Saturday, August 24, 2019
Budget and Financial Information

Budget and Financial Information

 

Financial Information

FY 2019-2020
FY 2019 - 2020 Adopted Budget Adjustments
FY 2019 - 2020 Recommended Budget

FY 2018-2019
FY 2018 - 2019 Adopted Budget
FY 2018 - 2019 Recommended Budget
FY 2018 - 2019 First Quarter Budget Report
FY 2018 - 2019 Midyear Budget Report
FY 2018 - 2019 Third Quarter Budget Report

FY 2017-2018
FY 2017 - 2018 Adopted Budget Volume1
FY 2017 - 2018 Adopted Budget Volume2
FY 2017 - 2018 Adopted Budget
FY 2017 - 2018 Recommended Budget
FY 2017 - 2018 First Quarter Budget Report
FY 2017 - 2018 Midyear Budget Report
FY 2017 - 2018 Third Quarter Budget Report

FY 2016-2017
FY 2016 - 2017 Adopted Budget
FY 2016 - 2017 First Quarter Budget Report
FY 2016 - 2017 Midyear Report
FY 2016 - 2017 Third Quarter Budget Report

FY 2015-2016
FY 2015 - 2016 Adopted Budget
FY 2015 - 2016 First Quarter Budget Report
FY 2015 - 2016 Midyear Budget Report
FY 2015 - 2016 Third Quarter Budget Report

FY 2014-2015
FY 2014 - 2015 Adopted Budget
FY 2014 - 2015 First Quarter Budget Report
FY 2014 - 2015 Midyear Budget Report
FY 2014 - 2015 Third Quarter Budget Report

FY 2013-2014
FY 2013 - 2014 Adopted Budget
FY 2013 - 2014 First Quarter Budget Report
FY 2013 - 2014 Mid-Year Budget Report
FY 2013 - 2014 Third Quarter Budget Report

FY 2012-2013
FY 2012 - 2013 Adopted Budget
FY 2012 - 2013 First Quarter Budget Report
FY 2012 - 2013 Second Quarter Budget Report
FY 2012-2013 Third Quarter Budget Report

FY 2011 - 2012
FY 2011 - 2012 Adopted Budget

FY 2010 - 2011
FY 2010 - 2011 Adopted Budget

FY 2009-2010
FY 2009 - 2010 Adopted Budget

FY 2008 - 2009
FY 2008 - 2009 Adopted Budget

Comprehensive Annual Financial Report (CAFR)

Compliance Analysis and Investment Report
Statement of Investment Policy

 

Comprehensive Annual Financial Reports (CAFR)

FY 2014 Comprehensive Annual Financial Reports (CAFR)


FY 19/20 BUDGET SUMMARY

EXECUTIVE SUMMARY

The extensive process to constructing the county’s budget for FY 19/20 included restrictions on some departments’ new requests for Net County Cost (NCC), as well as other ongoing NCC reductions.  In addition, it considered the potential for new and one-time revenue opportunities.  Not factored in, however, are impacts from ongoing labor negotiations that are currently unknown. 

The budget establishes $6.1 billion in appropriations for Riverside County, an increase of 6.6 percent from previous budgeted spending levels.  The increase is partly attributed to the Health and Sanitation appropriation function, which is a result of growth in patient volume care and expansion of the medical office building and clinics.  Overall estimated revenue is projected to increase to $5.8 billion, an increase of 5.1 percent.   It’s critical to note that while revenue has increased, the county’s current costs have risen at a much faster rate than revenue projections. The difference is covered with the use of departmental reserves, net assets, and county reserves.

General fund discretionary revenue is projected at $837 million which is 5 percent higher than the previous budget. This five percent increase is primarily due to modestly rising property tax revenues and interest income. Discretionary spending is at $828 million. The $20 million of contingency is not reflected in the $828 million.
This discretionary spending amount produced a temporary net positive of $9 million – before department requests were factored in.

At the start of the budget process, departments submitted requests for NCC in excess of $46 million. The entirety of these costs could not be absorbed in the current budget, while also planning for ongoing employee labor negotiations. 

