Deficit Reduction By ‘Creative’ Accounting

“The budget team continues to work with the departments to fine-tune the budget,” said CEO Darcie Antle on Tuesday. “It is requiring all departments to be creative, look at all funding streams to ensure all the dollars are going to the highest and best use.”

That nebulous statement, backed up by nothing from any, much less “all departments,” was typical of the Supervisors’ meandering budget discussion last Tuesday. As usual the discussion was heavy on basic budget opinions and light on departmental specifics.

Supervisor Maureen Mulheren effectively admitted that the Board has very little understanding of what the departments do, asking that in the future the CEO report — which lately has been nothing but a generic collection of boilerplate descriptions with a few random numbers — actually report what they did the previous month. No commitments were made, of course. None of her colleagues backed her up.

CEO Antle told the Board that the budget deficit has magically declined from over $23 million last month to just $2.6 million. She implied that the deficit reduction was the result of “creativity” by the departments, saying that six (unspecified) county department heads had submitted proposed reductions totaling only $624,327 since the April 8 budget workshop in Willits.

Wait a minute. The departments only came down by around $600k, but the deficit came down by almost $20 million?

A closer inspection of the agenda packet’s “Budget Deficit Detail” chart shows that most of the recent reduction is based on unfounded assumptions:

Sara Pierce, acting assistant CEO (and former Acting Auditor-Controller/Treasurer-Tax Collector), told the Board that the staff’s proposed recommendations since April 8 amounted to about $14 million in deficit reduction. Among other things, that $14 million apparently assumes an estimated 6% employee turnover rate. (See highlighted number.) This, along with a hiring freeze is supposed to translate to an $8 million savings by not replacing vacated positions. “The county's true turnover rate is about 9.9%,” said Pierce, adding, “So that’s almost 10%. We did take the conservative approach at 6%, taking that kind of consideration along with economic factors. People may not be wanting to change jobs to come up with a lower rate.”

So… $8 million in deficit reduction… Right.

We can’t make Pierce’s math work. The General Fund is around $100 million, most of which is salaries. So say $80 million for salaries. 6% of $80 million is $4.8 million. Then since the attrition occurs over the budget year, one cannot expect a full year of savings. So that’s an average of about half of the $4.8 million, or $2.4 million. On top of that, we doubt they will really leave every vacant position vacant because some of the affected positions will be determined to be essential and approved for rehiring. And whatever positions are re-filled will involve training and a learning curve and the associated cost.

If Ms. Pierce is saying the base number upon which to apply the deficit reductions is the County’s much bigger total budget, not just the General Fund, then we question that assumption on its face because the budgets for the state and federal grants and programs are fixed and (mostly) not funded by property, sales or bed taxes. Yet based on the above Deficit Reduction Chart it looks like they’re comingling the General Fund deficit with the non-General Fund deficit.

Unfortunately, the Board didn’t get into any of this during Tuesday’s rambling, muddled and ultimately indecisive budget discussion.

Supervisor Ted Williams suggested finding and assessing un- and under-assessed properties, But, as we have seen in prior discussions of this idea, there’s nowhere near millions of dollars’ worth of County revenue involved and what little there is will not help to reduce next year’s budget very much.

A much bigger long-term revenue loss, suspiciously unmentioned by the Supervisors, is Ukiah’s huge new annexation proposal. Nobody knew how much of a giveaway that was when they blindly approved the “tax sharing” agreement last year. And they certainly don’t know how much it will cost now that Ukiah has driven a semi-truck through it. It looks like it would involve a lot more property tax losses to the County than the $3 million they estimated last year. Sheriff Matt Kendall said last week that Ukiah’s big parcel annexation grab amounts to a significant “bait and switch” because Ukiah’s city leaders misrepresented their plans back when they bamboozled Supervisor Maureen Mulheren and the rest of the Supervisors into agreeing with the one-sided “tax sharing agreement” that would turnover millions in property tax revenue from many of the County’s most highly assessed properties for the next ten or so years to Ukiah’s coffers with no compensating reduction in County services and costs. The tax sharing agreement was worked out in secret between Mulheren and a few Ukiah city officials then sprung on the rest of the Supervisors for quick up or down vote. Nobody, including then-Acting Auditor-Controller/Treasurer-Tax Collector Sara Pierce could figure out how much the County stood to lose, yet the Supervisors voted for it based on Mulheren’s claim that everything would work out fine and everybody should be “optimistic.” The deal was not circulated for review by the public or County department heads for comment.

Another big chunk of assumed deficit reduction is the CEO’s proposal to “Utilize one-time funds from Retirement Contribution Reserve ($3.2 million) to offset one-time expense for General Fund portion of Pension Obligation Bond.”

If these kinds of ill-defined things are considered “deficit reduction,” one must wonder why the original deficit included them in the first place.

As union rep (and budget wonk) Patrick Hickey told the board on April 8, “The County always overestimates expenses and underestimates revenues. These chicken little announcements about the sky falling are once again being rolled out like clockwork. If you do this every time you lose credibility and you lose public trust.”

When the budget is “balanced” using “creative” approaches like these, the County’s credibility suffers major losses every time the Supervisors meet these days.