As the Santa Clara County Board of Supervisors prepares to adopt a $4.6 billion capital and operating budget Friday for the upcoming fiscal year beginning July 1, it faces some hurdles.
Some will be resolved in the coming months, but others -- including billions more in unfunded pension and retiree health care programs -- will take decades to pay off.
The proposed general fund budget of $2.4 billion for the new fiscal year, which covers all discretionary and many mandated services, has a $70 million shortfall. But Chief Operating Officer Gary Graves said no layoffs and few cuts to service are expected.
County officials earlier this spring devised a plan to dispatch that debt in part through ongoing labor concessions, revenues from the Measure A sales tax passed by voters in November and cutting 64 vacant county positions.
Graves said some unexpected positive economic news also has surfaced that should enable the county's finances to be more flexible. Windfalls include $24 million in additional property taxes after so many assessed property values have recovered from their decline during the recession; $9 million more in state sales taxes, as well as $8 million more from tobacco settlement funds.
"We're not seeing any cuts, and we're relieved," said Patricia Gardner, who for the past 12 years has served as executive director of the Silicon Valley Council of Nonprofits. "Almost the entire time I've been in this job, I've been fighting the budget demons. Not this year."
Gardner is pleased the upcoming budget restores $430,000 to the county's senior nutrition program and $375,000 to the county's drug and alcohol prevention services, among other benefits.
However, Graves warned there is plenty of uncertainty surrounding the costs of implementing the Patient Protection and Affordable Care Act, also called Obamacare, in January. And, he noted, Gov. Jerry Brown's proposal to expand Medical for indigent residents means the state will likely claw back $33 million annually it has paid the county to help with those services.
"Taking $33 million out of a safety net that's already been battered after five years of a recession is a difficult proposition," said Graves.
Another uncertainty is the status of Measure A.
County Executive Jeff Smith has proposed to pay down the county's $70 million general fund shortfall with $28.7 million in departmental cutbacks, $21.7 million from ongoing labor concessions, and $20 million from Measure A.
The 1/8th cent sales tax measure, which hiked the county's sales tax to 8.75 percent, one of the highest in the state, will raise almost $50 million annually for 10 years.
But that money has been tied up in a legal challenge. Until that issue is resolved, the county cannot spend the Measure A revenue. Graves said the county will use $20 million in one-time reserves to cover the deficit.
Likewise, the county's largest union, SEIU Local 521, which represents 9,000 of the county's approximately 15,000 workers, said it has not signed off on its part of the proposed $21.7 million in ongoing wage and benefit cuts.
Luisa Blue, the union's chief elected officer, said that Local 521 will continue its negotiations with the county, "but we are nowhere near" agreeing to the $21.7 million, she said.
Graves said the county faces $1.8 billion in unfunded retire health care payments, and another $2.3 billion in unfunded pension payments.
The upcoming budget, he said, has enough money to pay more of the cost of the retiree health care principal payment, plus $10 million of the interest payment.
Contact Tracy Seipel at 408 275-0140.
$4.6 billion -- county's capital and operating budget
$2.4 billion -- county's general fund budget
$70.4 million -- county's general fund deficit
HOW DEFICIT WILL BE PAID OFF:
$28.7 million -- departmental cuts
$21.7 million -- on going labor concessions
$20 million -- Measure A sales tax revenues or one-time reserves
Source: Santa Clara County