Budget talks in Santa Barbara County heated up as the Board of Supervisors grappled with the prospect of a deficit numbering in the tens of millions of dollars.
Documents detailing the county’s five-year budget forecast—first made public in January—reveal that although the county is increasing in revenues on an annual basis, the earnings are offset by growing expenditures, largely tied to retirement and health insurance costs from the California Public Employees Retirement System (CalPERS).
Although county employee salaries increase 3 percent per year—a relatively flat rate—retirement and health insurance costs are at least double that. Retirement has an average increase of 6 percent per year while insurance runs at 7 percent.
Meanwhile, growing revenues from property taxes (with an annual gross increase of 4.5 percent), sales tax (3 percent), and transient occupancy tax (3 percent), are also lower than expenditures.
“We are not in a period of revenue decline, we’re in a period of growth—that’s not the issue—the issue is our expenses are outpacing our revenues,” county Budget Director Jeff Frapwell told the Board of Supervisors at its Oct. 10 meeting.
In a letter to the board addressing the budget, County Executive Officer Mona Miyasato and Frapwell noted the 2018-19 fiscal year would see a $6 million deficit in the general fund and an additional $11.1 million deficit in major special revenue funds. Those numbers are expected to balloon by fiscal year 2022-23 to $15.1 million and $50.3 million, respectively.
“If you’re in a period of revenue growth but it doesn’t cover your expenditure growth, then it’s still a deficit by any other name,” 4th District Supervisor Peter Adam said at the meeting, “and it smells just as bad.”
Fifth District Supervisor Steve Lavagnino told the Sun that the deficit could grow so large that the county would need to undergo structural changes.
“There’s only two things you can to do fix something like that: either reduce your costs, and the size of the county employee pool, or you increase revenue,” he said, adding he believed the supervisors needed to approve more projects that would bring the county money. “We’ve got this disconnect on the board with the projects that come before us all year that generate revenue and have a direct impact on our budget, and I think people have lost sight of that and don’t realize—or fail to want to understand—where the money is generated from.”
Lavagnino pointed to the supervisors’ recent banning of short-term rentals in unincorporated areas from Carpinteria to Los Olivos.
“When we allowed short-term rentals, we were generating almost $2 million in transient occupancy taxes a year—538 different people were paying the hotel tax because they were renting out their property,” he said. “We decided to ban the entire program just because we never tracked where complaints [about the rentals] were coming from.”
Lavagnino also listed oil and smaller restaurant and hospitality projects that the board failed to approve in recent years as other instances of ignoring vital revenue streams.
“Those little ones add up,” he said. “At this point, we’ve kind of painted ourselves into a corner: If you don’t want oil, you don’t want development, and you don’t want short-term rentals, you kind of are running out of things that are left.”
This article appears in Oct 19-26, 2017.