No deficit here: SLO County budget hits more than $1 billion in latest adjustment

The San Luis Obispo County Board of Supervisors unanimously accepted final adjustments to this year’s budget on Tuesday — which now tops out at over a billion dollars, according to budget director Lisa Howe.

SLO County’s $1.1 billion budget for the 2024-25 fiscal year is an almost 11% increase over last year’s , which was just shy of $974 million.

More or less consistent with last year, the county’s main budget priorities included homelessness, behavioral heath, housing and economic development, while lesser priorities included storm recovery, infrastructure, water resiliency and organizational effectiveness, Howe said at Tuesday’s meeting.

Howe also said the county successfully closed an anticipated $15.6 million general fund deficit and saved more than it expected to last year, adding an extra $9.1 million in carryover funds to the county’s accounts.

The budget finalization came after the approval of the California legislature’s 2024 State Budget Act , which closed a $47 billion deficit in the nearly $300 billion statewide budget, according to Howe.

Based on the governor’s proposed state budget, the county had anticipated significant reductions in funding to government services, but the approved budget did not end up significantly hurting the county, Howe said.

“While it does include significant reductions statewide, it does recognize the vital role that county governments play and the public services that counties deliver, and it does minimize overall reductions to county governments as part of this item,” Howe told the Board.

The county’s total budget is made up of the governmental funds budget — which encompasses the general fund budget — as well as other proprietary funds.

According to Howe, the finalized general fund budget is $757 million, a 6% increase from last year’s. The governmental funds budget increased 3% from 2023-24 to $872 million this year.

The fiscal year started on July 1, but the county could not finalize its budget until the books closed in August, Howe said.

The next step is for the county to print the final budget accounting for the approved adjustments and submit it to the state no later than Dec. 1, though it typically happens as early as October, Howe said.

CA closes nearly $50 billion budget deficit with minimal impacts to county governments

The county held its initial budget hearing for its 2024-25 fiscal year budget on June 3, before the state had approved its budget.

At the time, California was facing a $46.8 billion general fund deficit.

Howe said staff expected to return to the San Luis Obispo County Board of Supervisors with budget adjustments as the state worked to close its budget gap, but then actual reductions in funding from the state were not as aggressive as anticipated.

In fact, the county’s budget has increased since the June 3 hearing.

The governmental funds budget increased an additional 2% from $855 million to the current $872 million and the general fund increased 1.6% from $745 million to the final approved $757 million.

“There were some minor reductions, however, departments wholly anticipated being able to absorb those reductions,” Howe said.

She said the county will continue to monitor the state budget as it fully anticipates future reductions in funding and grants.

One county department that was expected to lose some funding due to the state budget adjustment was Public Health. Its budget will drop $17,000 from its previously allocated $1.5 million this fiscal year.

Howe said the reduction would not cause any service level impacts, however.

In addition, there were a number of grant allocations that have been or will be reduced over the next few years, Howe said.

SLO County faces $15.6 million budget deficit. Here’s how it plans to close the gap

Rather than mainly pulling funding from counties, the state budget addressed its shortfall by employing $6 billion in reserve funds and reducing spending by $16 billion, among other solutions.

Howe said that even though the state has balanced its budget, the county will continue to track legislation that impacts funding sources.

For example, Gov. Gavin Newsom signed Assembly Bill 2561 over the weekend, which will require public agencies to meet with representatives of their employees regarding wages, hours and other terms and conditions of employment as well as present employment vacancies and recruitment and retention efforts at a public hearing at least once a year, Howe said.

SLO County finally balanced its current budget

With the final budget adjustments made on Tuesday, the county closed an expected deficit and balanced its budget with a small surplus in savings from last year’s unused funds.

Howe told theboard the county successfully eliminated its $15.6 million general fund budget deficit by utilizing a combination of short- and long-term solutions.

The deficit was closed through $8 million in one-time payments — made most notably from the county’s general, COVID-19 and rainy day funds — and $7.6 million in long-term restructuring and reductions in departmental spending over time.

Howe said staff was wary of over-utilizing short-term solutions in the form of one-time payments that would carry over and become the minimum gap in future budgets.

SLO County faces $15.6 million budget deficit. Here’s how it plans to close the gap

Howe also informed the board it had $12.2 million more in excess savings from last year, which carries over as a funding source for the 2024-25 fiscal year budget.

Of those $12 million in year-end savings, $3.1 million were used to reimburse FEMA for COVID-19 response costs received in fiscal year 2023-24, resulting in $9.1 million in actual usable savings.

Howe wrote in the staff report before the board meeting that the excess savings were a result of “careful financial management across the county.”

She applauded the “diligent work to control spending” and “strategic decisions made by the Board of Supervisors” like the implementation of a hiring chill that created temporary savings.

The extra $9 million was unequally split and used to replenish the county’s general reserve, governmental funds budgets and rainy day fund at Tuesday’s meeting.

Board of Supervisors finalizes budget with no opposition

The Board of Supervisors approved these budget adjustments and allocations on Tuesday in a unanimous vote, but noted that the process was not necessarily over this year and could continue to be improved upon.

Supervisor John Peschong said though he voted to finalize the budget as is, he recommends a reconsideration of budget priorities in future years.

“In the future, one of the things we should look at is putting money into an affordable housing fund,” Peschong said.

Supervisor Bruce Gibson commended the state for closing its multi-billion dollar deficit and the county for its frugality that brought in more savings than expected at the end of the year, but warned that the county must remain continually vigilant.

He emphasized that certain events could still impact the county’s funding this year — like the result of the vote on Prop. 35 in November, which would revoke $5 billion in budget solutions if passed, he said.

“$9 million is going to evaporate like the frost on a beer in Paso Robles in August — very quickly,” he quipped. “We’re not out of the woods yet.”