on Tuesday. The shortfall could grow by several million dollars depending on cuts made at the state level, the analysts warned.

Tuesday marked the board's first discussion about how to deal with the budget gap.

The supervisors adopted a $480 million temporary spending plan meant to serve until state legislators approve their budget. The county expects to pass a final 2009-2010 budget by August.

Though most of the tough decisions won't be made until then, supervisors voted Tuesday to make some preliminary cuts to health care programs for the poor.

They opted to raise eligibility requirements for the county's Medical Assistance Program, which provides low-cost health care for poor adults who don't qualify for Medi-Cal.

If the new requirements are given final approval after public hearings in the coming months, the changes will disqualify about 400 people currently enrolled in the program, said John Volanti, the county's public health director.

Supervisors delayed a vote on whether to renew a contract with the Merced County Economic Development Corp., or MCEDCO, that expires at the end of this month.

MCEDCO is a 15-year-old public-private nonprofit that is supposed to bring new businesses, industries and jobs to the county.

Supervisors Mike Nelson and Deidre Kelsey suggested they probably won't support keeping MCEDCO, because it's done little to help the county's economy in the last decade or so.

To balance its budget, the county will probably be forced to make severe cuts to social services. Supervisors may choose to dip into savings to avoid some eliminations.

Supervisor Jerry O'Banion said he'll "be shocked" if the county manages to close its budget gap without laying off workers.

"There's no doubt that we'll be coming back to you (in August) with choices that won't be easy to make," county CEO Dee Tatum told supervisors.

Declining tax revenues and property tax payments are the biggest factors behind the shortfall, budget officials said. The county's property tax income is projected to drop by $4.4 million next fiscal year compared with this one.

By law, state legislators should have adopted their budget by Monday. Instead they continued to grapple Tuesday with a $24 billion shortfall. To close the gap, legislators are considering massive cuts that would drastically reduce funding handed down to counties for social services, transportation and public safety.

"We're certainly far better positioned to deal with this than many counties across California," county spokeswoman Katie Albertson said. "But there's also no doubt that a lot of the cuts the state is considering would be absolutely overwhelming for us."

Reporter Corinne Reilly can be reached at (209) 385-2477 or creilly@merced-sun-star.com.