Butte County seeing red

Supervisors angry at state for withholding funds, contributing to budget shortfall

“They can’t keep doing this to us!”

That was Supervisor Bill Connelly’s cri de coeur Tuesday (Nov. 4), after being presented with a brutal financial report stating that Butte County was running out of cash, faced a $6 million shortfall this year—caused in large part by the state’s deferral of payment for services the county provides on its behalf—and would confront a $10 million shortfall in 2009-10.

The four other members of the county Board of Supervisors were also furious at state officials, whom they see as overly willing to solve their budget problems on the backs of local agencies like Butte County.

We need to fight back, the supervisors said.

“We clearly have to be present in Sacramento for this extraordinary session the governor is calling,” Supervisor Jane Dolan said. Noting that Gov. Arnold Schwarzenegger had proposed setting up a special commission to examine and possibly revamp the state’s tax structure, she pointed out that during previous fiscal crises such revamps had resulted in the county getting less money.

The California State Association of Counties and other groups “have to fight,” she said. “We have to prepare for the worst but fight for the best.”

The supervisors were responding to a fiscal-year 2008-09 first-quarter review presented by Chief Financial Officer Greg Irrutia. It so happened that the review was prepared just a short while after the county was presented with voluminous data from several sources, including the state, indicating that it faced troubling cash-flow and budget-shortfall problems.

The causes? “It’s a lot of things,” Irrutia said, all related in some way to the global economic meltdown and credit crisis. He mentioned lower property values resulting from the housing crisis that in turned produced lower property tax revenues; lower sales-tax revenues as consumers hold off on purchases; lower interest earnings on investments as the stock market tanks; and a cash-flow shortage caused by the state’s inability to borrow money to pay the county $11 million it’s owed.

The county also had extraordinary firefighting expenses this year, Irrutia added.

Because of the delay in state funding, the county already has been forced to use all of the $25.2 million in short-term loans it borrowed earlier to handle cash flow until revenues start to arrive (in December, after property taxes are paid). It will have to move cash around among various funds to pay the bills until December, Irrutia said.

Even then, the county is $6 million short of being able to close the fiscal year in the black. And 2009-10 will be even worse, with a projected $10 million shortfall.

Irrutia presented a long list of suggested actions to create an expense-reduction environment, prioritize spending, improve budget controls and otherwise tighten the county’s belt.

“I’ve been a chief financial officer for 17 years, though not all at this county, and I’ve coordinated budgets through three recessions,” Irrutia said. “If we work as a team and share resources, we can get through this.”

The very first step, he said, is to get all the department managers together to explore all options and come up with a collective plan.

“It doesn’t seem possible that we can maintain the same workforce,” Dolan said.

“Yes, you’re not going to be able to afford as much staff,” Irrutia replied.

Supervisor Kim Yamaguchi was furious that the state might make further cuts. “The state has made local government their credit line,” he grumbled.

“They don’t care,” Dolan added bitterly. “They’re only interested in solving their own budget problems.”

Butte County is hardly alone in facing a budget crisis. The state is looking at a $10 billion shortfall, and counties all over the state are cutting their budgets. Riverside County, which has been hit hard by the foreclosure crisis, is planning to cut its budget by 25 percent over four years, and Santa Barbara County has instituted mass furloughs for workers.

The white knight in the neighborhood happens to be Paul McIntosh, Butte County’s former chief administrative officer. He’s now executive director of CSAC, and thus the counties’ point man in standing up to the governor in this crisis.

As board Chairman Curt Josiassen put it, “If our ex-CAO is worth his salt, as he says he is, that [willingness to fight] is exactly what the CSAC board hired him for. He said he’d go to the mat on this. I hope he does.”