Orange County officials have cut their law enforcement funding projections by $20 million for the upcoming fiscal year, largely due to an audit that found state officials sent too much sales tax money to counties.
The audit by state Controller Betty Yee’s office, which was released last November, determined that the state Board of Equalization has been over-allocating sales tax revenue to counties and under-allocating to the state’s general fund, to the tune of over $120 million over a year and three months, according to county officials.
And they say it’s possible even more money is found to have been misallocated, given that the errors might have taken place as long as four-and-a-half years.
That impacts local law enforcement agencies because one of their main funding sources is the state’s public safety sales tax, which was created in the 1990s under Proposition 172. Affected agencies include sheriff’s departments and district attorney’s offices across California.
County staff say they are still waiting to hear from state officials about how the errors will be resolved, and, for the time being, are planning on the county’s Prop 172 funding staying flat going into the next fiscal year. This drops the 2016-17 projections from $317 million to $297
As a result, county CEO Frank Kim and his staff have scaled back their recommendations on how many sheriff and DA jobs to add next fiscal year.
Before the latest news, Kim had recommended that 29 out of the 35 extra positions requested by District Attorney Tony Rackauckas be funded. In his new recommendations issued Friday, Kim adjusted it downward to 16, with the possibility of eight more being added in the fall after the Prop. 172 funding situation becomes more clear.
He also rescinded his recommendation that two extra sheriff’s department positions be created for a new cyber crimes unit.
Supervisors, who discussed the reduced projections at a special meeting Friday, are already at odds over how to handle the situation.
Supervisor Todd Spitzer, a longtime advocate of law enforcement spending, said the county should dip into its general fund to pay for the DA and sheriff’s expansion requests – even at the expense of other departments who rely on general fund money.
“We have departments out here that are non [law enforcement], and I know they’re always fearful that the board is going to choose safety over their departments…But if we’re gonna have a scarcity of resources, I just personally want to make sure it’s unequivocally clear I’m going to vote to put it into [law enforcement],” Spitzer said at the meeting Friday.
“That’s just the way it is. If you don’t like it, elect other supervisors I suppose.”
Supervisor Andrew Do challenged that thinking, saying while law enforcement plays an important role in public safety, supervisors should keep an open mind about the full range of services that help reduce crime.
“We have to understand that things happen in society for many reasons,” Do said. “Do we only solve crime or do we also want to solve issues that contribute to crime? And so when we talk about fully funding only law enforcement at the expense of other services, are we looking for a band-aid approach to our problems?”
The Sheriff’s department will be hit hardest by the cut in projected revenue because it receives 80 percent of the Prop 172 money that comes to the county government, while the DA’s office gets the remaining 20 percent.
But county officials expect to fill much of the sheriff’s shortfall with extra money related to the state’s prisoner realignment law, known as AB109, which pays counties for their extra prisoner responsibilities.
Yet it’s a different situation for the DA, which doesn’t have as much flexibility with their AB109 revenues, officials say. As a result, that department might actually face a bigger budget challenge in the coming year.
The rest of the county’s revenue picture generally looks pretty good, staff say as they prepare for the first public hearing on the budget, to be held Tuesday. Supervisors have until June 30 to pass a 2016-17 budget. Final budget approval is expected June 28.
Property tax revenues, which account for over 90 percent of the county’s discretionary funding, continue to rise amid growth in the post-recession economy. They’re projected to rise 4 percent next year, but is then expected to slow down to about 2 percent yearly growth by fiscal year 2020-21 due to projections of another economic recession.
Staff also credited the county’s conservative fiscal approach for its improving financial strength and a recent boost in credit rating to AA+, which lowers the cost to taxpayers when the county floats bonds to raise money for major projects.
But not all is rosy as Orange County’s sales tax revenues continue to rise at a slower rate than the statewide average.
The county saw bigger sales tax losses than the rest of the state during the Great Recession, and during the recovery had slower gains each year from fiscal year 2011 through 2015, according to a chart presented by county staff.
Supervisors asked for a breakdown of sales tax changes by industry, and talked about working closer with the county’s big-business advocacy group, the Orange County Business Council, on how to attract and retain businesses.
They also emphasized a need to reduce traffic congestion in South County.
Pepsi and the package delivery company UPS have distribution centers in Aliso Viejo and have said they plan to leave if traffic congestion doesn’t improve in the area.
“That is a reduction of millions of dollars of tax revenue for the county” and the local economy and thousands of jobs, said Supervisor Lisa Bartlett, who like the other supervisors sits on the Orange County Transportation Authority board.
“There are things we can work on” that we do have control over, she said.
Nick Gerda covers county government for Voice of OC. He can be reached at ngerda@voiceofoc.org.