To: Board of Supervisors
From: County Administrative Office
Agenda Section: Public Hearing
Vote Requirement: Majority
SUBJECT:
title
Public Hearing on Proposed County Budget and Special District Budgets for Fiscal Year (FY) 2023-24
end
RECOMMENDATION(S):
Recommendation
That the Board of Supervisors:
1. Convene as the Board of Directors for the Special Districts governed by the Humboldt County Board of Supervisors;
2. Open the public hearing;
3. Receive testimony from the public;
4. Close the public hearing;
5. Approve the fiscal year 2023-24 budgets for special districts governed by the Humboldt County Board of Supervisors;
6. Set June 27, 2023, as the date to adopt the special districts budgets;
7. Adjourn and reconvene as the Board of Supervisors;
8. Open the public hearing;
9. Receive the staff report;
10. Receive testimony from the public;
11. Continue the hearing to 5:30 p.m.;
12. Receive updated reports from staff (if required);
13. Receive additional testimony from public;
14. Close the public hearing;
15. Deliberate on the FY 2023-24 proposed spending plan;
16. Give direction to staff regarding any desired modifications to the Proposed Budget; and
17. Set June 27, 2023, as the date to adopt the budget.
Body
SOURCE OF FUNDING:
All county funds, all dependent special district funds
DISCUSSION:
Special Districts Budgets FY 2023-24
The Auditor-Controller prepares annual budgets for the special districts governed by the Humboldt County Board of Supervisors pursuant to Chapter 1 of Division 3 of Title 3 of the California Government Code. California Government Code Section 29080 requires that the proposed budgets be made available for public inspection at least 10 days prior to the public hearing pertaining to such budgets. The Clerk of the Board of Supervisors published notice on June 2, 2023, that this documentation is available for inspection at the Office of the clerk of the Board and that the Board will consider adoption of the proposed budgets on June 12, 2023. The California Government Code requires each special district to adopt a balanced budget on an annual basis. The budgets are presented in the Appendix of the attached proposed fiscal year 2023-24 budget (Attachment 1).
Humboldt County Budget FY 2023-24
Annually, the County Administrative Office (CAO) presents a proposed budget to the Board of Supervisors. The adoption of an annual budget is one of the most significant policy decisions of the Board. As such, it requires substantial preparation and benefits markedly from public input.
California Government Code Sections 29000 through 30200, known as The County Budget Act, as applied through rules issued by the Office of the State Controller, provide the legal requirements pertaining to the content of the proposed budget, adoption procedures and dates by which action must be taken. The CAO, as designated by the Board, is responsible for completing the budget process with the confines of state code.
Locally, the budget process is lengthy and includes the below steps:
• On Feb. 7, 2023, as part of the Mid-Year Budget Review, your Board set parameters for the development of the FY 2023-24 budget for General Fund allocations and the budget calendar. The parameters included direction to set departmental allocations from the General Fund to remain at the FY 2022-23 level including the 10% vacancy allowance, to accept Additional Requests for General Fund Appropriation (additional funding requests) in the FY 2023-24 budget limited to those which prevent layoffs, set the annual departmental contribution to Public Agency Retirement Services (PARS) to 2% of salaries, suspend the annual contribution to the Deferred Maintenance Trust Fund (3464) for FY 2023-24, and approved staff recommendations to close the FY 2023-24 projected General Fund deficit. In addition, your Board allowed departments to recommend furloughs, hiring freezes or staffing reductions in their department in order to minimize impact to essential services and directed staff to reduce trust and reserve funds to the minimum balance required by county policy, ordinance or Government Code.
• Preparation of the proposed budget began on March 2, 2023, when CAO staff presented to departments the parameters for development of the FY 2023-24 budget requests. Departments were asked to submit their requests to the CAO by April 10, 2023. The CAO reviewed the budget and additional funding requests from April through June 2023.
• On May 22, 2023, at the completion of the department presentations, the CAO presented an update to the FY 2023-24 budget outlook and requested direction from your Board on the submitted additional funding requests. The additional funding requests are reflected in the recommended budget as your Board directed (Attachment 2). Your Board declared an immediate freeze to hiring staff in the General Fund through the end of FY 2023-24 and placed a moratorium on personnel actions, with allowance for the CAO and Director of Human Resources to authorize exceptions. Additionally, your Board directed the County Administrative Officer to return to your Board with further research on options for reducing the FY 2023-24 budget deficit at the presentation of the FY 2023-24 Proposed Budget or as soon as was practical. Some of the requested options require additional time and will return at mid-year.
