OC Budget Workbook FY 2008-09

Return to the PDF Document Version of the 2008-2009 Budget Workbook.

Introduction

The County Executive Office (CEO) is pleased to provide you with the FY 2008-09 Recommended Budget. The CEO budget proposal to the Board of Supervisors reflects Orange County's disciplined approach to fiscal management and is consistent with the County's Strategic Financial Planning process. The budget recommendations will be presented at a public budget workshop on May 30, 2008 and discussed at a Public Budget Hearing scheduled to begin on June 10, 2008.

The FY 2008-09 Recommended Budget reflects the impacts of the local, State and National economies, limited revenue growth and the rising cost of doing business. The County's local economy, although impacted by a downturn in the housing market and retail sales, is projected to grow moderately in FY 2008-09. The County's budget proposal reflects the impacts of the Governor's January budget and will be updated to reflect the impacts of the Governor's May revise budget and the State's final adopted budget if necessary.

This introduction contains a guide to reading the budget document, a brief description of the County's form of government, supervisorial districts, mission statement and the County's strategic planning initiative. This introduction also reviews the state budget and economic factors influencing the County budget, provides summary budget information, and budget highlights in various program areas of the budget.

I. A Citizen's Guide to Reading the Budget Document

This document includes information that provides readers with a greater understanding of each department's mission, organizational structure, and performance results as a narrative context for the budget amounts. The introduction section of Volume I contains several charts and tables that provide an overview of issues affecting the budget, sources and uses of funds and budgeted positions. Following the introduction are sections that present each department and fund in the County's seven program areas listed below:

1. Public Protection
2. Community Services
3. Infrastructure and Environmental Resources
4. General Government Services
5. Capital Improvements
6. Debt Service
7. Insurance, Reserves and Miscellaneous

The presentation for each department within each program area includes:

• An Operational Summary including:
  • Mission
  • Budget at a Glance
  • Strategic Goals
  • Key Outcome Indicators (Performance Measures)
  • Key Accomplishments of the current year
• An Organizational Summary including:
  • Organization Chart
  • Description of each major activity
  • Ten-year staffing trend chart with highlights of staffing changes
• A FY 2008-09 Budget Summary including:
  • Department's plan for support of the County's strategic priorities
  • Changes included in the base budget
  • Approved budget augmentations and related performance plan
  • Recap of the department budget
  • Highlights of key budget trends
  • A matrix of the budget units under the department's control

Volume II contains additional budget detail. Readers looking for more detailed budget information for a specific department can use the Index at the end of Volume II. Departments are listed in alphabetical order with the page number of that department's budget information.

In addition to the departmental information available in the County budget book, all County departments prepare annual business plans. These plans serve two key purposes:

• Communicate the value that the department brings to the community
• Report how the department is doing using outcome indicators

Business plans are published separately by the departments and are available on the County's website: http://www.ocgov.com/ceobusiness.asp A business plan sets forth long-term goals, discusses operational and budget challenges, identifies strategies for overcoming the challenges and making progress on those goals during the coming year and identifies how success will be measured by using outcome indicators (key performance measures). Occasionally, key performance measures change because of an ongoing review to ensure consistency with the departmental mission and goals. It is the intent that changes to performance measures will be minimized over time so the reader of the business plans and this budget document can consistently observe trends and progress in meeting objectives.

II. Organizational Overview

Orange County's FY 2008-09 Recommended Budget presents the County's financial capacity and priorities in providing public safety and health, social services, environmental, and regional planning services for its residents. The County provides the public with a comprehensive array of public services through its departments and through comprehensive community partnerships with public, private and non-profit agencies.

Form of Government

The County is a charter County as a result of the March 5, 2002 voter approval of Measure V that provides for an electoral process to fill mid-term vacancies on the Board of Supervisors. Before Measure V, as a general law County, mid-term vacancies would otherwise be filled by gubernatorial appointment. In all other respects, the County is like a general law County. A five-member Board of Supervisors, each of who serve four-year terms and annually elect a Chairman and Vice Chairman, governs the County. The Supervisors represent districts that are each equal in population.

