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June 8, 2012 > Proposed county budget presented to board

Proposed county budget presented to board

Submitted By Guy Ashley

Alameda County Administrator Susan S. Muranishi on Tuesday, June 5, presented a Proposed Alameda County Budget for FY 2012-13 that calls for eliminating 37 vacant positions and other reductions in order to close a funding gap of $88.1 million. Muranishi said the funding gap shows that Alameda County continues to be squeezed financially as a result of a protracted economic slump, with demand for safety net services remaining unusually high and the resources to pay for these services diminished. But she also noted that the budget gap is under $100 million for the first time in four years, which suggests that the County's concerted efforts to lower costs are having a positive impact.

While County supervisors face no small task in balancing the budget for FY 2012-13, they can take some consolation in the clear signs that sacrifices made in recent years - including a four-year freeze on cost-of-living increases for most County employees and community based organizations who contract with the County - are helping to stabilize County finances. Moderate upturns in the local economy, including rising real estate prices and increasing numbers of homes sold, provide some reason for optimism that the trend toward diminishing budget deficits will continue, Muranishi said.

"We fully recognize the contributions made by service providers, County departments and agencies, and our 9,000-plus employees in order to maintain essential services and keep the County on solid financial footing,'' she said "These sacrifices have helped us immensely during some very difficult times. But let there be no doubt that the tough times continue - as evidenced by an $88.1 million budget gap for the coming year that will require some difficult decisions to close.''

The 2012-2013 Proposed Budget is balanced and provides more than $2.6 billion in total County spending authority. It was unveiled amid signs that an economy that has been in decline for several years is at the beginning of a slow recovery. Employers are adding jobs, initial claims for unemployment have dropped and businesses appear poised to increase spending. While housing prices remain far off their peaks, some indications point to slowly rising values beginning next year. However, the direction in which the economy is headed remains uncertain, as evidenced by last week's surprisingly dismal jobs report and revised GDP figures for the first quarter.

A healthier economy would improve the County's fiscal condition by decreasing demand for County services and increasing County revenues, thereby reducing deficits and program cuts. Still, the County's finances remain constrained by housing prices that are far lower than their 2007 levels, resulting in lower property tax revenues that are the main source of the County's discretionary funds. Though the County assessment roll grew in FY 2011-12, it was only by an anemic 0.37%. The unemployment rate in Alameda County also has dropped far below the 11.7% recorded in August 2010, but the 8.9% recorded in April remains stubbornly high.

"Until we return to normal employment levels, the County will be challenged by the double-edged sword of higher demand for services and lower revenues to pay for those services,'' said Supervisor Keith Carson, who chairs Alameda County's Budget Workgroup. "And even if the local economy improves significantly, the poor fiscal health of the State and federal governments means funding of County services will likely be in jeopardy for years to come.''

With the release of the State Budget's May Revision, the Governor has acknowledged a funding deficit of $15.7 billion, or $6.5 billion higher than the $9.2 billion gap estimated in January. Most of the increase can be attributed to dramatically lower revenue estimates. Half of the Governor's proposals to close the State's funding gap involve spending cuts, including dramatic reductions to health and human services programs administered by local government and the use of assets from now-defunct local redevelopment agencies.

Concerns persist that the cuts coming from Sacramento won't end there. The Governor also assumes $5.6 billion in new revenue from a package of tax hikes that will go to voters in November. His plan includes severe "trigger" cuts to K-12, higher education and the courts if voters reject the measure. While most of these "trigger" cuts would not directly affect County services, it is possible that the Legislature would not have the inclination to cut education so severely and would instead reduce other programs and funding for County services.

With regards to "realignment,'' the State's transfer of responsibility for many public safety and health and human services programs to counties, much uncertainty remains, including whether the County will receive adequate funding to pay for realigned services. The Board of Supervisors and County staff continue to advocate for a more just and equitable funding formula. While these shifting responsibilities mostly involve public safety programs, Governor Brown has been clear that local government will likely be asked to assume control of yet more programs in the coming years.

The Proposed Budget includes funding to provide mandated and essential services, meet debt service obligations, maintain a minimum level of infrastructure and capital funding, and adhere to the Board's Financial Management policies.

The Proposed Budget supports a workforce of 9,060 full-time positions. The $88.1 million funding gap was determined by identifying the difference between the cost of maintaining existing programs and available financing. The Proposed Budget calls for using a combination of permanent ongoing program reductions, revenue increases, and one-time strategies to close the funding gap. Through ongoing cost-saving and revenue generation efforts, County agencies/departments have offered to contribute $48.4 million in prior-year "Fiscal Management Reward" savings to help balance the FY 2012-13 Budget. Alameda County's Fiscal Management Reward Program allows departments to carry over net savings each fiscal year to be used in subsequent years for budget balancing and to help preserve vital services.

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