Spending the public’s money is the job of government, and the work must be done in an open, structured and prescribed way. The county’s official “spenders” went to budget school last week when Chief Financial Officer Laura Schwartz presented “Budget Basics” to the El Dorado County Board of Supervisors.
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Developing the county’s annual budget is a fairly lengthy process that begins this month. With frequent updates between now and then, supervisors will hold budget workshops in the first week of June and then approve a “Recommended Budget” on or before June 30. That date marks the end of the current fiscal year. A final “Adopted Budget” must be in place before the end of September. In August, the “Budget Addenda” is prepared and may be included during budget hearings in early September.
In the past, department heads would deliver a “state of the department” address between February and June that included a budget request for the following fiscal year. Tuesday, supervisors discussed reviving that practice but opted not to on the grounds that it would be overly tedious and unnecessary. Supervisors Ron Briggs and Ron Mikulaco both advocated for the more expanded process, but eventually gave in to the majority who felt the current method is adequate. Department heads still prepare their budget requests but they are more often carried forward by the Chief Administrative Office with Chief Financial Officer Schwartz.
Supervisors voted unanimously to adopt a set of “Guiding Principles Fiscal Year 2014-2015″ as recommended by the CFO.
Schwartz suggested that “One-time funds (will) be used for investment priorities: including facilities; information technology and human resources.
“That: There (will) be no new growth in the number of county positions unless efficiencies can be shown.
“That: There (will) be a focus on change-management, process improvements and fiscal efficiencies related to implementation of FENIX.”
FENIX is a nickname for the new Enterprise Resource Planning system the Information Technology Department is developing and installing. When complete, the computer system will coordinate and manage all county government operations.
The Current Investment Priorities include “Facilities” consisting of a $46 million deferred maintenance program over the next 15 years. Under “Information Technology,” the completion of the FENIX project along with hardware/software related to “mainframe conversion” are the goals. “Human Resources” will pursue “investment in staff and investment in training.”
Because all of the county’s money is public money within a “closed system,” the budget has to be balanced. Thus if one department spends more than was anticipated, the county must take funds from some other department or account in order to maintain the balance. The budget process is based on assumptions or projections of revenue for the coming year. Technically, all projected appropriations then must not exceed the projected revenue. Because the real world is not as clean as mathematics, the budget is monitored on a monthly basis and several formal budget updates are presented to the board throughout the year by the auditor-controller or CFO.
The county’s current budget is $591 million, Schwartz explained. Of the total, about $249.2 million is in the General Fund. Special Revenue Funds are about $227.6 million and are received from a wide range of state, federal or other agencies and grants and fees for services. Several other specific accounts such as Capital Outlay and Internal Services Funds round out the total budget. Also there are several contingency or reserve “rainy day” accounts.
“The General Fund is the slice of the budget primarily funded with discretionary dollars,” Schwartz noted in her presentation. “This is where the board has the authority to decide how to allocate the dollars.”
The discretionary amount of the General Fund allocated for the current fiscal year is $138 million. A little over $62 million or 45 percent represents the county’s contribution to its law and justice programs. The county’s General Government allocation is just under $25 million. By comparison, the next largest recipients of discretionary funds are facilities investment and contingency/reserves at about $11 million or 8 percent.
Most of the county’s local revenue comes in the form of property taxes — approximately $62 million, Schwartz said. Sales tax is about $8 million annually and “in lieu of property tax” payments total about $16 million. The latter are payments from entities that own or hold real property within the county but are not subject to a county tax obligation. The federal and state governments, for example, may not be taxed by a local jurisdiction. Schools, especially colleges and universities often are tax exempt as well, so they negotiate “payment in lieu of tax” usually referred to as “Pilot” or just “PILT.” The theory is that the non-taxed entity is keeping the land off of the tax rolls from which the county would otherwise benefit, therefore it is fair that it should pay something to make up for the loss.
As described by Schwartz, the goal of the county’s investment strategy is to provide “enhanced services (with a) limited government.” To do that, the mantra says, “spend conservatively” and “invest wisely.” Good policy but not enough to secure a balanced future, Schwartz predicted.
Beginning in the next fiscal year the “budget gap” is expected to widen. The gap basically is the difference between income and outgo. Current projections show probable county revenues rising from about $224 million in 2015 to approximately $234 million by 2018. Allocations, however, increase from just under $230 million to about $244 million during the same period. The revenue projection “is very conservative,” Schwartz said. It is based on an estimated 1 percent increase in income per year. Growth has been and is likely to continue to be “flat,” according to realistic projections, she said.