County agencies contend with red ink in first months of fiscal year

Riverside County’s chief financial officer told the board of supervisors that “fiscal discipline” is a must to avoid deeper deficit spending and eating up reserves, even though multiple agencies are already struggling with budgetary challenges in the first half of the current fiscal year.

“We are on an unsustainable trajectory,” CFO Don Kent said during a hearing on the first-quarter report for 2017-2018. “The overages are unsustainable. The conditions driving revenue are uncertain. Deficit spending must be curtailed. Fiscal discipline is only possible if we contain costs.”

The 70-page budget report revealed shortfalls in public safety and the Riverside University Health System, which is facing a $15 million gap as it strains to meet ballooning health care demands while taking in smaller disbursements under the Patient Protection & Affordable Care Act, better known as “Obamacare”.

Executive Office analysts pointed out that RUHS is trying to adjust to escalating workloads stemming from increased detention health services guaranteed under a consent decree the county accepted to settle a federal lawsuit filed by a Bay Area-based prisoner rights’ law firm three years ago.

The cost of expanding services to mentally and emotionally disordered inmates is more than $40 million a year, according to county officials.

As expected, the Riverside County Sheriff’s Department, District Attorney’s Office and Office of the Public Defender indicated budget overruns would be unavoidable in 2017-2018, according to the report. The agencies entered the fiscal year in the red.

Sheriff’s officials anticipated a $9.3 million overrun, which may swell, while the D.A.’s office is contending with a $5 million overage, and the public defender’s office is working to find ways of containing a $2.2 million deficit.

“This first quarter report is not good news,” Supervisor Marion Ashley said. “I don’t think we’ll have to go back to closing down (non-public safety operations) on Fridays to save money. I think we’ll be able to work it out.”

The supervisor’s biggest complaint was against state lawmakers who create “problems here, sucking funds away from local programs” by imposing new state mandates and shifting previous state functions, like parolee monitoring, to localities.

“They’re going to have to start realizing the consequences of their actions,” Ashley said.

County CEO George Johnson expressed concern over softening sales tax revenue and “lagging” property tax receipts. He also returned to an issue that plagued the county throughout the last half of 2016-2017 – the prospect that surging In-Home Supportive Services costs might be shifted from the state to counties.

IHSS is a Medi-Cal program that provides direct assistance to low-income seniors and the disabled who are living independently, including meal preparation, bathing, medication dispensation and other on-site care. There were proposals to make counties pick up the lion’s share of IHSS expenses, which would have translated to tens of millions of dollars in additional expenditures for Riverside County.

A deal was struck in the state budget to spare counties a major new cost obligation in 2017-2018.

Supervisor Kevin Jeffries said he was worried about the Department of Probation slipping into a damaging deficit as it spends the last of grant funds that kept the agency in the black going into the current fiscal year.

“Potentially 100 positions may have to be eliminated,” Jeffries said. “We need to be thoughtful about the impacts.”

The supervisor also urged the executive office to make a habit of incorporating dollar figures from widening pension obligations and the future opening of the John J. Benoit Detention Center in Indio into budget reports.

“We need a chart that shows all likely cost increases so we know what we’re in for,” he said.

The $333 million detention center will open in phases beginning next summer, eventually housing 1,600 inmates. But it remains unclear how the county will staff it as the sheriff struggles to find the money to fund deputies for patrol operations in unincorporated communities.

Johnson said that despite cautionary signs on the horizon, there was reason for “optimism,” as both public safety and general government agencies undertake pilot projects and implement reforms to save money and gain operational efficiencies identified by auditors from Netherlands-based KPMG.

The professional services firm was hired in October 2015 to ferret out opportunities for improving practices in public safety operations and was later retained to do the same throughout county government. The county is set to spend more than $40 million on the KPMG contracts.

“(KPMG’s) cost-saving measures are essential to maintaining service levels while containing ongoing spending,” Johnson said.

According to the executive office, the county is on track to stay above the board-mandated $150 million in reserves in the current fiscal year – despite drawing down the reserve pool by $53 million to meet some expenses.

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