After applying strategic reductions to these new requests for NCC, the $46 million was reduced to $31 million. These substantial efforts were put forth to meet the priorities set by the Board of Supervisors and serve the residents, visitors and businesses of Riverside County.
The county’s reserve balance is currently estimated at $212 million, just $3 million above the Board Policy B-30. This policy stipulates that 25 percent of the county’s discretionary revenue must be held in reserve. The reserve balance is intended to cover the county’s expenses for a finite length of time during an economic or other natural or man-made disaster with severe economic impacts. Additionally, maintaining reserves of $150 million is essential to the county’s bond ratings. 

To keep discretionary spending within the reserve limits and continue meeting our high priorities established by the Board of Supervisors, the Executive Office implemented targeted reductions, a total of $21 million, or approximately three percent. Furthermore, the Executive Office has instructed county departments to reevaluate and pursue new revenue opportunities. 

 

Total Budgeted Appropriations

Overall, the budget contains $6.1 billion in total appropriations across all funds, a 6.6 percent net increase of $375.4 million from the previously budgeted levels. Broken out by function, the largest sector of overall county appropriations is $1.8 billion for health and sanitation at 29 percent, reflecting a 19.6 percent increase, followed closely by $1.7 billion for public protection at 29 percent, reflecting an increase of 1.9 percent, and $1.2 billion for public assistance at 20 percent, reflecting an increase of 3.6 percent. These three functions comprise 78 percent of total appropriations. General government comprises only 14 percent of all appropriations at $865 million, a net decrease of 2.8 percent, while all others combined comprise only 8 percent.

Broken out by spending category, 39 percent of overall appropriations are for salaries and benefits, with 28 percent for services and supplies, and 24 percent for other charges, such as public aid and debt service. Just 5 percent of overall appropriations are for acquisition of fixed assets, and 0.3 percent of the overall budget is set aside for general fund contingency.

 

Personnel Summary

The county uses Budget Schedule 20 to amend the authorized position levels in Ordinance No. 440 in conjunction with annual appropriations. The budget authorizes a total of 28,246 full time positions, a 4 percent net increase of 1,002 positions from the level authorized as of May 2019. Additional summary analyses are provided below. Further details regarding requested and adopted position authorization are summarized in the departmental narratives, and provided by budget unit and job classification in Schedule 20.

As of May 2019, 19,742 regular, full-time positions were filled and 7,502 were vacant. On a percentage basis, 72 percent of regular positions authorized were filled, and 28 percent remained vacant, an increase in vacancy of 5 percent from the previous year. Of those vacant, 32 percent are in general government which includes 1,800 temporary positions, 27 percent are in public protection, 25 percent in health and sanitation, 15 percent are in public assistance. Vacant positions may not need funding for a full fiscal year, if at all.

Total Estimated Revenue

The budget includes $5.8 billion in estimated revenues across all funds, a 5.1 percent net increase of $284 million from the prior budget estimates. By function, general government is projected to collect $1.6 billion, or 27 percent of estimated revenues, an increase of 0.5 percent. It should be noted that general government departments are responsible for collecting the bulk of the county’s general-purpose revenue, which causes the amount of revenue attributed to that functional group to be disproportionate to their appropriations, which are minor by comparison. Such revenues include property taxes, sales and use taxes, and public safety sales tax. Health and sanitation is projected to collect $1.5 billion, or 26 percent of the total, for a net increase of 11.1 percent, public protection is projected to collect $1.1 billion, or 20 percent, a net increase of 5.2 percent, and public assistance is projected to receive $1.1 billion, or 19 percent, a net increase of just 3.1 percent. The other functional areas together comprise only 8 percent of all estimated revenue.

Of total revenues across all funds, 47 percent is intergovernmental state and federal revenues, charges for current services comprise 31 percent, and taxes comprise only 8 percent. Minor revenue sources comprising 4 percent of the balance include licenses, permits and franchises; use of money and property; and fines, penalties, and forfeitures.

