Thank you for coming to the release of the 1998-99 Proposed Budget for Los Angeles County. As you know from my forecast released in January, the budget proposed this year is quite different than the one proposed at this time last year. The overall budget will increase to $13.2 billion, a 5.3percent increase (most in CalWORKs). Budgeted positions will decrease by2,493 for a total of 81,932, largely due to the deletion of 5,139 trial court positions, offset by an increase of 2,646 positions in various other County programs. As you know, understanding a County budget is extremely difficult, because of all the State and Federal funding changes throughout the year. So you will see significant increases in certain departments, and virtually, none in others. Nevertheless, this is the first County budget in many years that is not struggling to overcome a deficit.
Where were we last year at this time? You may not remember, but we do; there were many unknowns built into last year's budget:
My objective in that budget, my first as CAO, was to present the full picture of our fiscal condition--to not overstate our problems, but to be clear about the assumptions we were making. I also noted that we would, with the strong leadership of the Board of Supervisors, manage our problems one at a time, as we are obligated to do on behalf of the citizens of the County.
Resolution on many of these challenges was achieved only through the strong support of the Board, our legislative delegations, the State and Federal governments, as well as our employee unions.
Although the short-term fiscal condition looks pretty good there are still two structural problems that remain in the budget and must be addressed: the use of approximately $308 million in LACERA excess earnings to offset the impact of the property tax transfer; and the restructuring of the healthcare system. (This is not to say that the reductions that were made in the Sheriff, Parks, Library, etc. are not still ongoing issues, and the unmet needs of departments still amount to millions of dollars.)
Before discussing these two issues, let me run through the budget charts behind me. They explain pretty clearly the complexity of County budgeting.. . . . . . . . .
As I indicated earlier, this is the first budget in a long time that does not have to deal with a deficit. In fact, there is approximately $49million in new general fund dollars available for appropriation. I am proposing that the Board allocate it as follows:
|
Proposed Budget (in millions) |
Final Changes (in millions) |
Change (in millions) |
LACERA Buy Down |
$25 |
$30 |
$5.0 |
Infrastructure/Automation |
15 |
10 |
(-5.0) |
|
$40 |
$40 |
$ -- |
First, the LACERA buy down. As you know, in 1992-93 and 1993-94, the State transferred almost $1 billion in LA County property tax to schools and backfilled part of it with Prop 172 sales tax for public safety. For this year, the transfer is $918 million; the sales tax is worth $425 million and the trial court funding shift is worth $91 million, for an ongoing shortfall of $402 million per year of discretionary general fund money.
The County has been fortunate since that time to have excess earnings from its retirement investments to cover the costs of contributions to the retirement system. However, these earnings are expected to run out in a little over 4 years. I think it is important that we plan ahead for this eventuality, so I am proposing a 5-year plan of $30 million a year to deal with this structural problem in our budget. It is not easy with all of the pressing program needs, to deal with a problem 4 years down the road (particularly, since it is not one we caused), but it is the fiscally prudent thing to do in my mind. The long-term fiscal stability of the County is, in the final analysis, our problem here locally.
Likewise, the County over the last 7 years, has not been able to identify resources to deal with infrastructure requirements. We are not unique in this regard as most public jurisdictions in California have made the decision to keep services going and put off less visible infrastructure decisions. However, like salaries, this is not something that can be done indefinitely, and although $10 million is only a drop in the bucket for an expense that is worth several hundred million, it is a start. Similarly, our fleets are wearing out and becoming dangerous, and we must restart a replacement program for our vehicles.
And finally, I am proposing some modest program restorations, mostly in the unincorporated area and law enforcement: 14 positions in the Parks Department to restore recreational programs focusing on after school programs for kids; 9 positions in Animal Control to develop full-time dangerous animal control squads; 5 zoning enforcement officers in the Planning Department to deal with the growing problem of code violations; $400,000 for the Library to modestly expand its book purchasing program (still $5 million down from requirements). I am also proposing to continue funding for 82 deputy sheriffs in our community policing program as the Federal revenues run out and to restore funding for 32 probation officers to maintain a caseload of 50 per officer for juvenile placements. And lastly, the restoration of 9 positions in the Coroner's Office to improve the quality of services.
Beyond these recommendations, we are anticipating that year-end fund balance will exceed initial estimates, and I am recommending that any such additional fund balance be allocated to further infrastructure/automation investments.
The Health Department is the other critical concern that I have for our long-term stability. We received approval for the final three years of the1115 Waiver; and also for a two-year period have additional room under the OBRA 93 cap to claim additional Federal revenues. This means for the next two fiscal years, the Department has adequate resources to maintain its programs. However, in the first year, after the waiver, we are looking a potential deficit of $318 million ($218 waiver-related). In the last 2 _years, the Department has made great strides in restructuring the safety net system: increased the number of primary care sites to 151; continued the reduction of inpatient capacity by 25 percent since 1994-95; eliminated almost 5,500 positions; and begun a comprehensive, aggressive reengineering effort. Next year's budget assumes a savings of $120 million gross (net$83 million) growing to $143 million net in the year after the waiver ends. The Department has more than 100 design teams, with over 1,700 participating employees in this process to fundamentally redesign work processes throughout the Department. We cannot become lax in dealing with the long-term challenge facing us in our health care delivery system, and the Department is actively preparing a post-waiver implementation plan to address this problem. While there are no significant program changes being proposed in the Health budget at this time, at a minimum, details of the reengineering effort will be reflected in final changes.
In other areas of the budget, I am recommending increases largely offset by State and Federal revenues or grants; and most have been acted on by the Board in the current fiscal year:
This concludes my formal presentation. I am optimistic about our future. There remain structural issues both in our budget and between the State and counties, but there are good people working on them.90