Report: County’s discretionary revenue rising, but higher costs on horizon

RIVERSIDE, Calif. (KESQ) - The Board of Supervisors today made several budget adjustments based on a Riverside County Executive Office report indicating that, at the halfway point for the 2024-25 fiscal year, reserves are growing above previously estimated levels despite ``escalating costs'' weighing on the economy and the balance sheet of county government.  

The 35-page midyear budget report showed a 3% increase in discretionary revenue compared to what Executive Office staff earlier predicted would be available by this juncture.

The county's reserve pool is now projected to reach $731 million, rather than $720 million, in the current fiscal year, according to the report.   

"Reserves are in a better position than what they have been in the past, but I want to caution that's not enough,'' county Chief Executive Officer Jeff Van Wagenen said. "We need to have two months' General Fund operating reserves, or $775 million (to meet baseline budgetary recommendations from public sector accountants). We're approaching that number, but we're certainly not there yet."  

Van Wagenen pointed out that sales tax revenue receipts are sagging, and higher interest rates from which the county has benefited due to inflationary pressures are projected to slide lower, impacting operating income.

"We've got to maintain our service levels as best we can,'' he told the board.

The Executive Office statement introducing the budget report noted ongoing concerns tied to ``escalating costs related to maintaining service levels, labor cost increases and addressing the critical need to repair or replace aging facilities.''

One of the largest increases in near-term costs was connected to the Medical Retiree Health Insurance Fund, operated by the Department of Human Resources. The outgo was estimated at $9.75 million for the current fiscal year. Only $5 million had been budgeted. The board authorized tapping a reserve account to cover the obligations.   

Public safety agencies were generally holding inside spending thresholds. However, the Department of Animal Services needed a $750,000 augmentation to its budget stemming from "greater medical needs for animals in its care."  

The agency has been operating at maximum capacity at all four county shelters for at least the last two years. The board approved clearing the revenue deficiency by drawing on savings netted from available funds left over due to departmental positions remaining unfilled.

The largest tax revenue shortfall detected to date was in Proposition 172 Pubic Safety Sales Tax receipts, which were projected to slip by $9.2 million in 2024-25. Other income streams were expected to offset the loss, resulting from decreased consumer spending.

The budget for 2024-25, approved by the board in June, contained $9.2 billion in appropriations, representing an 11% increase over the 2023-24 spending blueprint.

Van Wagenen confirmed at the start of the fiscal year there were 2021 American Rescue Plan Act funds still in the county treasury. They were, by law, supposed to be spent by Dec. 31. The county received $480 million in ARPA allocations and another $500 million in 2020 Coronavirus Aid, Relief & Economic Security Act money. The federal infusions have been applied to "budget stabilization," community development, infrastructure projects and related programs.  

Under the current budget, $2.6 billion is going to the Riverside University Health System, the largest set-aside in the spending plan, at 27% of total expenditures. The outgo translated to a 5.6% increase in healthcare-oriented obligations.

Public safety agencies are next, with $2.2 billion in expenditures, 8.5% more than last year's outlays and 23% of the composite budget, while the social services portfolio is receiving $2.1 billion in General Fund receipts, also representing an 8.5% increase compared to 2023-24 and comprising 21.4% of the budget.  

The next budget update will be the third-quarter report on May 20. Hearings on the proposed 2025-26 budget are tentatively slated for June 9-10.