County - good government includes substantial cash reserves

Mercury News/Bonnie Eslinger, 2/1/12.  "San Mateo County may make most of its budget deficit go away by tapping reserves again."

"San Mateo County once again faces a huge budget deficit as it heads toward a new fiscal year, this time to the tune of about $77 million. And once again county supervisors indicated during a budget discussion Tuesday that rather than bite the bullet and make drastic cuts, they'll likely choose to tap into a reserve account that is replenished annually with excess property taxes. 

Cuts, cash reserves, taxes, recovery = survival success

Acting County Manager John Maltbie advised them to remove $53 million from that account and try to cover the rest of the projected deficit through more taxes. According to his memo, the deficit could grow to $146 million by the 2017 fiscal year if reserves aren't tapped, even though the county launched a five-year plan in 2008 to eliminate a structural gap between spending and revenues.

Only Supervisor Dave Pine challenged the recommendation, noting that given the uncertainty of state funding, the county should prepare for the worst by making necessary cuts now. "We're just going to make things more difficult," Pine said. "I just can't believe there's nothing we can cut in the fiscal year."

Maltbie replied that each department already has been asked to look for cost-saving efficiencies that "do not directly affect the level of local services," such as reducing cellphone usage. Board President  Adrienne Tissier said she agrees with that strategy. "I don't want to make cuts for the sake of making cuts." Maltbie said that after all the cuts made in recent years the county can ease up next fiscal year, which begins July 1. His memo says that since 2008, more than 500 positions have been eliminated from the county payroll. "There comes a time in an organization where you need to catch your breath," Maltbie said. "Maybe 2013 is that time."

The board directed staff to prepare two tax measures for the June ballot. One would raise the hotel tax in unincorporated areas from 10 to 12 percent, for an annual revenue boost of $200,000. The other would allow the county to charge a 2.5 percent vehicle rental tax and an 8 percent parking lot tax in unincorporated areas, for an annual revenue boost of $12 million. 

Money funneled into the reserve account comes from property taxes the county is required by state law to collect for schools and community colleges. Although most counties distribute all that money -- known as Educational Revenue Augmentation Funds (ERAF) -- San Mateo and Marin have such a high tax base they end up with millions of dollars left over each year after paying what's required to schools. This fiscal year the county received $80 million in excess property taxes."

Posted by Kathy Meeh