After 11 years of shortfalls and $2 billion of gap-closing, Santa Clara County plans to adopt a budget that maintains services and even restores some debilitating cuts. The Board of Supervisors will spend four days this week hammering out last-minute details of the $4.6 billion 2013-14 budget, which must balance a $67 million shortfall.

To close the gap, County Executive Jeff Smith proposes a three-pronged approach: $28.7 million in departmental cutbacks, $20 million from the Measure A 1/8-cent sales tax and $21.7 million in labor concessions.

Since Smith released his budget proposal in the spring, there has been a bump in property tax ($24 million) and a higher state allocation of sales tax ($9 million).

“However, despite these revenue improvements, Medi-Cal expansion implementation puts a minimum of $33 million in expected state revenue at risk,” the county warns. 

Those changes will be discussed at this week’s hearings. Still, the county approaches the new budget cycle having already won $75 million in concessions from labor unions, says Jeff Smith. But challenges remain.

“It is important to recognize that there are still many threats on the horizon, including rising retirement costs, instability at the state and federal levels and a health care landscape that is creating significant challenges for Valley Medical Center,” Smith writes. “Any of these threats could impact us if they are not resolved in a way that avoids harsh outcomes for local government.”

Retiree health costs
A decade ago the county held the distinction of being one of the few jurisdictions to fund retiree health liabilities on an actuarial basis, the county says. But over the past 10 years, it couldn’t sustain that, leaving unfunded actuarial accrued liability to grow to $1.78 billion at the outset of the current fiscal year.

“In the past two years we have reduced our funding of the normal cost of retiree health to 50 percent of the requirement in order to preserve resources for direct services,” explains Smith, who’s now recommending upping that commitment to 75 percent of normal cost in the coming year.

Information technology
Smith suggests the county issue $100 million in bond debt to pay for health information software for the Santa Clara Valley Medical Center. The total cost to fund the program, called EPIC, totals $200 million over the next decade.

Capital projects
The maintenance repair backlog is expected to cost about $5 million this coming year, Smith says, and an addition $3.5 million for new air-conditioning at the Elmwood Jail support buildings. Smith recommends spending $1 million on energy-saving measures.

Reserves
The proposed budget keeps the contingency reserve at 5 percent of general fund revenues—$96.65 million. There’s also a $10 million rainy day fund and a $2.9 million cash reserve.

Repayment of debt
Smith proposes repaying $11.4 million to the retiree health trust fund for the loan used to buy the San Jose Medical Center site.

Threats and challenges
The Valley Medical Center, which is wrapping up a tough year, faces a lot of uncertainty because of healthcare reform, Smith notes.

“We are working hard to prepare for the changes that have already started in healthcare, and are due to change again dramatically in 2014,” Smith says. “Recognizing that a decision by the U.S. Supreme Court could send federal healthcare financing into chaos, the risk to the Valley Medical Center and the county in the near future is considerable. This level of uncertainty is unsettling to say the least, considering the amount of preparation that has gone into meeting the federal requirements associated with healthcare reform.”

Union negotiations this year also pose risks for the new budget. A lot of contracts come up for renewal in 2013, and the budget assumes concessions will be made. The county will have to contribute more to the CalPERS, a $12 million impact in 2014 and $24 million the year after.

Then there’s the uncertainty of higher echelons of government. The county receives about a third of its general fund revenue from property taxes, just less than a third from the state and about a fifth from federal allocations.

In 2013-14, the county will receive more than half its total revenue from Sacramento and Washington D.C.

“This reliance creates significant risk in this period of economic uncertainty,” Smith says. “At both the state and federal levels, lawmakers are contemplating solutions to address their respective budget deficits … it is reasonable to assume that future … funding to the county will be reduced.”

Click to read the entire 43-page 2013-14 Santa Clara County budget message.

BUDGET HEARING SCHEDULE

1:30pm Monday
Budget Overview
Health and Hospital – Public Health, Mental Health, Custody Health Services, Drug and Alcohol Services, Community Health Services, Valley Health Plan, Valley Medical Center including Health SB12 and Children’s Health Initiative

1:30pm Tuesday
Finance and Government Operations: Special Programs and Reserves, Contingencies, Board of Supervisors, Clerk of the Board, County Executive’s Office and LAFCO, Assessor, Information Services Department, Facilities and Fleet, Capital Programs, Procurement, County Counsel, Registrar of Voters, County Communications, County Library, Employee Services Agency, Finance Agency

6:30pmTuesday
Children, Seniors and Families –Department of Child Support Services, In Home Supportive Services, Social Services Agency

1:30pm Wednesday
Public Safety and Justice: Office of the District Attorney, Office of the Public Defender, Office of Pretrial Services, Criminal Justice System-wide Costs, Office of the Sheriff, Medical Examiner-Coroner,  Department of Correction, Probation Department

Housing, Land Use, Environment and Transportation: Planning and Development (including Office of Affordable Housing), Agriculture and Environmental Management, Environmental Health Department, Vector Control District, Parks and Recreation, Roads and Airports Department, County Fire Department, Los Altos Hills Fire District, South Santa Clara County Fire District.

9:30am Friday
Summary and wrap up

WHAT: Board of Supervisors meet for budget hearings
WHEN: 1:30pm Monday, Tuesday and Wednesday; 9am Friday
WHERE: County Government Center, 70 W. Hedding St., San Jose
INFO: Lynn Regandaz, [email protected]
AGENDA: http://sccgov.iqm2.com/citizens/default.aspx?frame=no