Orange County officials say they’re considering furloughing employees and potentially cutting services due to a major drop in sales tax revenue from the coronavirus pandemic, and have started discussions with employee unions on how to navigate a financial hit projected at more than $200 million over the next year.
Officials say they’re still early in the process of figuring out what the cuts might be, with the Social Services Agency and Sheriff’s Department facing the steepest losses to their revenue streams. A formal plan hasn’t yet been put forward publicly, aside from a decision in early June to delete over 500 vacant jobs from the county budget.
The financial losses are major and cuts are on the table, officials say.
“We are facing exactly what we’ve been fearing,” Supervisor Don Wagner told Voice of OC in an interview Monday.
“We are going to have to be making some cuts and tightening our belts, and doing what we can to get a robust recovery underway as soon as possible,” he added.
“It wouldn’t surprise me if there are service cuts, if there are furloughs, if there are things closed down periodically. All options are on the table at the moment, as I understand it. The good news is we would be looking to avoid layoffs. But as I say, all options at this unprecedented time remain on the table.”
County officials say the bulk of the loss in tax revenue is from plummeting retail sales due to coronavirus pandemic.
Labor groups say it’s still too early to know how much revenue will be lost, with businesses now re-opening and Congress considering whether to backfill cities and counties’ revenue losses.
One such bill, the bipartisan SMART Act, would provide $500 billion for state and local governments to cover economic losses from the pandemic, with the caveat that the money can’t be used to pay for pensions.
“Public health nurses, social workers and other frontline workers are in the trenches against this pandemic. They are keeping us safe and going above and beyond every day,” said Charles “CB” Barfield, general manager of the Orange County Employees Association, which represents about two-thirds of the county government’s employees, in a statement.
“We hope the County won’t short change its commitment to the community when these workers are needed most. The County can find plenty of places to save money that don’t involve putting community health at risk, or penalizing those who are doing their all to serve our community during these challenging times.”
The head of the sheriff’s deputies union said he’s hopeful that as businesses open back up, the revenue picture will improve.
“It’s still too soon to understand the full impact of the revenue loss, if there is any revenue loss. So I think we’ll get a better idea once the businesses start to open up,” said Juan Viramontes, president of the Association of Orange County Deputy Sheriffs, in an interview Monday with Voice of OC.
“I think it was a good first step to open businesses up and have them get hopefully back to where they were at pre-COVID.”
County staff are projecting a revenue loss of at least $216 million in the upcoming fiscal year, which starts about two weeks from now on July 1, due to the economic downturn from the coronavirus pandemic.
Those financial hits are mainly to sales taxes that fund the Sheriff’s Department, District Attorney’s Office, and social services like child protective services, foster care, and mental health services.
County officials plan to operate on a status-quo budget when the new fiscal year starts on July 1. They pushed the annual budget hearing to September, when more is expected to be know about the financial picture, including whether Congress approves a bailout.
County executives have been meeting with all of the unions that represent county employees to get their ideas for how to save money, Viramontes said.
“They’re meeting with everybody,” he said. “I get it. They’re preparing for the worst. And if they get money that they can backfill…we can be in a better position.”
County officials plan on using about $453 million of their federal CARES Act stimulus money to cover new county expenses related to the coronavirus response. But that money can’t be used for the revenue losses because the CARES Act doesn’t allow for backfilling lost revenue, according to county CEO Frank Kim.
One of the questions facing county officials is to what extent – if any – to tap into their over $500 million in budget reserves, which local governments often dip into during economic downturns.
Wagner emphasized the financial picture will continue to become clearer between now and the budget hearings in September.
“There’s more clarity almost daily. We’re seeing the county re-open. We’re seeing moves in Congress to provide additional relief funding,” Wagner said, adding the picture will also become clearer in the coming days when the Legislature approves the state budget.
“It’s a moving target. We are looking to do, as I understand, some stopgap stuff once the new fiscal year starts, and then revisit the budget I believe some time in September. We’ll have a better picture,” he added.
“The budget of the county – as well as every city in this county – is going to be extraordinarily challenged. And we’re hopeful for a robust return back to normal.”
Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at ngerda@voiceofoc.org.