• Presentation of the proposed budget came before your Board on June 6, 2023.
• Public hearings on the proposed budget and special district budgets are before your Board today.
• The FY 2023-24 final budget is scheduled to be adopted on June 27, 2023.
At today’s hearings, it is recommended that you accept additional public comment and staff input and provide any direction you wish staff to pursue prior to the final opportunity for public input and budget adoption, scheduled for June 27, 2023.
California State Association of Counties (CSAC) Grant Initiative
At the presentation of the proposed budget, your Board requested staff return with information on a grant initiative being offered by CSAC for consideration. CSAC will be available to present to your Board on the parameters of the program. In addition, Attachment 3 has information on the program. The program, initiated by CSAC Immediate Past President and Siskiyou County Supervisor Ed Valenzuela, would require a contract with The Ferguson Group, who would help the county seek out and write grants, among other grant-related services.
The Board has taken previous action toward enhancing the ability of the county to seek out grant funds. On Dec. 6, 2022, Supervisor Bushnell brought forward an agenda item for the Board to consider creation of a community grant coordinator position and directed staff to bring back a proposed position class and supplemental budget for this position, following further analysis and community engagement. Staff are currently working with Cal Poly Humboldt’s California Center for Rural Policy (CCRP) to develop what this position and program could look like. Staff anticipate bringing this to back to your Board in the next few months. Due to the ongoing work in developing a grant position and program and the current budget constraints, the CAO’s office recommends revisiting participation in the CSAC grant initiative after reviewing the grant position and program recommendations.
American Rescue Plan Act (ARPA)
In March 2021, Congress passed the $1.9 trillion American Rescue Plan Act, which provided $350 billion in federal fiscal relief to local governments, with $65.1 billion set aside for counties and another $65.1 billion designated for cities. The County of Humboldt, and all of the incorporated cities within Humboldt County, received funding through this act in 2021 and 2022. All counties receive funding directly from the US Treasury, while cities under 50,000 total population receive funding through the state.
The US Treasury has released guidance on uses for the local fiscal relief funding. This funding can be used to:
• Respond to the public health emergency and address its negative economic effects;
• Replace lost public sector revenue; and
• Invest in water, sewer, and broadband infrastructure.
As presented on June 6, $19.8 million of the original $26.2 million is anticipated to be expended by the end of the current year. Of the remaining $6.4 million, $6,046,803 has already been obligated by your Board to following projects in FY 2023-24:
Given this, $397,318 is available for your Board to allocate in FY 2023-24. The CAO recommends the Board consider allocating these funds to the prevention of layoffs, reducing the use of fund balance in the General Fund. During the May 22 meeting, your Board elected to fund an additional $617,296 beyond the CAO recommendations, for a total of $9,307,697 in approved requests for additional General Fund appropriations. Utilizing the remaining unallocated funds totaling $397,318 towards these additional expenditures, would reduce the additional burden to the General Fund to $219,978.
Local Assistance and Tribal Consistency Fund (LATCF)
Through the American Rescue Plan Act, the U.S. Department of the Treasury established the LATCF to distribute funds to eligible revenue sharing counties and Tribal governments for use on any governmental purpose, other than lobbying efforts. This program is intended as a general revenue enhancement program designed to augment or stabilize revenues.
The county was awarded $3,196,536.10 in LATCF funds to be distributed in two separate tranches, one in Federal Fiscal Year (FFY) 2022 and one in FFY 2023. The county received the first tranche in October 2022. On Jan. 10, 2023, your Board allocated $1 million of these funds to establish an Earthquake Recovery & Assistance Program to assist residents displaced as a result of the December, 2022 earthquake and subsequent aftershocks. Upon receiving the second tranche in October of 2023, $2,196,536 will be available for your Board to allocate in FY 2023-24. The CAO recommends holding these funds as unallocated while staff and your Board work to stabilize the General Fund. The county must fiscally plan to reduce the structural budget deficit. Utilizing flexible one-time monies, such as LATCF and previously mentioned ARPA, will allow the county to do that over time, reducing the need for more extreme measures of cost cutting, such as mandatory furloughs or staffing reductions.
Measure Z
Currently, there is $1,120,010 in discretionary funding available for your Board to allocate in FY 2023-24. The Fire Chiefs’ application was the top-rated submittal evaluated by the Measure Z Committee and requested $3.05 million. The next highest-rated applications were K’ima:w Medical Center, which requested $468,685 and Southern Trinity Area Rescue ambulance, which requested $197,926. Attachment 4 includes the full list of applications as ranked by the committee. Staff are seeking direction on which applications to fund, if any, for FY 2023-24.
