While Orange County finance managers Monday unveiled a largely status-quo, $5.4-billion budget for fiscal year 2013-14, they acknowledged that plans could change depending on the impact of a judge’s ruling against the county involving $73 million in property taxes.
The response to the ruling could include a mix of budget cuts, drawing on reserves and increases in revenue streams like the public safety tax.
It also could include layoffs, but finance officials say it’s too early to tell.
“For now, it’s a lot of monitoring, less action,” said county Budget Manager Frank Kim during Monday morning’s budget briefing for reporters.
Kim will spend the rest of the day briefing members of the Orange County Board of Supervisors on the proposed budget.
County officials have been locked in a dispute with state officials since 2011, when Gov. Jerry Brown’s budget staff identified a glitch in Orange County’s allocation of vehicle license fees and took away more than $50 million in property taxes to balance accounts.
Orange County officials reacted in January 2012 by coordinating with then Auditor-Controller David Sunstrom to withhold more than $73 million in property taxes.
State officials reacted to the Orange County money grab by going to court and winning a tentative ruling last week.
Meanwhile, the county’s political leaders — including state Sen. Lou Correa; Nick Berardino; general manager of the Orange County Employees Association; and Board of Supervisors Chairman Shawn Nelson — have all shifted into high gear to work out a deal.
Until then, the county’s budget remains in limbo.
“We’re in discussions with our attorneys on how to approach the tentative ruling,” said county Chief Financial Officer Bob Franz on Monday morning.
While Franz said there are plans to implement a 10-percent budget reduction if the state funds must be returned quickly, it’s still too early to know exactly how that would be implemented.
Franz said budget managers would spend the next few weeks considering a mix of alternatives — including expense reductions, increased revenue estimates and drawing from reserves — to help blunt the impact from the potential loss of $73 million in property tax revenue each year.
Kim noted that the Board of Supervisors’ policy of beefing up reserves in recent years has paid off. Reserves now hold $243 million.
While Wall Street tells Orange County leaders that reserve is merely average, officials said, Franz and Kim both said the reserves would help blunt the impact of any large payment to the state.
The most immediate impact of the uncertainty, Franz said, is the probable continued delay of deferred maintenance projects that have already been placed on hold in recent years.
Despite the bad news of the potential property tax loss, Franz acknowledged that Orange County’s budget has improved significantly from the darkest years of the Great Recession, which ended in 2009.
While next year’s fiscal budget is down 4 percent from last year, Kim noted that is mainly due to the loss of redevelopment funds rather than a cut in spending.
According to the budget, there are 17,554 positions at the county, up 297 positions from last year.
The current role of assessed property values is up by 1.92 percent over last year’s. The county’s public-safety tax, commonly referred to as Proposition 172 funds, is estimated to grow by 4.5 percent next fiscal year.
Realignment revenue coming from the state, which funds the increase in prison inmates and parolees being transferred to Orange County, is estimated at about $66.2 million, which officials say is about $10 million less than costs.
The public will have an opportunity to discuss the 2013-2014 budget on May 24 during a public budget workshop. County supervisors will begin consideration of the budget during a two-day hearing on June 11 and 12.