County General Fund

Total General Fund Appropriations

The county general fund is the principal operational fund, comprising 57 percent of total appropriations. The budget includes $3.5 billion in general fund appropriations, an overall 3.9 percent increase of $129.8 million from the current budget. Public protection accounts for the largest portion, totaling $1.5 billion, or 44 percent, reflecting a spending increase of 2.6 percent. A total of $1 billion, or 30 percent, is for public assistance programs, which is up 2.9 percent, and another $737 million, or 21 percent, supports health and sanitation services, reflecting a net increase of 4 percent. General government services account for only 5 percent, at just over $158 million, a net increase of 3.9 percent.

Broken out by spending category, 47 percent of general fund appropriations are for salaries and benefits, with 25 percent for other charges, such as public aid and debt service and 23 percent for services and supplies. Just 0.2 percent of general fund appropriations are for acquisition of fixed assets, and 1 percent of the general fund budget is set aside for contingencies.

Total General Fund Estimated Revenue

The budget projects $3.5 billion in estimated general fund revenue, a 4.6 percent net increase of $155 million. By function, public assistance is projected to receive $992 million, or 28 percent of general fund revenue, a net revenue increase of 2.7 percent. Public protection is projected to collect $954 million, or 27 percent, a net revenue increase of 5 percent. General government is projected to collect $899 million, or 26 percent of estimated general fund revenues. As noted above, general government departments are responsible for collecting the bulk of the county’s general-purpose revenue, causing the amount of revenue attributed to that functional group to be disproportionate to their appropriations. Such revenues include property taxes, sales and use taxes, and public safety sales tax. Health and sanitation is projected to collect $653 million, or 19 percent of general fund revenue, reflecting a net revenue increase of 8 percent. The other functional areas together comprise only 0.4 percent of all estimated general fund revenues.

Broken out by revenue category, $2.3 billion, or 64 percent, of estimated general fund revenue is from the state or federal governments, a net 5.2 percent revenue increase of $111 million. Charges for current services, such as fire and police services to contract cities, comprise $627 million or 18 percent, a net revenue increase of 4.2percent. Taxes comprise $334 million, or 9 percent, a net increase of 6.5 percent over current estimates. All other revenues comprise just 5 percent of the general fund total.

Discretionary General Fund Estimated Revenue

Overall, county spending is dominated by mandated core functions such as health, welfare, and criminal justice, which are heavily supported by purpose-restricted state and federal subventions. While having fiduciary responsibility for oversight of the entire county budget, the Board of Supervisors has discretionary spending authority over a limited amount of the county's overall financial resources. The Board alone decides how general fund general-purpose revenue will be spent. Only 24 percent, or $837 million, of the county’s estimated general fund revenue is general-purpose, with the remaining 76 percent comprised of purpose-restricted sources such as state and federal revenues. General-purpose revenues are estimated in part on internal projections based on revenue history, and on reports from independent economists hired by the county to provide economic forecasts.

Property Taxes

Property tax revenue comprises 47 percent of the county’s general-purpose revenue, and is estimated at $390.6 million, including $116.5 million in redevelopment tax increment pass-through revenue. As property values increase, this revenue increases. Property tax estimates assume 5 percent growth in assessed valuation.

Motor Vehicle In-lieu Fees

Motor vehicle in-lieu revenue is estimated at $271.9 million, and represents about 33 percent of the county’s discretionary revenue. When the state converted this revenue source to property tax revenue, it became tied to changes in assessed valuation. In essence, although tracked separately, it is now just another component of property tax revenue. When combined with traditional property taxes, property-driven revenue equates to 79 percent of the county’s general purpose revenue.

Sales and Use Taxes

Motor vehicle in-lieu revenue is estimated at $271.9 million, and represents about 33 percent of the county’s discretionary revenue. When the state converted this revenue source to property tax revenue, it became tied to changes in assessed valuation. In essence, although tracked separately, it is now just another component of property tax revenue. When combined with traditional property taxes, property-driven revenue equates to 79 percent of the county’s general purpose revenue.

Sales and Use Taxes

Sales and use taxes are estimated at $31.3 million and represent about 4 percent of the county’s discretionary revenue. The county lost a significant share of sales tax to incorporations in FY 09/10. This was partially offset briefly from FY 12/13 to FY 15/16 while major solar projects were under construction. Since completion of these projects, the trend has normalized.