The members of the Board of Supervisors by district are as follows:

John M. W. Moorlach, Chairman, from the Second District, representing the communities of Costa Mesa, Cypress, Fountain Valley, Huntington Beach, La Palma, Los Alamitos, Newport Beach, Seal Beach, Stanton, and portions of Garden Grove.

Patricia Bates, Vice Chairman, from the Fifth District, representing the communities of Aliso Viejo, Dana Point, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Mission Viejo, San Clemente, San Juan Capistrano and Rancho Santa Margarita.

Janet Nguyen, from the First District, representing the communities of Santa Ana, Westminster, and portions of Garden Grove.

Bill Campbell, from the Third District, representing the communities of Brea, Irvine, Orange, Villa Park, Yorba Linda, Tustin and portions of Anaheim.

Chris Norby, from the Fourth District, representing the communities of Buena Park, Fullerton, La Habra, Placentia and portions of Anaheim.

Strategic Planning Initiative

In December 2006, as part of its Strategic Planning Initiative, the County adopted a new mission statement to define the spirit, purpose and focus of Orange County government. The County's mission statement is:

Making Orange County a safe, healthy and fulfilling place to live, work and play, today and for generations to come, by providing outstanding, cost-effective regional public services.

The County is committed to providing Orange County residents with the highest quality programs and services as articulated in its mission statement. Supporting this mission statement is a set of vision statements for business and cultural values ( Table A ):

Table A

Vision Statement for Business Values	Vision Statement for Cultural Values
We strive to be a high quality model governmental agency that delivers services to the community in ways that demonstrate:	We commit to creating a positive, service-oriented culture which:
Excellence - provide responsive and timely services	Attracts and retains the best and the brightest
Leadership - leverage available resources as we partner with regional business and other governmental agencies	Fosters a spirit of collaboration and partnership internally and externally
Stewardship - seek cost-effective and effective methods	Supports creativity, innovation, and responsiveness
Innovation - use leading-edge, innovative technology	Demonstrates a "can-do" attitude in accomplishing timely results
	Creates a fun, fulfilling and rewarding working environment
	Models the following core values in everything we do: Respect Integrity Caring Trust Excellence

III. Economic Outlook for FY 2008-09

Key factors that influence the local Orange County economy include the unemployment rate, job growth, inflation, housing market, incomes and taxable sales. Two indicators of the state of the Orange County economy are: how well the local economy performs relative to surrounding counties, the state and the nation (i.e., External Indicators); and how well the local economy performs relative to its own historical trends (i.e., Internal Indicators). In terms of the external indicators, Orange County's economy routinely out-performs local surrounding counties, the state, and national economies (in annual percentage growth), and, in fact, ranks higher (in absolute dollars) than the economies of the majority of the countries in the world. External indicators for 2008, however, show sluggishness in the local economy with respect to certain factors, particularly when compared to the state and national levels. In terms of internal (historical) trends, current and projected indicators show that economic growth at the local level will continue to be slow in 2008. This section provides various external and internal indicators that describe the current and projected outlook of the Orange County economy.

Orange County's unemployment rate continues to be one of the lowest in the State, and is below that of all surrounding Southern California counties, the state of California and the nation. In March 2008, unemployment rates for the U.S., California and Orange County were recorded at 5.2%, 6.4%, and 4.6%, respectively. By comparison, in March 2008, rates for surrounding counties in Southern California were 5.8% for Los Angeles County, 7.4% for Riverside County, 6.7% for San Bernardino County and 5.3% for San Diego County. Thus far, Orange County's unemployment rates for calendar year 2008 are 4.5% in January, 4.3% in February, and 4.6% in March. The five-year point-in-time unemployment rates for the month of March in Orange County are 4.7% for March 2004, 3.9% for March 2005, 3.4% for March 2006, 3.5% for March 2007 and 4.6% for March 2008. In effect, in terms of unemployment rates, the County of Orange profile remains relatively favorable, with the exception of the point-in-time indicators for the month of March.

