A five-year fiscal forecast estimates that Santa Barbara County could incur a cumulative budget deficit of roughly $27 million by 2026 in part because of the pandemic-induced recession and rising pension costs. But county staff say that’s the worst-case scenario, and mid-year cuts aren’t needed at this time.
At a meeting on Nov. 17, the Santa Barbara County Board of Supervisors discussed a forecast for fiscal years 2021 through 2026. It outlines the various financial challenges the county will likely face in coming years as the U.S. works to rebound post-COVID and projects a slowly growing gap between the county’s funding needs and its revenue growth.
“It really, as I mentioned, provides a context for balancing both short-term and long-term goals for the development of next year’s budget and beyond,” Budget Director Jeff Frapwell said at the meeting. “Our goal today is not to solve the gaps identified but rather to bring those to your board’s attention. And those will be issues that we’ll be working on in our office to develop strategies of how we minimize and eliminate those gaps.”
In addition to recession-induced losses, Santa Barbara County is facing hefty pension increases. Retirement costs are driven by salary increases, pension investment returns, and expectations regarding existing and future retirees, according to a county staff report. Costs are anticipated to rise nearly 12 percent—equating to $17.7 million—in the first year of the forecast, largely due to lower than anticipated pension investment returns. Contribution costs are expected to rise by about another 5 percent each following year.
The county’s general fund expenditures are also expected to grow in coming years, according to the report, because of increasing salaries, health insurance costs, and liability insurance premiums. Several of the county’s other operating funds are anticipating COVID-19-related deficits as well, and millions in deferred maintenance and new legislative policies that will likely be costly to implement pose as threats to the budget as well. Although the county’s general fund revenues are expected to expand too, county staff estimate it won’t be enough to cover the projected costs.
“We continue to face the daunting challenge of responding quickly to the pandemic and acting amid uncertainty,” the staff report reads. “We prepared and positioned ourselves to adopt new practices, be responsive and resilient, and rethink what the public needs and expects of us through our Renew ’22 initiative.”
Despite the challenges that lie ahead, supervisors remained optimistic about the county’s fiscal horizon.
“Sometimes when we look at this, we’re looking at a big macro lens, and what’s strange is being on this board, we really have to be nimble year-to-year just to keep the lights on,” 5th District Supervisor Steve Lavagnino said at the meeting. “So it’s good exercise. I don’t get too worried about what I see. And maybe that’s a problem that I have that I get a little myopic about it, but I appreciate staff’s input, and we’ll see what happens at budget time.”
Staff will be back before the board on Dec. 8 to discuss budget development policies for fiscal year 2021-22.
This article appears in Nov 26 – Dec 3, 2020.