There are two budget-related questions from the public that I hear quite often:
- Why is money being spent on X instead of on Y?
- I live within my means, why can’t the county?
These are great questions and so I decided to write a post where people could gain a better understanding of how the County budget works, how to find the most recent budget, and how to dig in and get answers to some of your questions about where money is spent.
General Fund vs Non-General Fund
The key to answering the question “Why is money being spent on X instead of on Y?”, is to understand the difference between general fund (or discretionary) revenue and non-general fund revenue. This is the single most important concept when it comes to understanding the County budget.
The fiscal-year (FY) 2018-2019 Yuba County budget was almost $180 million, but only about $30 million of that (< 17%) was general fund (discretionary) revenue, and within the control of the Board of Supervisors to allocate as desired. The other $150 million, must be used for a specific purpose and can’t be used for anything other than it’s designated purpose.
General Fund Deep Drive
Where does general fund revenue come from? There are multiple sources, but the most common are:
- Property Tax
- Property owners pay an annual 1% tax on the assessed value (subject to Prop 13 limitations) on their property. About 20% of this 1% goes into the County general fund. In FY 18/19 that’s anticipated to be about about $11.8 million dollars. You can read more details about property tax revenue in this previous post.
- Sales Tax
- Yuba County get’s 1% of the 7.25% sales tax as discretionary revenue. In FY 18/19 that’s anticipated to be about $3.6 million dollars. You can read more details about sales tax revenue in this previous post.
- As a result of Measure K, the sales tax will increase to 8.25% on April 1st, 2019 and this is expected to generate an additional $4.3+ in discretionary revenue in FY 19/20. While revenue from this additional 1% is discretionary, the ballot measure indicated it would be spent on public safety and essential services. Staff presented a recommended spending plan to the board. You can see it here.
- For FY 18/19, other general fund revenue sources include: Motor Vehicle In-Lieu (see page 11) revenue of about $8.8 million, franchise fees of about $1.6 million, and landfill tipping fees of about $1 million.
What is general fund revenue spent on? The Board of Supervisors prioritizes public safety and in FY 18/19, 72% of the general fund was allocated to the sheriff’s department, the district attorney, and probation. For a detailed description of how general fund revenue is spent, you can view the FY 18/19 budget. Pay close attention to the line of revenue in each department’s budget summary labeled “Net County Cost”. These are the discretionary funds (i.e. property and sales tax) that go to that department.
Non-General Fund Deep Dive
Non-general fund revenue (and expenditures) make up the majority (over 80%) of the Yuba County budget. This revenue is restricted, usually due to its source, and must be used for its intended purpose.
What are some examples of non-general fund revenue and their associated expenditures?
- State and federal funding to operate specific programs such as child welfare, child support, and many other human services functions.
- Capitol Improvement Funds
- Gas tax revenue (must be used for road improvements)
- Federal, State, and Regional grants for infrastructure or limited-term programs
- Development Impact Fees (must be used to build infrastructure for which the fee is collected)
- Fees collected for service, such as building permits (fee should equal the cost to provide the service and must pay for that cost)
- County Service Area (CSA) assessments (must be used to provide the designated service(s) within the CSA boundary)
The important thing to understand about non-general fund revenue is that it can’t be re-allocated for another purpose. While all County departments and services should operate as efficiently as possible, saving money in Child Support does not free up funds for an additional sheriff’s deputy or money spent for the Olivehurst Roundabout (grant) could not have been used to hire a deputy or support an initiative to reduce homelessness.
The County Budget Process
The next question that I heard frequently related to the county budget is “I live within my means, why can’t the County?”
The simple answer to that question is that the County does live within it’s means. The County fiscal year runs from July 1st – June 30th and the starting point for creating the budget is anticipated revenue. The previous years budget, mandated services/services, and desired services/service levels are then taken as additional inputs to the process. Early in the process, the various departments submit a request that includes spending levels they believe are important to meet the mandated and desired service levels for their area are responsibility. It’s almost always the case that anticipated revenue doesn’t align with mandated and desired service levels and so cuts to the proposal are made as needed to ensure that the budget remains balanced. Non-general fund revenue is used and prioritized above general fund (discretionary) revenue where possible. As with a typical household budget, costs usually increase on an annual basis, often in areas that are outside the control of the County. These inflationary cost increases, in addition to new laws and requirements passed down from the State and Federal governments, often drive the need for larger annual budgets in many departments. Sometimes revenue increases, both general fund and non-general fund, cover those cost increases and sometimes they do not. If they do not, cuts are made to ensure the budget is balanced. Mandated services and service levels are prioritized over desired services and service levels, taking board priorities and the revenue source (general fund vs non-general fund) into account.