Teeter Overflow

In 1993, the county adopted the Teeter Plan to secure participating taxing entities’ property tax apportionments against delinquencies. Debt service on the Teeter financing is paid off as delinquent properties are redeemed. State law requires a tax loss reserve fund with a balance equal to 1 percent of the Teeter roll. Any delinquent collections exceeding the 1 percent, called the Teeter overflow, may be transferred to the general fund. As local housing and employment markets continue to strengthen, property tax delinquency rates continue to decline; this will continue to erode this revenue in future years. Due to key assumptions such as, assessment roll growth, interest and delinquency rates for FY 19/20 and beyond, this revenue is reduced by $5 million. Teeter overflow is now estimated at $16 million.

Interest Earnings

he Treasurer’s estimates for interest earnings include several factors: general fund balances in the Treasurer’s pooled investment fund, current interest rates, and the continuation of accommodative U.S. Federal Reserve monetary policy, impacting interest earned by investors such as the Treasurer’s pooled investment fund. Due to recent activity by the Federal Reserve, the County Treasurer projects interest earnings at $18 million, a 14 percent decrease of $3 million.

Court Fines and Penalties

Court fines and penalties are estimated to decrease slightly to $19.1 million from $19.2 million. Representing 2 percent of the county’s discretionary revenue, fines and penalties are tied to funding the county’s obligation to the trial courts, and subject to state maintenance-of-effort requirements. The county continues to shift fines and fees resulting from trial court reform to the state.

Documentary Transfer Tax

Documentary transfer tax revenue is generated by recordation of transfers of real property ownership and is up 5 percent to $16 million.

Franchise Fees

Franchise fee revenue is collected as part of franchise agreements executed between the county and utility, waste, and cable franchisees.  Franchise revenues are typically calculated as a percentage of the franchise revenue from services and sales to customers within the county.  Franchise revenue is estimated to increase again 2 percent to $7 million.  Previously, cable franchise fees were administered by the Clerk of the Board and applied to their budget as departmental revenue.  However, since cable franchise fees are declining due to increased obsolescence, this revenue was realigned to discretionary revenue to stabilize the Clerk of the Board’s budget.  Franchise revenues tracked here do not include franchise revenue from solar power plant projects, which are deposited to a separate fund per Board policy.

Tobacco Settlement Revenue

In 1998, when the master tobacco litigation settlement was finalized, tobacco companies agreed to pay for causing tobacco-related problems across the nation.  California cities and counties entered into an agreement with the state establishing allocation of the proceeds.  In 2007, the county sold a portion of its tobacco-settlement income to generate a one-time lump-sum amount, reducing the annual payment to $10 million per year, which the general fund contributes to the county medical center to use for debt service payments.

Federal, State, and Other Miscellaneous

A small portion of the general fund revenue received from federal and state sources is unrestricted and available for discretionary use.  Miscellaneous revenue includes other revenue not readily classified in other categories.

General Fund Obligated Fund Balance <h2>and Designations

In FY 16/17, the reserves for disaster relief and economic uncertainty were consolidated into a single reserve for budget stabilization.  In line with prudent practices for building structurally balanced budgets, projections assume no unassigned fund balance will carry over for use in ongoing operations.  Due to a projected general fund operating deficit, the budget anticipates release of $21 million from the reserve for budget stabilization.

Discretionary General Fund Appropriations

The discretionary general fund portion of the budget includes $858.6 million in net county cost allocations. These net cost allocations included targeted cuts to achieve savings. The tables below list the net county cost allocations summarized by functional area and department within the general fund, with the breakout following of individual contributions to other county funds and outside agencies with which the county has obligations.

STRATEGIC OBJECTIVES & BUDGET POLICIES

The budget was developed with the following Board-approved strategic objectives in mind.

Strategic Objectives

The Strategic Alignment Framework is composed of three tiers (County, Portfolio, and Department), and provides a network of KPIs to assess progress towards desired strategic outcomes. The framework acknowledges interconnected roles in achieving countywide outcomes. Each tier has a unique set of objectives and KPIs that align to the level above. To reinforce this strategic alignment and performance management mindset, the budget leverages this framework as the basis for the departmental objectives and performance measures contained in the narratives.

