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HomeMy WebLinkAbout05.25.20 Shari McCracken - CAO Comments 5.26. memo RE County FY 20-21 budget AT1 Butte County Administration Shari McCracken Chief Administrative Officer 25 County Center Drive, Suite 200 T: 530.552.3300 buttecounty.net/administration Oroville, California 95965 F: 530.538.7120 Members of the Board Bill Connelly | Debra Lucero | Tami Ritter | Steve Lambert | Doug Teeter MEMORANDUM DATE: May 25, 2020 TO: Members, Board of Supervisors FROM: Shari McCracken, Chief Administration Officer RE: Fiscal Year 2020-21 Budget th On May 14 the Governor released the May Revise of the proposed State Budget, a budget proposal dramatically different from the January Budget and one that will have significant repercussions for Butte County and counties throughout the State. Staff are currently analyzing the impacts, but I wanted to share with you what I know to-date. 1991 and 2011 Realignment The statewide sales tax realignment revenues are projected to drop significantly in the current year and budget year. The County receives over $100 million in State revenues referred to as realignment. They are derived primarily from statewide sales tax as well as statewide vehicle license fees to a lesser degree. Realignment revenues fund large portions of Social Services, Public Health, Behavioral Health as well as a number of public safety programs and services. Based on the May Revise, it is projected that those revenues will come in $16.7 million short in the budget year. Specifically this would create a $5.1 million shortfall in Behavioral Health, an $8.2 million shortfall in Social Services, a $0.8 million shortfall in Public Health and $2.5 million shortfall in revenues that fund public safety services. The programs that may be impacted by these shortfalls range from child and adult protective services, to court security, to juvenile probation services, to mental health services, to entitlement safety net programs such as and aid for adoption, but it is much more complicated than just impacts to these programs. Some of the impacted programs are mandates, which the County is obligated to provide regardless of funding, and will require that discretionary General Fund resources be shifted from other programs to fund these programs. Public Safety Sales Tax The County receives approximately $17.4 million in Public Safety Sales Taxes annually, which is generated from statewide sales tax revenues. These are discretionary General Fund revenues that require the County meet a statutory maintenance of effort (which we do easily each year). The economic downturn has resulted in an estimated $900,000 shortfall in these revenues in Once mandates are met, General Fund discretionary resources fund public safety, general government, land use, and library services among others. 1 Local Sales Tax The County receives approximately $5.7 million in local sales tax revenues. These discretionary revenues fund a variety of services similar to Public Safety Sales Tax revenues. A shortfall is now anticipated of approximately $500,000. Gas Tax The County anticipated about $13 million in Gas Tax revenues to fund road work-at-Home Order has resulted in reduced gas purchases and an estimated revenue shortfall of $1.6 million in the current fiscal year and $1 million in the next fiscal year. Other Revenues In addition to the revenues highlighted above staff are reviewing a wide variety of other revenues related to the COVID-19 pandemic, economic downturn and s Stay-at-Home Order. General Fund Appropriation for Contingencies In addition to the budget year impacts for fiscal year 2020-21 described above these same programs are all th seeing revenue shortfalls in the current year. At the June 9 be recommending a $2 million transfer from General Fund Appropriation for Contingencies to the Social Services Fund to support mandated th entitlement programs through June 30 and to make up for the anticipated shortfall in current year realignment revenues. This will bring the balance in General Fund Appropriation for Contingencies to under $1 million dollars from a starting point of $9.5 million. Juvenile Justice Realignment The May Revise includes a new proposal to realign responsibility for juvenile offenders to counties from the California Division of Juvenile Justice (DJJ). Butte County youth housed in DJJ are generally older, have commitments measured in years rather than months, and have significant criminal histories including serious, violent, and sexual crimes. These youth are sent to DJJ only after the Superior Court determines that local Integrating this population with our current Juvenile Hall population would require a profound shift in the existing programs, and could result in dismantling of some the more progressive, successful programs currently in place. This is a significant realigning of the State and local relationship in this area and staff are analyzing the programmatic and fiscal implications. Federal CARES Act The May Revise brought with it significant concerns, but there was a bright spot. The May Revise proposes to share of federal CARES Act funds. For Butte County this could be over $22 million dollars. The funds have strict limitations and can only be spent for unanticipated costs related to the COVID-19 pandemic such as emergency response, operational changes, community support, and staff costs. While this does not address our most significant COVID-19 impacts related to revenue shortfalls it does support the growing expenses of the COVID-19 pandemic. Conclusion The potential challenges facing the County are significant and if there is no State or federal action to backfill declining revenues that to a large degree support federal and State programs the County will have to make significant and painful adjustments to our budget. Given the significance of these changes, the pending State rdst budget adoption and possible federal action, I have moved budget hearings from June 23 to July 21, possibly ndrd extending into July 22 and 23. th At the June 9 Board meeting you will be asked to authorize the Recommended Budget, primarily created prior st to the COVID-19 pandemic, as the legal authority for expenditures starting July 1, and as required by State law. st Then in July, in advance of the July 21 budget hearings you will receive proposed adjustments to the Recommended Budget for your consideration at budget hearings. To meet the sudden decline in revenues, recommendations will utilize a combination of tools including budget reductions, use of reserves, and hopefully other State and/or federal support to address the worst of the impacts.