State ‘Cash Crisis’ Could Stop County Payments

by Daniel Mintz, April 13, 2011

A state cash flow crisis has been described as inevitable and one Humboldt County supervisor has related that county workers fear that the loss of their jobs is imminent.

Suspension of state payments to counties and the possible delay of the county’s budget process were talked about when Humboldt County Administrative Officer Phillip Smith-Hanes gave a state budget update at the April 5 Board of Supervisors meeting.

The state has a $15.4 billion deficit and Smith-Hanes said the state’s controller is worried that a “cash crisis” could occur next month, with payments to counties and cities suspended to ensure that state operations can continue.

“That appears, at this point, to be largely unavoidable,” Smith-Hanes continued.

A few days before, the deadline for legislators to approve a June special election on tax hike extensions had passed. Governor Jerry Brown had failed to convince enough Republicans to support the election, which would have asked voters to continue vehicle license fee, sales and income tax increases for five years.

The state has already made $12 billion in cuts, much of them to mental health, welfare, in-home support and other human services. Lacking the special election, Brown has said that an “all cuts” budget to schools and law enforcement will be proposed to close the rest of the deficit.

Next month, Brown will present a revised budget proposal that will “take on increasing importance” due to the failure to strike a deal on the tax extensions vote, said Smith-Hanes.

With the continuation of the increased tax revenues deflated, there will be no funding for the state’s recently-approved plan to divert some felony offenders from state prisons to county jails.

Brown’s revised budget is “going to be framed in the context of having a majority vote budget in place that solved only slightly more than half of the state’s deficit problem and makes transfers of programs to counties with no associated funding,” Smith-Hanes told supervisors.

He added, “That’s all going to occur within the back-drop of an impending cash crisis.”

And “the ultimate outcome” may be that the county will have to approve its budget after the fiscal year ends on June 30. Smith-Hanes said he’d give another report in late April, when more is known and a revised budget schedule can be set.

But Supervisor Jimmy Smith said that he wants to know what the county’s losses will be when the vehicle license fee revenues are downscaled. The county has already made cuts this year and in previous ones, and so-called one-time fixes to plug budget gaps have run out.

“We’ve got a whole array of very uncomfortable things facing the County of Humboldt, more so than I’ve ever seen before, Smith said. “The unknown parts have our employees scared to death, frankly.”

He asked for information about probable fiscal impacts to give people an idea of what to expect when budget hammers fall. “I’m worried about all those folks that work for us, that work within the cities, within the special districts — there is nobody that will be untouched by this problem with the state budget,” said Smith.

Smith-Hanes will detail the county’s vehicle license fee-related losses at this week’s meeting.

He had said that he’d be updating the situation as “things grind forward in Sacramento.” Board Chairman Mark Lovelace asked, “Are things actually grinding for-ward or are they just grinding?”

“Unfortunately, they seem to be grinding down a lot of programs that benefit the community,” Smith-Hanes replied.

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