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The big budget scramble

By   /   Friday, December 19th, 2008  /   Comments Off on The big budget scramble

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As state lawmakers wrestle with what’s projected to be a $40 billion budget deficit by 2010, county governments in the Tri-Counties face a combined $30 million shortfall of their own and say they are bracing for the worst.

Though the region’s budget experts say they already have made cuts this year to adjust for fewer state dollars, they must now ponder eliminating entire programs, cutting more services and terminating employees.

The smaller the county the bigger the problem. San Luis Obispo County, population 266,000, and Santa Barbara County, population 424,000, respectively face 2009 general fund shortfalls of $21.5 million and up to $8.9 million. Ventura County, population 826,000, is cleaning up a $13 million deficit from this year and could face a $5 million gap next year, though that number remains uncertain.

Ventura, Santa Barbara and San Luis Obispo counties have all gone on hiring freezes and taken other steps to cut payrolls. They are keeping all options on the table for fiscal year 2009.

“If the state money dries up enough, everything is possible,” said Paul Derse, chief deputy executive officer of Ventura County. “If people in [impacted] programs can be moved to other programs, we will try to do that. Layoffs are clearly our last resort.”

“The state’s a real wild card,” said Jason Stilwell, budget director for Santa Barbara County.

State dollars typically make up from one-third to one-half of the budgets of counties and state-funded universities. State money usually funds mandatory social safety net programs, and when the money runs low, the programs get cut back.

As state dollars dwindle, the recession and housing meltdown have led to sinking tax revenue in the local portion of county budgets.

“We’re just waiting with baited breath to see what the state is going to do,” said Dan Buckshi, budget director with San Luis Obispo County, where health programs already have been cut back.

State funding for public universities is dwindling, too.

At the University of California, Santa Barbara, the state’s share of the school’s outlay has declined from about half in 2001 to a little more than a third in 2007.

“We used to call ourselves a state-funded university,” said Gene Lucas, executive vice chancellor at UCSB. “We’re more like state-assisted these days, moving toward state-located.”

San Luis Obispo County
In San Luis Obispo County, the state already came through with $1.9 million less for health and human services than the county expected. Though the county could fill that with local funds, it faces a $21.5 million shortfall of its own.
“We need to close our own gap,” Buckshi said.

The county will have to look at reducing immunizations, funding to hospitals for otherwise uncompensated care and children’s and mental health services, among others.

Buckshi said departments have been asked to tighten belts by cutting back on training and travel and holding positions open, savings he hopes will add up to $7 million to $9 million.

“Our priority is to minimize the impact to our customers, to keep it hidden from the public so they don’t feel the effect,” Buckshi said. “But with the economy the way it is, some significant service impacts will probably be put in place in 2009 to 2010.”

Santa Barbara County

In June, Santa Barbara County cut more than $13 million from its appropriations. It’s also instituted an unpaid, two-week furlough starting Dec. 22 that’s expected to save $11 million.

The county has also laid off 32 full-time equivalent positions.
“A lot of other jurisdictions are scrambling to make cuts in the middle of the year, but we had accurate enough revenue projections that we’re essentially holding, even as the rest of the economy is deteriorating,” Stilwell said. Because of the steps Santa Barbara County has already taken, “We don’t see a wholesale shakeup,” he said.

But with two major wildfires – the Gap Fire, which cost the county $7 million, and the Tea Fire, whose cost is still undetermined – slamming the county budget this year, times could get even leaner.

“For the Tea Fire, we’ll have loss of tax revenue because of the houses that burned,” Stilwell said. “That’s millions of dollars of value in assessments.”

Ventura County
In November, Ventura County cut $1 million from its general appropriations budget and 29 positions. It did so without making any layoffs.

“We were kind of gearing up for this anyway,” Derse said. “Most of our managers tried to maintain some flexibility by not going on hiring sprees in these program areas.”

If the state fills its $40 billion hole by slashing funding for mandated programs such as mental health care and cost-of-living adjustments for medical aid, those programs will have to be cut or funded with local money, the latter going against longstanding Ventura County policy. Even county-funded operations could face the knife if sales and property tax revenue dry up.

“Our general policy is that if departments lose direct revenue, they need to reduce their expenditures accordingly,” Derse said. “Sometimes it’s easier said than done.”

So far, one bright spot is that Ventura County property tax revenues have continued positive growth – a sharp contrast to counties such as Riverside or San Bernardino, whose property tax revenues have declined.

“We’re not looking at negative numbers – at least yet,” Derse said. “Our values increased this fiscal year 3.2 percent from the prior fiscal year,” he said, adding that a 2 percent increase is expected next year.

Higher education
At UCSB, administrators expect a $16 million cut this year – about 7 percent of the school’s funding from the state. Over the past six years, the school has had its budget cut five times totaling $34 million, roughly 15 percent of its money from the state.

“It’s starting to add up to a very significant number for us,” Lucas said.

The school has instituted hiring freezes, even among faculty positions.

“We’ve spent a lot of time and effort getting ourselves to a top tier research university and we don’t want to undo that,” Lucas said.

Still, cuts will have to happen, though Lucas declined to say what might be on the chopping block.

California Polytechnic State University, San Luis Obispo, started off the fiscal year with a $1.9 million cut to its $230 million budget. More cuts will probably come, but administrators say their response will hinge on the specific numbers.

“It depends on the order of magnitude,” said Larry Kelley, Cal Poly’s vice president of administration and finance. “We just don’t know right now.”

At California State University, Channel Islands, near Camarillo, administrators moved earlier this year to turn away hundreds of qualified students and increase class sizes to deal with fewer state dollars.

“It hurts like heck, but at least it’s not a surprise for us,” said Joanne Coville, CSUCI vice president of finance and administration.

Launched with 1,000 students in 2002 and now counting 3,800 students, CSUCI is CSU’s youngest campus and has struggled to grow.

“We should be close to 5,000 students now, but the state budget has held us back every step of the way,” Coville said.

“This year and next year are particularly bleak.”

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