Contra Costa 2009 Budget Meeting

Tomorrow when the Board of Supervisors (BOS) takes up the issue of the County budget they will again claim that this is “balanced.” However, given the County is in union negotiations with the majority of their employees, it is more important than ever to make the point that this budget is NOT balanced and that the worst is yet to come. A budget is only really “balanced” if you include all of the costs. It is easy to balance if you continue to “kick the can down the road” and fail to fund expenses. Ultimately these expenses will have to be paid.  

David Twa, the County Administrator, and his staff have done an excellent job of disclosing both the unpaid and upcoming budget costs as you will see below. The bottom line is that the County must reduce its expenses. The current health, retiree health, and pension expenses are unsustainable. REPAIRS/CAPITAL IMPROVEMENTS from the budget report (web address below): Once again the County is not including anything for Capital Improvements (page 14). That is how the County got into the $250 million unfunded liability in the first place. Because you are not required to fund these expenses, they can technically ignore the expenses and call this a balanced budget. NOTE: The $250 million was disclosed in December of 2007, so it will be over 2 ½ years that these items go unaddressed. These include real physical problems with buildings, for example, the roof of the County Finance building leaks when it rains according to a staffer I spoke with this morning. OPEB from the report: “While we would prefer a greater level of pre-funding, the absence of any new resources makes this impossible without further service cuts…our annual funding gap was reduced from $139 million to under $60 million…annually required contribution (ARC) to reach the Board’s adopted 40% funding target.” (page 12) NOTE: 40% is not an accepted level of funding according to the Governor’s Commission. Their

conclusion was that if you offer retiree health, you must fund it. The County chose an unacceptably low funding level in order to make budgeting easier. These costs will eventually have to be paid. However, legally they can get away with simply disclosing the unfunded portion of the liability. PENSION COSTS: While the current charges for pension are included in the budget, the news is that the expense level is going to grow and is not sustainable. From the report: “The bad news is that market losses (26.5%) in combination with unachieved earning assumptions (7.8%) in calendar year 2008 exceeded 34% and will necessitate increased contributions to the Contra Costa County Employees Retirement Association (CCCERA) for the next five to seven years. Actual FY 2007-08 retirement expenses and projected increased contributions, assuming 7.8% earnings annually for the next five to seven years are depicted in the chart found below.” (page 15) “It will take revenue increases over 1.2% Countywide to support such an increase – that ranges from $10.4 million in FY 2010-11 to $165.4 million in FY 2015-16 – virtually doubling County retirement expenses. If general purpose revenue were to increase by over 50% in that time frame – the total increased revenues would not cover this projected expense.” The County’s problems are not merely a product of reduced revenues. The problems with the pension, retiree health, capital repairs/improvements, etc. have been known for some time, but they have not been adequately dealt with even when financial growth was good. It was too easy to put off maintenance. It was too easy to sign contracts that the BOS had not bothered to have a cost analysis done. (I know because I pulled the firefighters contract from the consent agenda and asked for the cost analysis. None had been done.) Currently, the County is in negotiations

with the majority of their employees. If they do not make real headway in reducing employee costs, the County will continue in its downward financial spiral. You can find the complete Recommended Budget document on the County website at: http://64.166.146.155/docs/2009/BOS/20090317_65/620_FY %202009-10%20Recommended%20Budget%20.pdf

Kris Hunt Executive Director Contra Costa Taxpayers Association