According to Chapman University, Orange County's job growth is expected to decrease by 0.2% in 2008 and result in approximately 2,361 less jobs relative to 2007. This compares to slight percentage increases at the State of California (0.1%) and at the national level (0.2%) for the same time period. Historically, job growth in Orange County has been sporadic since the early 2000's. However, during the past four years (2005 to 2008) there is a definite decline in job growth. From 2000 to 2008 job growth in Orange County was 3.2% in 2000, 1.8% in 2001, -0.7% in 2002, 1.8% in 2003, 1.9% in 2004, 2.3% in 2005, 2.0 in 2006, 0.5% in 2007, and is projected to decline to -0.2% in 2008. Thus, in terms of job growth Orange County levels are declining and are lower relative to state and national indicators. This trend represents a change in job growth at the local level relative to prior years when employment growth was consistent with or higher than the state and national levels.

Inflation, as measured by the Consumer Price Index (CPI), is expected to be higher for Orange County relative to the U.S. but comparable to the CPI at the state of California level in 2008. Chapman University projects the CPI at the national level to increase by 2.4%, in California by 2.9%, and in Orange County by 2.8% in 2008. Comparisons of Orange County's historical CPI trends from 2000 to 2008 are sporadic at 3.3% for 2000, 3.4% for 2001, 2.8% 2002, 2.6% for 2003, 3.3% for 2004, 4.5% for 2005, 4.3% for 2006, 3.0% for 2007, and 2.8% for 2008.

According to DataQuick Information Systems the real estate housing market throughout the State of California has taken a substantial hit in 2008. Three indicators are particularly noteworthy; median sales price, number of sales, and foreclosure rates. The median sales price in Orange County was $506,000 in March 2008 compared to $629,000 in March 2007, representing a -19.60% decrease. This compares to decreases of -18.50% in Los Angeles County, -27.10% in Riverside County, -28.20% in San Bernardino County, -19.40% in San Diego County, and -38.3% in California during the same time period. Median home prices in Orange County remained higher relative to surrounding counties and the State; $506,000 for Orange County, $440,000 for Los Angeles County, $306,250 for Riverside County, $265,000 for San Bernardino County, $395,000 for San Diego County, and $358,160 for the State of California.

With respect to sales, 3,130 homes were sold in Orange County in March 2007 compared to 1,663 in March 2008, representing a decrease of -46.9%. The counterpart decreases in sales for surrounding counties and the State were -49% in Los Angeles County, -26.9% in Riverside County, -38.0% in San Bernardino County, -34.5% in San Diego County, and -26.0% in California.

In terms of foreclosures, Orange County experienced an increase of 167.9%, from 2,644 foreclosures during the first quarter of 2007 (i.e., January, February and March) to 7,082 foreclosures during the same time period in 2008. This compares to increases in foreclosures of 130.0% for Los Angeles County, 161.3% for Riverside County, 155.9% for San Bernardino County, 128.3% for San Diego County, and 143.1% for the State of California.

For the future, Chapman University is projecting that while housing appreciation in Orange County will continue to decline, housing affordability (compared to other parts of the country) will continue to remain low.

Median family incomes were adjusted ("Re-benched") in 2003 by the U.S. Department of Housing and Urban Development (HUD) to comply with actual data collected during the 2000 Census. Orange County's adjusted (HUD) median family income is expected to be $84,100 in 2008 (up from $78,700 in 2007). This compares to $59,800 for Los Angeles County, $72,100 for San Diego County, $62,000 for Riverside County, $62,000 for San Bernardino County, $67,800 for the State of California and $61,500 for the U.S during the same time period.

Taxable sales in Orange County are forecast by Chapman University to increase by 2.1% in 2008. This compares to an increase of 2.7% for the State of California. Taxable sales in Orange County increased by 10.1% in 2000, by 0.3% in 2001, by 0.6% in 2002, by 5.9% in 2003, by 8.8% in 2004, by 6.5% in 2005, by 3.6% in 2006, by 3.1% in 2007, and are expected to increase by 2.1% in 2008.

In summary, economic growth in Orange County continues to slow down relative to external indicators and internal historical trends. Projected trends suggest a continuing pattern, at least through the balance of 2008.