While there is not enough funding available to fund the Fire Chiefs’ application, your Board has in the past partially funded applications to fund more services. Some of the highest priority services the Fire Chiefs’ desire to fund include dispatch service, estimated at $238,000, and fire planning at a cost of $91,000.
Your Board expressed a desire to move towards the Measure Z Committee’s recommendation that county expenditures account for no more than 67% of all available Measure Z funding, including tax revenue and one-time funding (typically due to salary savings from the prior year) by FY 2026-27. A similar methodology, with the exclusion of one-time carry forward funding, would equal approximately 80% of annual revenue. These targets represent the average amount of funding that has been allocated to county departments for ongoing costs during FY’s 2017-18 through FY 2022-23. Currently, county allocations amount to $11.55 million of $12.67 million in projected revenue, or 91%. Staff are not projecting any one-time funding from the prior year due to actual revenues coming in lower than projected.
In order to achieve the expenditure levels recommended by the committee (80% of annual revenue), Measure Z expenditures for county departments would need to be reduced by $1.42 million, to $10.13 million. The CAO does not recommend attempting to achieve this funding level in FY 2023-24. However, your Board can take steps next fiscal year to move closer to that goal, by continuing to evaluate vacant positions. Included in Attachment 5 are the details for all of the current Measure Z position allocations. In total, after providing consideration for vacant positions that are currently in an active hiring process, only 1.0 IT Technician I/II in the District Attorney’s Office remains vacant and available for deallocation, offering a potential savings of $82,101. The CAO recommends this action as the Board’s first step towards the Committee’s recommendations of reducing county Measure Z allocations.
If your Board were to deallocate this position, it would increase the total amount of discretionary funding available for allocation in FY 2023-24 to $1,202,211.
A second course of action would be to evaluate 4.0 DHHS positions that are funded with a grant through Dec. 31, 2023, but would require Measure Z funding for the second half of FY 2023-24 as the positions are currently filled. Staff could use the rest of FY 2023-24 to seek funding in future years for these positions and should that be successful these could be deallocated in FY 2024-25. This would offer a savings of roughly $400,000.
Following are the positions that could be evaluated in FY 2024-25 for deallocation:
o 1.0 Mental Health Case Manager I/II
o 1.0 Mental Health Clinician I/II
o 1.0 Peer Coach I/II
o 1.0 Supervising Mental Health Clinician
As a final measure, your Board has implemented a hiring freeze, any additional vacancies realized over the next two fiscal years could be reviewed for deallocation to meet the Citizens’ Advisory Committee recommendations. Additional reductions of approximately $900,000 would be required to meet the Committee’s recommendations, assuming there are no significant revenue increases over the next two fiscal years.
In addition, your Board’s Measure Z ad hoc will continue to meet in the new fiscal year to implement your Board’s prior direction to return with a percentage-based allocation scenario for all Measure Z funds, including outside agencies.
Transient Occupancy Tax (TOT)
At the presentation of the proposed budget, your Board requested staff bring information back today on the current allocation of Measure J and options for potential reallocation of these funds to the Measure Z ambulance service applications. On Feb. 7, 2023, your Board received recommendations from the TOT workgroup on allocation of the Measure J funds. The total anticipated funds included in the FY 2023-24 proposed budget for these funds is $880,000. Your Board elected to distribute the funds as follows for FY 2023-24 and revisit the allocation in 2024:
As requested on June 6, 5% of these funds equates to $44,000 and would result in a reduction to one of the already allocated priorities listed here. The safety allocation listed is included in the Sheriff’s Office FY 2023-24 budget and would result in a larger budget deficit for the Sheriff and ultimately, the General Fund, if reduced. Additionally, the allocation for the Humboldt-Del Norte Film Commission has already come before your Board on April 4 and the contract amendment has been executed for the film allocation. Finally, the contract for the arts allocation with the Ink People is in negotiation and close to finalization.
The Measure Z ambulance service applications total $651,611, $468,685 for K’ima:w Medical Center and $182,926 for Southern Trinity Area Rescue (STAR). To fully fund these applications from Measure J TOT funds in FY 2023-24, it would require 74% of the anticipated revenues from this funding source. Due to the Board’s recommendation to utilize this funding for the Sheriff’s Office, this action would result in a necessary cut in expenditures elsewhere or would increase the use of General Fund balance to cover the revenue shortage in the Sheriff’s Office budget. The CAO does not recommend any action increasing overall expenditures in the FY 2023-24 proposed budget.
