Updated 5/1/09
Overview of the Economy and the County’s Budget Gap
Shared Vision 2025 – Fiscal Stewardship Toward a Sustainable San Mateo County
San Mateo County is nationally recognized as being a leader and innovator in programs and services that improve the lives of the people in our community. We have also demonstrated prudent financial management that enables us to plan ahead with a long-term perspective so that we can continue to be effective at providing services to our residents and to the most vulnerable people in our community. Our vision of a healthy, prosperous, livable, collaborative, and environmentally conscious community, articulated in our Shared Vision 2025, is intended to effectively sustain the resources we have so future generations can enjoy this unique place that is home to more than 700,000 residents.
The Impact of the Economic Downturn on County Revenues and Expenses
Just as we are committed to creating a more sustainable county, we are also committed to being responsible fiscal stewards as we experience the most severe economic downturn since the Great Depression. The current national economic crisis has a more pronounced impact on local government than previous downturns due to the following major factors:
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The housing slump has resulted in significant declines in local property values which has led to almost no growth in property tax revenues compared to an average 7% growth in the last five years; Unemployment rates have almost doubled compared to 2008, resulting in significant demands for public assistance and safety net services provided by the county and community-based nonprofit organizations Consumer spending has declined significantly, which has resulted in major reductions in statewide and local sales taxes revenues; Losses from investments in the stock market have resulted in (1) increased costs to fund retirement benefits that have been negotiated with our employees, and (2) reduced income tax revenues to the state, which funds many of our state-mandated services like health, social services and public safety.
San Mateo County’s Structural Budget Gap
Although San Mateo County consistently has one of the lowest unemployment rates in the state and is comparatively better off than other areas, we still estimate a $73 million structural budget gap in the County’s $1.3 billion General Fund budget due to declining state and local revenues and rising costs described above for the 2009-10 fiscal year, which begins on July 1, 2009. Over the next five years, we project this gap to grow to almost $100 million, or 10% of our total General Fund budget. Just like a household or business, we need to reduce our spending to bring our budget back in balance with the income or revenue we are receiving, while also facing increasing demand for our services in the areas of public assistance and safety net services such as food, shelter, health care, and employment services. The County is committed to responding to this economic urgency in a fiscally sound and socially responsible manner with our community partners and stakeholders. Our plan is to take a long-term strategic approach to balancing our budget over the next several years, so that we can continue to be a high-performing organization that effectively provides services that contribute to achieving our community’s Shared Vision for 2025.
Updated 5/1/09
Actions Already Taken Since 2007 to Address the Budget Gap
Though we have a significant gap to close, we are not facing a crisis like a number of other public agencies given our tradition of prudent financial decisions. We began taking more proactive steps in 2007 to eliminate our budget gap, including:
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Developing a five-year plan that brings the budget back in balance by Fiscal Year 2013; the plan assumes a managed spend-down of County reserves to minimize impacts to direct services during the recession, increase of 30-50% for retirement benefit contributions in Fiscal Year 2011 due to investment losses in the Retirement Fund, increase of 10% annually for health benefit premiums, reductions in the General Fund subsidy to the County hospital from $72 million to $50 million, no salary increases for employees after current labor contracts expire, and no increases to contracts with community-based organizations. Implementing a 5% hiring freeze in December 2007 (holding at least 300 positions vacant) Reducing departmental budgets by $8 million in net County cost in Fiscal Year 2009 and $11 million each year from 2010 through 2013 Using reserves to pay down retiree health liabilities for employees Reducing retiree health benefits for new management employees starting April 2008 Meeting monthly with union representatives to provide updates on the state and County budgets Asking employees for cost savings and revenue generating suggestions for the budget Holding off on major projects and purchases Reducing extra help, overtime, travel, contracts
Public and Employee Involvement
Public and employee involvement is an important part of the County’s budget and long-term planning process. Providing information about the County’s budget and getting input from the public, our employees and other stakeholders will result in more and better solutions to the major challenges ahead. As part of this process, we also want to highlight what County government does and how the County budget and services impact our community. We will provide information on the County website as we move forward with engaging the community on the budget during the months ahead.
County Budget Updates on the Web
In addition to this Overview of the Economy and the County’s Budget Gap, other budget documents and updates will be posted regularly on the “Budget” tab located in the center of the County’s homepage www.co.sanmateo.ca.us in order to provide the public and our employees with current County and state information throughout the budget process.