Department Objectives

Department budget narratives leverage the groundbreaking Strategic Alignment Framework. Department objectives are aligned to corresponding portfolio objectives, which in turn align to county strategic outcomes. In addition, Insights provide relevant context to departments’ operating environments, the nature of their KPIs, and KPI trends.

Key Performance Indicators

 

Financial Objectives

The Executive Office focuses multi-year fiscal planning on fiscally sustainable operations that support the county’s long-term strategic vision.  These financial objectives include:

  • Achieving a structurally balanced budget in which ongoing expenditures do not exceed ongoing revenues.
  • Achieving and maintaining prudent reserves and working capital.
  • Limiting use of one-time resources only to one-time expenditures and rebuilding reserves.

Short & Long-term Factors Influencing Objectives

Several factors constrain the county’s strategic financial objectives.

Revenue Growth

Assessed valuation, the basis for property tax and motor vehicle in-lieu, is assumed to grow by 5 percent during the budget year.  Optimistically foreseeing continued near-term economic strength, but prudently cautious about the potential for out-year softening, the Executive Office is now assuming a more graduated cooling to valuation growth that steps down to 3.5 percent over the next few years.  Based on softening growth in taxable sales, assumed sales and use tax and Prop. 172 public safety sales tax estimates remain tempered.  Also, actions by the Federal Reserve have caused the Treasurer’s interest earnings forecast to decrease.  Overall, general-purpose revenue growth is estimated to rise 3.5 percent over the next several years.  Unfortunately, revenue growth at this rate will continue to be substantially outpaced by increasing costs.

Labor and Pension Costs

Provisions of past labor agreements and steeply rising pension obligations continue to increase costs for salaries and benefits across departments.

New Detention Center

Phased opening of the new detention center continues to factor substantially into long-term operational planning.  The Sheriff’s Corrections budget is increased $12 million, currently factored into the multi-year forecast for FY 19/20, $9 million in FY 20/21, and another $15 million in FY 21/22.  However, discussions with the Sheriff’s Department are ongoing, with the potential to more gradually ramp up to full operations over a longer period. 

Inmate Legal Settlement

The county continues working diligently to meet the settlement terms of a federal suit filed on behalf of inmates in the county’s jails.  Not part of the settlement terms per se, but triggered by it, are costs to provide security for these added health care workers and their patients. 

In-Home Supportive Service Costs

In January 2017, the Governor proposed shifting a significant share of In-Home Supportive Services costs back to counties.  Based on increased county workload, cost estimates were expected to severely impact county budgets.  Fortunately, 1991 realignment growth revenues were sufficient to cover the majority of increased costs in FY 17/18.  Looking forward, the Governor’s January 2019 budget proposal and May Revise propose to lower the county’s Maintenance of Effort (MOE) share of cost, which will better align with realignment revenue growth projections, and continue to offset fiscal impacts to the county through FY 19/20.  Although revenue projections are favorable, the potential impact of out-year costs remain unclear due to continued program growth and a revenue stream directly linked to Sales Tax revenue.

Insurance Costs

During the downturn, the county held self-insurance rates low to lighten the burden on departments.  However, due to high claim levels in general liability and workers compensation, it was necessary to raise those rates to cover claims and higher reinsurance premiums.  Departments have been asked to absorb increases in these costs, the charges for which correlate directly each department’s claims and judgment history.  In May 2019, the Board approved recommended changes that will promote mitigation activities in an effort to prevent or reduce claims.

Internal Service Costs

Internal service rates were set for full cost recovery.  Yet during the budget process, the internal service department budgets were cut 5 percent to give relief to the general fund departments who were also asked to take cuts.  The internal service departments will absorb the budget cuts through attrition and service level negotiations with user departments.

Multi-year Forecast

The Executive Office prepares multi-year discretionary funding forecasts to set the context for major policy decisions of an ongoing nature.  This multi-year approach enables the long-range planning and fiscal discipline necessary to achieve and maintain a structurally balanced budget with adequate reserves (Board policy sets the reserve request at 25 percent of revenue.).