Voluntary Separation Incentive Program (VSIP)
In 2011, the Board implemented a VSIP to achieve salary savings, with some success. The program offered a $10,000 cash incentive to staff who separated before the FY 2011-12 year began, with declining amounts for each month that passed after the beginning of the year. It also required departments to hold vacant for 3 years any positions that participated in the VSIP. In total, 24 employees took advantage of the program and the county paid $233,000 in incentives, resulting in overall salary savings of $1.4 million for the first year, and an estimated $5 million over 3 years. In the General Fund, after incentive payments, there was an estimated savings of $887,000 in FY 2011-12, and $3.12 million over 3 years.
This year, staff are proposing a similar program, though with an incentive structure that begins at $20,000 for employees that have worked for the county for 10 years or longer, and $15,000 for other employees, with declining values as each month passes. The value is near the annual amount an employee would receive in unemployment benefits if they were unemployed. Other noteworthy parts of the program are as follows:
• Departments submit to the Board a list of classifications and the number of positions in each classification they wish to make eligible for the VSIP
• Up to 50% of the savings experienced from the VSIP, after funding the separation incentive payment, can be used for extra help expenses to offset the reduction of staffing
• Savings experienced through the use of VSIPs will be applied as a credit to future years reductions in general fund allocations
• Employees would have 1 month to turn in an irrevocable notice of resignation to their department
• Employees in eligible classifications would be chosen on a first-come, first-served basis
• Incentive payments would be paid by the department upon separation of the employee
• The position would be held vacant for at least 2 years, after which time departments would need to request from the Board permission to re-hire for that position
• An employee who participates in the VSIP would be prohibited from being re-hired by the county for at least 1 year, with an exception:
o They could return within 6 months with approval from the hiring department head and Human Resources Director, and if approved, the employee would need to return 90% of the incentive payment they received
o They could return within 6 months plus 1 day and 12 months, with the approvals above, and they would need to repay 50% of the incentive payment.
• Employees would sign a waiver approved by County Counsel acknowledging program parameters, releasing claims and other conditions required by Counsel, Human Resources/Risk Management, and/or the County Administrative Office.
Staff are requesting approval from your Board to develop a program using the above parameters, including any additions or changes requested by your Board, and direct staff to return on June 27, 2023 for final adoption of the program.
Expenditure Evaluation and Reduction
At the May 22 meeting, your Board directed staff to evaluate and determine what expenditures, products and/or services are not critical to identify areas for budget savings. The following are expenditure categories for consideration:
• Professional Services
• Travel (reinstitute the CAO approval process on out of state travel)
• Extra Help
• Overtime
• Utilities and device utilization
o Cell phones
o Tablets and Computers
o MiFi
• Fixed Assets
• Special Department Expense
General Fund departments submitted detailed expenditure reviews of their proposed budgets for professional services, travel, extra help, overtime, utilities and special department expenses. Through the evaluation of this data, staff believes that there is little ability to cut expenditures that are funded solely by the General Fund. Furthermore, departments felt the vast majority of these expenditures were critical to effective operations. The following summarizes the analysis of this data:
• Professional services, travel, utilities and special department expense account for nearly 75% of the services and supplies category in the FY 2023-24 budget for the General Fund. Based on department submissions, an estimated $11.98 million does not have an outside funding source.
• The total General Fund cost for overtime and extra help is $5.98 million. Based on department submissions, an estimated $4.53 million does not have an outside funding source.
• Lastly, fixed assets only amount to $3.77 million in the General Fund with the majority of these expenditures having outside funding sources such as the Finance Plan and grant funding.
The below chart represents the breakdown of the expenditure categories of Salaries & Employee Benefits, Services and Supplies, and Fixed Assets in the General Fund for the FY 2023-24 proposed. The CAO is not recommending any reductions to these expenditure categories and further commends departments in their efforts to keep these expenditures at a minimum through the budget process.
Deallocating Positions
At the May 22 meeting, your Board directed staff to evaluate the positions that have been vacant and/or unfunded for more than two fiscal years and return with recommendations to deallocate those positions. At the proposed budget, staff reported that there was a potential of 86 positions to review for deallocation. After detailed review of those positions, seven positions were determined to be previously deallocated or related to an underfilled position. Of the remaining79 positions, departments had already identified 26 positions for deallocation in the proposed budget and 50 positions were identified to be budgeted in the next year. The remaining three positions that were unfunded and vacant for more than two years are presented for your Board to consider deallocating in the adopted budget. Those positions are:
• (1.0) FTE Correctional Deputy I/II position in budget unit 243 (Class 0424, Position 57)
• (1.0) FTE Associate Civil Engineer position in budget unit 321 (Class 0304, Position 03)
• (1.0) FTE Boat Operator I/II position in budget unit 325 (Class 0431, Position 01)
This does not present an immediate budget savings to your Board, rather it reduces the number of positions that remain allocated but are vacant and unfunded.
