RivCo's Midyear Fiscal Position 'Stable' Due To Higher Revenue

RIVERSIDE COUNTY, CA — Riverside County government's reserve pool is "much better" than anticipated going into the second half of the current fiscal year, but revenues are beginning to "flatten," and that could pose challenges with budget planning for 2024-25, the county's chief executive officer said Tuesday.

"As far as year-end reserves, our position is improving and has increased," CEO Jeff Van Wagenen said during a presentation on the midyear 2023-24 budget report. "We are doing much better than we have in the last 15 years. That reserve is starting to make us feel a little better about our year- end position."

Aggregate reserves are projected to reach $677 million, as opposed to the initial prediction of $555 million, by June.

Van Wagenen tempered the good news with a caveat that "revenue flattens in the next fiscal year."

"Bad times have not yet arrived ... (but) our revenue growth is absolutely slowing," he told the board.

He said one of the principal areas of concern is the sizable state budget deficit, which could be anywhere from $60 billion to $73 billion, depending on which numbers are consulted -- the governor's or the Legislative Analyst Office's.

The exact size will determine funding levels for a number of state- supported programs countywide going into 2024-25.

Van Wagenen also pointed to the erosive effects of inflation, or general cost escalation stemming from supply and demand and federal monetary influences, as impacting the county's finances.

"Something that cost $1 two or three years ago now costs $3," he said. "We have a need for new programs and new capital improvement projects" and price patterns may bear on the county's decision to move forward or hold off on them.

The midyear report indicated that General Fund discretionary revenue is "stable and continues its positive trajectory, with a projected increase of $60.7 million, representing a 5% growth over the adopted budget."

The report showed an estimated year-end gain of $20.4 million in property taxes, a $20 million increase in interest earnings on county treasury pool investments and an $8.6 million jump in motor-vehicle-in-lieu of property tax receipts, among other gains, which offset projected losses in other revenue streams.

Estimated year-end discretionary revenue is now at $1.2 billion, compared to an earlier estimate of $1.14 billion. The board generally has a free hand in allocating discretionary funds, as opposed to programmed, or non- discretionary appropriations, which are earmarked for a range of social, health and other budget mechanisms.

The 2023-24 budget is roughly 15% larger than 2022-23's, which was about $7.45 billion.

Executive Office staff noted the county's share of statewide Proposition 172 Public Safety Sales Tax revenue will likely decline this fiscal year because receipts are $7 million lower than originally anticipated.

At midyear, a few county agencies were contending with higher cost pressures, requiring elevated outlays to deal with them. However, none of the costs appeared to be unmanageable.

District Attorney Mike Hestrin informed the Executive Office that almost $1 million more would be needed to cover "one-time improvement projects." Thanks to state and federal infusions, mainly grants, the expenses would not splatter red ink on the DA's financial plan, officials said.

The picture might be slightly different for the Emergency Management Department, which is predicting $977,606 in larger outlays, mostly stemming from ongoing obligations tied to Tropical Storm Hilary last August. Some of the recovery costs have not qualified for state or federal reimbursements, so the county could be on the hook for them.

The Department of Purchasing & Fleet Services requested -- and received -- the board's approval to draw down internal funds to cover an additional $6 million in expenses before year-end.

"As of mid-year, fuel prices are higher compared to the same period last year," according to an Executive Office statement. "Additionally, fuel sales countywide are up due to employees returning to work sites following COVID-related closures and telecommuting."

The county received almost $500 million in 2020 Coronavirus Aid, Relief & Economic Security Act allocations and another $480 million in 2021 American Rescue Plan Act money. Van Wagenen previously acknowledged that just under 10% of the federal infusions had been applied to "budget stabilization" in 2022-23.

The funds have been used for homeless and rental assistance programs, along with other social welfare efforts, but they've also been appropriated for capital improvement projects.

Hearings on the proposed 2024-25 fiscal year budget will be held on June 10-11.