As a result of the housing crash of 2008, the County experienced a drop in general fund (discretionary) revenue of about $9 to $10 million. The majority of losses were in property tax and interest earnings as well as a few other categories. As of 2018, only about half of the annual revenue that was lost has returned, but during the last decade the cost of doing business has continued to rise. The drop in revenue and slow recovery have
driven the County to go through a decade long process of increasing efficiency and cutting costs. The result is a smaller workforce that is better trained and works more efficiently for the residents of Yuba County.
Growing the tax base is the ultimate solution to this problem and it’s why economic development is key to the future of Yuba County. The County, as well as the Yuba Water Agency, are well aware of this and it’s a strategic priority of both entities and their boards.
Deep Dive into the Budget Timeline
The annual budget process is an ongoing process that starts in the fall after the final budget for the current fiscal year is approved by the Board of Supervisors. However, we are going to consider the budget process timeline from the boards perspective, so we’ll begin in June.
- Draft Budget Presentation: After months of work, staff brings the draft budget and an associated presentation to the Board of Supervisors in June each year. Legally, the board must approve this draft budget prior to the start of the fiscal year (July 1st). The public has an opportunity to comment on the budget, and supervisors have an opportunity to propose changes they would like to see in the final budget. [Note: It’s important that any changes the board wants to see in the final budget must keep it in balance, so in addition to recommending where we want to see additional spending, we must also give direction to staff on what areas should be considered for equivalent reductions.]
- Budget Workshop: Around August each year, two consecutive days are set aside for a public board workshop. During this time, all departments come before the board of supervisors and give a 30-60 minute presentation on their accomplishments of the prior fiscal year and plans for the next fiscal year. In addition, they have an opportunity to make a case to the board why the need more funding than was allocated to them in the draft budget. Like with the draft budget presentation, the board has the opportunity to provide direction on changes we would like to see in the final budget. The budget workshop schedule is agendized and lists the specific day and time that various departments will present. The public is encouraged to attend and view the presentations.
- Final Budget: Around September of each year, after the books for the prior fiscal year are closed, the board is presented with a final budget to approve for the current fiscal year (July-June). This occurs at a regular board meeting.
- Draft Budget Creation: Once the final budget is approved, County staff begins working on the budget for the next fiscal year, to be presented to the board in June.
If any changes are needed to the budget during the course of the year, they are brought before the Board of Supervisors to consider. In addition, any changes to position allocations during the year are also brought before the board.
Finding & Reading the Budget
You can find the budget for the current fiscal year, as well as prior fiscal years going back to FY 2004-2005 on the County Administrator’s (CAO’s) website.
This post will focus on accessing and reading the FY 2018-2019 budget, as it’s the current budget at the time of this post. You can access it by clicking FY 2018-2019 under “County Budgets” on the left side of the CAO’s website. There is a link to the final budget there and that will give you access to the final spending plan for the year, but you will likely find the links under the draft budget to be more informative and I suggest you start exploring the budget there.
The suggested starting place for understanding the budget is to read through the Budget Message. In FY 18-19, this section contained an executive summary which provided a list of accomplishments from the previous fiscal year, a comparison of the operating budget of FY 17-18 to FY 18-19, a discussion of CalPERS costs, healthcare costs, and use of one time revenues. Following the executive summary is a high level breakdown of revenues, expenses, reserves and contingencies, debt service, and our workforce.
The Budget Overview contains a high level rollup of revenue and expenditures for each department as well as a comparison between the draft budget and the prior fiscal year’s budget. In addition, there is a summary of all County positions and any suggested changes from the prior fiscal year. Finally, there is a list of proposed capital projects and purchases.
The final component of the budget that you might be interested in reviewing is the breakdown by department. The budget page contains a link to the specific budget for each of the departments/agencies within the County. In these documents you will find the following items for each sub-department:
- A table that presents a high-level summary of four expense categories and four non-general fund revenue categories compared to the prior fiscal year. In addition, this table contains a line item called Net County Cost, which is the portion of the department budget funded by the general fund (discretionary revenue). For some departments, like Human Services (in Health and Human Services) or Public Works (in Community Development and Services) it will be minimal or zero. In other cases, like the Sheriff, this number will make up the majority of revenue for the department.
- A narrative about the department and their goals and objectives for the fiscal year.
- A detailed breakdown of revenue and expenses.
I hope this discussion about the County budget, including the difference between general fund and non-general fund revenue, the annual budget process, and where to find and access the budget has been beneficial. As always, I’m interested in your feedback and questions at [email protected].