County CFO: Too Early to Worry About Deficits

A nearly $40 million deficit in the sheriff's budget may not be cause for immediate concern, Riverside County's chief financial officer said today, adding that as long as supervisors stick to a conservative spending strategy, budgetary challenges in the current fiscal year should be minimal.

"We have to watch every dollar we spend," CFO Ed Corser told the Board of Supervisors during a first-quarter budget report, which included a mix of positive and negative news. "We can see the iceberg in front of us, and we need to do whatever we have to do to get around it."

Corser's presentation came shortly after the board approved a $26 million contract with Chicago-based Huron Consulting Inc. to implement a turnaround plan to keep the financially distressed Riverside County Regional Medical Center afloat.

Corser acknowledged the hospital's $86 million deficit was a source of significant concern and could impact the county's operating budget if not successfully addressed, but expressed optimism that the consultants would bring the RCRMC "back into the green over the next few years."

The CFO was also reasonably certain that a $39 million funding gap in the sheriff's budget could be whittled down between now and June. According to county officials, union-negotiated labor cost increases are the main source of the sheriff's unfunded liabilities.

However, higher costs associated with court security -- for which the county had to assume responsibility under the governor's 2011 public safety realignment -- and the recruitment and hiring of 500 additional deputies to staff jails and patrol unincorporated communities are also chewing up the sheriff's appropriations, the budget report stated.

"You have to remember that in fiscal year 2012-13, the sheriff anticipated coming up $10 million short, but he ended up with $4 million in surplus funds," Corser said.

He suspected that Sheriff Stan Sniff and his staff would be able to identify cost savings again in the current fiscal year and recommended that the board hold off on appropriating more funds to cover what could end up being a much smaller deficit than currently projected.

"We can count on him covering half of this amount," said Supervisor Marion Ashley. "The sheriff has done a wonderful job managing the department in the past."

Officials will take a more detailed look at the deficit during the midyear budget report in February, according to Corser. He cautioned that many county agencies were facing challenges absorbing salary increases for employees that were negotiated as part of three-year collective bargaining agreements with several unions. However, it remained to be seen whether the higher costs would translate to personnel cuts.

The county's nascent Public Safety Enterprise Communication System, an all-digital network that will replace the decades-old analog system, is expected to come on-line in January -- a year late, according to the budget report. The system is expected to be more expensive to maintain than originally thought and will require larger general fund allocations, despite concessions by the contractor, Motorola, county officials said.

Executive Office staff said liabilities to the California Public Employees' Retirement System were going to be an ever-enlarging draw on the general fund, and any discretionary revenue needed to cover pension costs would have to come at the expense of non-public safety agencies.

On the bright side, the budget report indicated that discretionary revenue would top out at $594 million in 2013-14 -- about $4 million more than first projected.

Property tax receipts are on track to increase 4.5 percent in 2013-14, thanks to a rise in real estate values that propelled the median price of a single-family home in the county 25 percent higher between August 2012 and August 2013, according to the report.

Meantime, according to the budget report, sales and use tax receipts jumped 5.7 percent in the last quarter compared to the same time a year ago, and county reserves had gone from $140 million to $170 million.

County CEO Jay Orr noted that although the financial picture has improved, the county is still contending with a double-digit unemployment rate - - just under 11 percent as of August -- and uncertainties remain about what might happen at the federal level that could impact the county.

The budget resolution that ended the partial government shutdown in October only provided funding for federal operations through Jan. 15.

—City News Service