Budget Cuts For Thee, Comfy Business As Usual For Me

The Supervisors say the County faces a $2 million deficit this fiscal year even after some preliminary budget cuts. The county's leadership spent several desultory hours on Tuesday wondering what to do about it. Do they really have to give the Parks department $1.6 million? 

Supervisor Ted Williams wondered if the County gets a “return on investment” for the nearly $600k of general fund they dole out to Visit Mendocino? (He later withdrew that pointed question in the face of a generic Visit Mendo pushback saying that other counties promote themselves so Mendo must also.) 

Vehicle replacements? How about that couple hundred thou on West Company for “business development”? Can anything be done about the increasing cost of employee health care? 

Interim CEO Darcie Antle insisted that the Departments have cut all they can. 

Williams: “We have to make some cuts somewhere.”

The apparent deficit is mostly caused by the County’s irresponsible and contradictory approach to cannabis permitting. All the way back to 2017 we saw that the ambitious staffing that they first proposed plus everything that comes with it — vehicles, office space and so on — would probably not be paid for by the pot program revenues over the long term. For a few flush years cannabis taxes produced $5 or $6 million, but a lot of that was “minimum” tax on non-growing growers and the early days when pot growing was still somewhat profitable. 

“We were living on cannabis,” said Williams, “and that is now over. It’s not coming back. We have lived on one-time revenue as if it would continue but instead spent it on staffing.”

Williams is right, albeit belatedly, but he failed to mention that County bungling is a major reason “it’s not coming back.”

But is there really have a deficit? 

There’s almost $17 million in Covid relief money yet to be allocated. There’s a $20 million reserve, a reserve that Supervisor Williams says is too small, covering only a few weeks of County spending. But, as usual, he’s mistaken and misstating the reserves to make things look worse than they are.

There are basically two kinds of reserves: Operating reserves which cover cash flow needs during the ups and downs of otherwise predictable but irregular revenues. And there’s General Fund reserves for unplanned expenses. 

Mendo has over $20 million in the latter. 

Sonoma County, with a much more mature and sensible budgeting process, makes the distinction about General Fund reserves quite clear. “The [SoCo] Board will maintain a minimum level of unassigned General Fund Reserve balance equal to 1/12 (8.3%) or 1 month of annual General Fund revenues.” And the Board “will strive to maintain a total unassigned General Fund Reserve balance equal to 1/6 or 2 months of annual General Fund operating revenues.”

Translation as it would apply to Mendocino County’s $84 million general fund: Mendo should keep a minimum of about $7 million and a target of about $14 million. 

Williams is conflating operating reserves with General Fund Reserves. Operating reserves are supposed to cover cash flow for budgeted expenses, including non-General Fund expenses. General Fund Reserves do not apply to State and Federal Grant money, the much larger part of the County’s spending. And they are not withdrawn or spent without the approval of a supermajority of the Board.

For all their training and access to information, you’d think the Board and their “finance team” would know the difference. But there’s no indication that anyone in Official Mendo (with the possible exception of the Auditor who we haven’t heard from since last year when the Board unilaterally consolidated her office with the Treasurer without a plan or budget or idea what it involved and over the objection of everyone involved except themselves. And which has not been planned for or budgeted as a consolidated department.)

Sonoma County also has a prudent accompanying reserve policy: “Anytime the Board authorizes drawdown of Reserves, staff will present a re-payment schedule which shall include the amount of state/federal reimbursements expected to be received.”

Then we get to what was NOT discussed: Themselves and their overlarge executive staff. New “Deputy CEOs” magically appear almost monthly lately, and nobody asks where the money for them will come from. Every meeting, there’s a new one introduced for this or that presentation with a new artificial specialty. Each one of those new Deputy CEO’s costs about $250k. Nobody ever asks where that money will come from.

In 2010 when the Board faced a more serious budget crunch, the first thing discussed [by a majority of the board] was their own salaries. Over the objection of “liberal” Supervisors Colfax and Smith, the other three Supervisors at least realized that voluntary, if modest, pay cuts, were in order if they were going to impose cuts on staff because it looks bad when you don’t impose some cuts on yourself while cutting other departments. 

But not this crew. Not having any idea what to do, they sent the “deficit” question to a couple of ad hoc committees and staff to come up with a list of proposals they can rank next month. But since the listers are themselves and their staff, we doubt the list will include the Executive Office, the Supervisors, or County Counsel’s office which, btw, is running over budget due to higher than planned staffing.

They should at least take responsibility for their own failed cannabis permit program and cut the cannabis staff since there aren’t many new applications and many of the old ones have given up. If more cuts are necessary after that, then look at those covid relief funds and the over-large reserve. Maybe even consider trying to live without an extra Deputy CEO or two.

In a normal world, the Board would do whatever they can to keep from cutting operational departments that deliver services, however spotty those services may be at times.