- Elizabeth Larson
- Posted On
Supervisors approve recommended new fiscal year budget; staff warns of revenue challenges ahead
LAKE COUNTY, Calif. — At its June 14 meeting, the Board of Supervisors approved the recommended budget for the new fiscal year, but it wasn’t a unanimous vote due to concerns over falling cannabis tax revenues.
Supervisor Bruno Sabatier was the lone dissenting vote in approving the 2022-23 recommended budget, raising objections due to staffing increases and lack of an economic development plan in the face of looming financial challenges.
The recommended budget must be adopted by June 30, with the final budget to be adopted no later than Oct. 2, said County Administrative Officer Susan Parker.
The board usually accepts the initial budget document in June and the final one in September. This year, the final budget hearing dates are Sept. 21 and 22.
Deputy County Administrative Officer Stephen Carter led the budget presentation during the hourlong discussion.
He said the coming fiscal year budget totals $337,455,551 for all funds, an increase of $18,069,436 over the fiscal year 2021-22 budget, which totaled $319,386,115.
The 2022-23 general fund totals $76,237,204, a decrease of $6,995,140, from the fiscal year 2021-22 general fund, which totaled $83,232,344.
Carter said the guiding principles of creating the budget continue to be to develop a “reasonable, sustainable budget” that will enable the county to maintain its fiscal solvency for the short- and long-term, while minimizing or avoiding negative impacts on service to the public and improving services when possible.
He said they also work to preserve the county’s general reserves, avoid layoffs, work furloughs or other compensation reductions that would negatively impact county employees and the local economy.
He said Bradley-Burns sales tax revenues received through May 2022 total $3,894,494, $100,000 lower than fiscal year 2020-21, with one month remaining to be received).
Proposition 172 sales tax revenues through May 2022 equal $4,410,082, nearly $1 million greater than fiscal year 2020-21.
Transient occupancy, or bed tax, revenues totaled $753,806.01 through May 2022, slightly higher than the total received in the now ending fiscal year.
An area of particular concern is the revenue from the cannabis cultivation and business tax, which through June 2 total $6,704,062.58, down $1,640,814.47 from May 2020-21.
Carter said that was due to the board deciding earlier this year to provide cannabis tax relief to growers who have been having challenges with the market. The county has temporarily reduced the cultivation tax rate by 50% and is applying it to the canopy area only, as opposed to the total cultivation area.
“These reductions, coupled with remaining uncertainty surrounding which permitted cannabis businesses will operate this year, make projecting revenue difficult,” Carter’s written report said.
Carter said during the meeting that the board’s decisions on the cannabis tax resulted in the county having to give some money back to growers who already had paid.
He raised concerns with the impact that those reduced revenue could have on the county’s budget going forward.
“With all the changes that have happened to cannabis, I do want to say that this is verging on the not being sustainable for the way we're heading,” Carter said. “If we do hire all of our positions, we are going to start running into not having enough ongoing revenue/cannabis funds. I just want to put that warning out there. It’s not imminent, but it is within the next three years, depending on how things go.”
Carter said the recommended budget includes a total workforce of 1,053.60 full-time equivalent positions, a net increase of 15.65 full-time jobs, over the previous year. Full-time positions in the general fund total 426.75, a net increase of 9.25 jobs over the year.
Need for fiscal projects, more complete reporting
Sabatier said approving a budget is one of the most important jobs the supervisors have to do.
He said four days for him and for the public to review the document — referring to when the budget was released by the county ahead of the meeting — was not enough time, especially as part of that meeting with its full agenda.
Sabatier said he had particular concerns about the situation with cannabis tax revenues.
“I think that we are making a very large assumption that we’re going to collect something. I’m not saying we're not going to collect anything,” but Sabatier said the board has heard from those in the cannabis industry saying they still have unsold products from the last few years.
He wasn’t sure the county will collect the projected $3.5 million in cannabis funds, and along with that Sabatier was concerned about potential impacts if the federal government allows the industry to go nationwide, along with the current economic challenges that include inflation and gas prices.
“While, yes, we’re balanced for this year, I do not see this as a balanced budget as I do not see this as a sustainable budget where I can be sure that in five years from now, everything is fine,” said Sabatier.
He also questioned the wisdom of adding new staffers, noting over each of the next two to three years the county will have 2% increases in salaries; that’s the result of the $21 million raises the board approved in 2020 and 2021.
“We know we’re heading towards a fiscal issue,” said Sabatier.
“We’re continuously increasing the cost of running the county, not decreasing the cost, where our revenues and appropriations are more balanced,” Sabatier added, noting he wanted to freeze hiring again.
Sabatier said the county has no economic development plan at all. He wanted to make changes that day to the budget, and said he believed the county had made a mistake by getting rid of the fiscal crisis plan. That occurred before the board finalized the millions in raises last year.
He asked for five years of “big picture” budget projections that would give a strategic look at the county’s fiscal situation.
Carter asked if Sabatier wanted any analysis specific to salaries. Sabatier said yes. “Salaries is definitely one of the biggest numbers that we should be looking at,” especially since they know there are ongoing increases, he said.
“Today I cannot approve this budget as is,” Sabatier said.
Supervisor Jessica Pyska agreed with the request for forecasting. “We are in a spot that calls for that.”
However, during the discussion she said the board needed to be strategic, and put more thought into it before making sweeping decisions that day.
Supervisor Tina Scott said the board needed to rely on its staff in creating the budget, and she said the county isn’t hanging everything on cannabis.
“I don’t think we’ve completely seen what the wage increase is going to do for Lake County. I’m optimistic,” she said, adding that she thinks the wage increases will save the county money because it doesn’t have to go through the hiring process repeatedly.
Scott said she was ready to move forward, and Supervisor Moke Simon said he was as well, although he also supported doing long-term strategic planning.
Sabatier also asked staff for a column of actuals on the budget sheets showing comparisons from previous years so he could look at trends. Carter said he would work on that.
Parker said the five-year analysis will help with the budget discussions the board will have in September.
“That’s the only comment that I wish to make at this time,” Parker said.
In separate motions, the board approved the recommended budget, the position allocation chart and the purchase of capital assets. Each of the votes was 4-1, with Sabatier voting no.
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