To: Board of Supervisors, Board of Directors
Department or Agency Name(s): County Administrator’s Office
Staff Name and Phone Number: Peter Bruland, 565-3086
Vote Requirement: 4/5th
Supervisorial District(s): Countywide
Title:
Title
Fiscal Year 2021-22 Year-end Fund balance
End
Recommended Action:
Recommended action
A) Receive an update on the Fiscal Year 2021-22 Final Year End fund balance.
B) Adopt a resolution increasing General Fund Contingencies by $416,291 using year-end available discretionary fund balance in alignment with direction from budget hearings.
(4/5th Vote Required)
end
Executive Summary:
During the June 2022 Budget Hearings, the Board gave direction to staff on how to use the $20.2 million in anticipated FY 2021-22 Year End General Fund discretionary balance and gave direction for use of the first $1.4 million of fund balance above this amount, should it be available after the close of books. Additionally, staff were directed to return with the final balance to give the Board the opportunity to consider funding certain items not included in the Adopted Budget.
In total, the County closed FY 2021-22 books with $13.9 million in unassigned/unprogrammed General Fund discretionary balance.
After accounting for the $1.4 million that was directed at budget hearings, there is approximately $12.5 million in available fund balance. While this funding is available for one-time purposes, staff do not recommend programming it at this time due to recognition of a number of significant upcoming needs that may require use of this funding.
Discussion:
In 2017 the Board adopted a policy stating that the Budget should be balanced without the use of anticipated year-end savings. This policy was implemented during the FY 2018-19 adopted budget <https://stg.sonomacounty.ca.gov/WorkArea/DownloadAsset.aspx?id=2147541732> and allows for any eventual year end General Fund available balance (fund balance) to be dedicated to one-time purposes. The Board approved County Financial Policies for 2022-2023 <https://sonomacounty.ca.gov/administrative-support-and-fiscal-services/county-administrators-office/budget-and-operations/financial-policies-for-2022-2023> include “…a structurally balanced budget matches total ongoing expenditures to the annual estimated revenues. In a structurally balanced budget, beginning fund balance may not be used as a financing source for ongoing expenditures.”
At budget hearings, staff projected the year-end fund balance using data on revenues and expenditures through the third quarter. Based on these estimates, the Board may consider programming anticipated discretionary unspent balance for one-time uses. This estimate is meant to be conservative, in order to reduce the risk that the Board make funding decisions with funds that ultimately does not materialize. In addition, the Board may designate uses for additional year-end fund balance, should it be available.
During the FY 2022-23 budget hearings, the Board programmed $20.2 million in anticipated year-end fund balance. Additionally, the Board gave direction that the first $1.4 million of additional fund balance be programmed as follows:
1) $416,291 to restore contingencies to a full $5 million; and
2) provide $1 million for the implementation of a food program by the Human Services Division, following a needs assessment review effort that was also funded as part of the budget. Finally, the board directed that any remaining funding not be programmed but instead be brought back to the Board in the fall for potential programming.
Following the close of books, as well as some post-close audit adjustments, the County ended FY 2022-23 with $34,106,446 in General Fund discretionary unused balance. After accounting for the $20.2 million programmed at budget hearings and the $1.4 million for which direction was given, there is $12,499,203 for which direction has not been given. The year end fund balance was much higher in FY 2021-22 than is usually the case. This was primarily driven by revenues, which rebounded more quickly from the COVID-related downturn than was initially expected. In addition, high vacancy rates in many departments led to greater than expected salary savings.
As part of the direction to return with the final General Fund discretionary unused balance, the Board noted six potential uses for available funds. These uses are:
• Remaining items in Rows/Section “B” of Exhibit A (Budget Adjustment Tool)
• Contribution of paying down Pension Unfunded Liability
• Contribution to Reserves
• Contribution to County Center/Deferred Maintenance
• Contribution to Roads
• Contribution to contingencies
The list of items in section “B” of exhibit A is found in Attachment A to this item. More information about these items is available as part of the materials from the FY 2022-23 budget hearings, found in Tab 5 at: <https://sonomacounty.ca.gov/administrative-support-and-fiscal-services/county-administrators-office/budget-and-operations/budget-reports>. It should be noted that all items in this section were requesting ongoing funding, yet the close of books final General Fund available balance is one-time in nature. A funding alternative approach could be to set aside one-time funds for multiple years, but the program/initiative cannot count on an ongoing source.
In addition to the needs identified at budget hearings, the County faces several known upcoming financial challenges:
ONE-TIME
1) There is an identified gap on funding for the Behavioral House Housing Unit at the Main Adult detention facility. While $5 million of funding was identified at budget hearings, there is still an estimated gap of more than $4 million. The County anticipates going out to bid later in FY 2022-23, which may result in a larger gap when final bids are known.
2) There is a funding gap for the public infrastructure needed to support the Roseland Village redevelopment project which is holding up the construction of 75 affordable and 100 market-rate housing units. As reported in a separate report on the Board’s consent calendar, the current gap is estimated to be as much as $18.5 million.
ON-GOING
1) All labor agreements expire in the next year. The cost of new agreements cannot be known prior to bargaining, which creates significant uncertainty for upcoming budgets.
2) Several units supporting key Strategic Plan objectives are currently funded using one-time sources that will expire in the coming years. This includes positions on the Mobile Support Team in the Department of Health Services, as well as the Climate Action & Resiliency Division in the County Administrator’s office.
3) While the Board has set aside funding for staffing of the Behavioral Health Housing Unit when it is completed, current estimates suggest that approximately $2 million in additional funding may be needed when it opens.
4) While the General Fund contribution to Roads increases by 2 percent each year, this is not enough to meet the full costs of maintaining our road system. Additional funding of $4.3 million annually would be needed in order to keep up with deterioration of existing road infrastructure.
Given the array of upcoming needs and the one-time nature of the funding, staff does not recommend additional programming for the remaining $12.5 million year-end General Fund discretionary unused balance at this time, particularly for ongoing costs. Instead, it is recommended that the Board keep fund balance available to help address needs identified above or other emergent needs as they may occur.
Strategic Plan:
N/A
Prior Board Actions:
June 17, 2022 - Adopted Budget
Fiscal Summary
|
Expenditures |
FY 22-23 Adopted |
FY23-24 Projected |
FY 24-25 Projected |
|
Budgeted Expenses |
|
|
|
|
Additional Appropriation Requested |
$416,291 |
|
|
|
Total Expenditures |
$416,291 |
|
|
|
Funding Sources |
|
|
|
|
General Fund/WA GF |
|
|
|
|
State/Federal |
|
|
|
|
Fees/Other |
|
|
|
|
Use of Fund Balance |
$416,291 |
|
|
|
Contingencies |
|
|
|
|
Total Sources |
$416,291 |
|
|
Narrative Explanation of Fiscal Impacts:
This item will program $416,291 of year-end available General Fund balance to increase contingencies, as directed by the board at the June 17 budget hearings. Programming for the $1 million dedicated to implementing a food program will occur when the initial needs study is completed. If the Board directs funding of any other items, staff will return with a consent item to adjust the budget.
Staffing Impacts:
None
Narrative Explanation of Staffing Impacts (If Required):
n/a
Attachments:
A: List of items in section “B” of Exhibit A (Budget adjustment tool) from budget hearings.
B: Budget Resolution
Related Items “On File” with the Clerk of the Board:
None