Mandatory Furlough
At the presentation of the proposed budget, your Board requested staff bring back the option of mandatory furloughs as a cost reduction method for re-consideration. Mandatory furloughs were brought forward as an option to reduce the budget deficit at the May 22 meeting in which your Board indicated that all options were to be explored and considered. Should your Board direct staff to go forward with exploring mandatory furloughs as an option to reduce the budget deficit and prevent staffing reductions, staff will bring additional information forward at the mid-year budget presentation in Feb. 2024. To provide exact data on what the cost saving potential would be, staff would need the additional time to consider all impacts. For the purposes of determining if your Board would like staff to proceed with exploring this option, staff considered the following scenarios:
• If all General Fund staff participated, the potential savings based on salaries, PARS, and applicable taxes is estimated to be up to $225,000 per day furloughed.
o For one day per month, the annual savings could be up to $2.7 million
o For two days per month, the annual savings could be up to $5.4 million
o For furloughing a holiday week such as the week in between the Christmas holiday and the New Year’s holiday, the savings could be $900,000
• If an exemption was explored to consider socio-economic factors such as income, a potential factor that could be explored would be that staff with budgeted salaries under the Humboldt County Median Household Income be given the option to telework, use a different schedule, or take leave time. Per the United States Census Bureau, the Humboldt County Median Household Income (in 2021 dollars) was $53,350. Based on the initial salary projections produced for FY 2023-24, 76% of budgeted general fund positions had salaries above this the Median Household Income. When considering just the base salary85% are above this threshold. If this exemption were to be applied, the estimated savings is approximately $192,000per day furloughed.
o For one day per month, the annual savings could be up to $2.3 million
o For two days per month, the annual savings could be up to $4.6 million
o For furloughing a holiday week such as the week in between the Christmas holiday and the New Year’s holiday, the savings could be $770,000
The CAO recommends that your Board continue to consider this as a cost saving option to reduce the budget deficit and to prevent staffing reductions and direct staff to further explore this option working with Human Resources and other county departments.
FINANCIAL IMPACT:
Funding is as shown in the Humboldt County FY 2023-24 Proposed Budget document (Attachment 1). The total proposed county budget is $578,547,816, proposed General Fund expenditures are $153,467,257, including a Contingency Reserve of $1,376,785. Due to the structural budget deficit, the CAO does not recommend any additional expenditures be budgeted in FY 2023-24.
STAFFING IMPACT:
|
Position Title |
Position Control Number |
Monthly Salary Range (1A-E Step) |
Additions (Number) |
Deletions (Number) |
|
IT Technician I/II |
2950189A-01 |
1A |
|
1.0 |
|
Correctional Deputy I/II |
243-0424-57 |
1A |
|
1.0 |
|
Associate Civil Engineer |
321-0304-03 |
1A |
|
1.0 |
|
Boat Operator I/II |
325-0431-01 |
1A |
|
1.0 |
Narrative Explanation of Staffing Impact:
Staffing is as shown in the Humboldt County FY 2023-24 Proposed Budget document (Attachment 1). The total proposed county staffing allocation is 2,444.27 positions, a decrease of 61.50 positions over the FY 2022-23 year-end authorized positions. The CAO recommends your Board deallocate three additional positions detailed in the chart above that have been vacant for more than two years and are unfunded.
STRATEGIC FRAMEWORK:
This action supports the following areas of your Board’s Strategic Framework.
Core Roles: N/A
New Initiatives: Manage our resources to ensure sustainability of services
Strategic Plan: N/A
OTHER AGENCY INVOLVEMENT:
All county departments and agencies, as well as several community organizations that receive county funding, are affected.
ALTERNATIVES TO STAFF RECOMMENDATIONS:
Board Discretion
ATTACHMENTS:
Attachment 1: Proposed Budget
Attachment 2: Additional General Fund Appropriation Requests
Attachment 3: CSAC Grants Initiative
Attachment 4: Measure Z Application List Prioritized
Attachment 5: Measure Z Vacant Positions
PREVIOUS ACTION/REFERRAL:
Board Order No.: N/A
Meeting of: 12/6/2022, 2/7/2023, 5/22/2023, 6/6/2023
File No.: 22-1608, 23-9, 23-129, 23-687, 23-767