State Legislation and Budget

The Governor released the Fiscal Year (FY) 2008-09 State Budget Proposal on January 10, 2008. The total State budget is $128.8 billion including General Fund expenditures of $101 billion, a decrease of 2.3 percent due to various budget reductions. Fiscal Year 2007-08 is estimated to have begun with a reserve of $3.5 billion. With proposed expenditures of $2.6 billion more than revenues, the Governor's budget projects ending FY 2007-08 with a reserve of less than $1 billion. For the FY 2008-09, various budget-balancing proposals would allow the state to grow the reserve to $2.8 billion.

On January 14, 2008, the State Legislative Analyst's Office (LAO) released an overview of the Governor's budget proposal and concluded that the Governor's revenue forecast is generally reasonable, though it has some downside risk from recent cash trends and continued negative economic reports. There is a declining economic outlook, sagging revenues, and rising costs that have created bleak prospects for FY 2007-08 and FY 2008-09. The Governor identified a gap of $14.5 billion between revenues and expenditures and proposed more than $17 billion in current and budget-year solutions to bring the state's budget back into balance. These budget-balancing actions included the issuance of additional deficit-financing bonds, higher revenue accruals, and budget reductions across most state programs. However, the LAO believes that the Governor's budget reform proposals are flawed and represent a serious reduction of the Legislature's appropriation authority. In addition, the LAO believes that the proposals would limit future policy makers' options to craft budgets.

Public Safety

• The Governor's budgets proposed to provide early release to state prison inmates who are within 20 months of their original release date and meet specific criteria. Only those offenders who have a history of non-violent, non-serious and non-sexual offenses would be eligible for early release. At the time of the budget proposal, it is estimated that just over 22,000 state prison inmates would qualify for early release.
• Proposed parole reform whereby non-violent, non-serious and non-sexual offenders would be placed on "summary parole" which would require no active supervision by the California Department of Corrections and Rehabilitation and would subject parolees to minimal parole conditions. Statutory changes would be required to implement.
• The Governor's budget proposed 10% across the board cuts to most programs. However, the Juvenile Justice programs, which experienced significant cuts in the prior year, were left whole this year. The Youthful Offender Block Grant, which supports counties' responsibilities to provide local programming and supervision to a new population of youthful offenders, under SB 81 (2007) dedicates $66 million for counties in FY 2008-09.
• $20.1 million reduction to Juvenile Probation Camp Funding.
• Proposed reductions for Citizens Options for Public Safety (COPS) and the Juvenile Justice Crime Prevention Act (JJCPA) of $11.9 million each.

Health & Social Services

• The Governor's proposal also includes actions to address state budget and cash shortfalls, including delaying payments to counties until September or the first quarter of FY 2008-09.
• The budget proposes various reductions in the Medi-Cal program including
• Benefit reductions ($10 million in the current year and $134 million in FY 2008-09),
• Eligibility changes for children and parents ($92.2 million savings in FY 2008-09)
• Rate reductions to providers and managed care ($33.4 million in the current year and $602.4 million in FY 2008-09).
• The Governor's proposal also makes administrative changes to county administration of Medi-Cal, including (1) eliminating the cost of living adjustment provided to county eligibility, administrative and support positions; (2) eliminate caseload growth funding used to hire additional county staff to address increased workload due to increases in Medi-Cal eligibles; (3) reduce the county administration base; and (4) reduce funding for administration of the California Children's Services (CCS) and Child Health and Disability (CHDP) programs (approximately $75.8 million reduction in FY 2008-09)
• Reduced rates for Healthy Families Program planned at 5% reduction and increased premiums and co-pays proposed for subscribers above 150% of the Federal Poverty Level.
• Proposition 36 (Substance Abuse & Crime Prevention Act--SACPA) funding is reduced by $3.3 million in the current year and $10 million in FY 2008-09 with no corresponding changes to sentencing law requirements.
• Mental Health Managed Care funding is expected to decrease by 10% or $8.2 million in the current year and $46.7 million in FY 2008-09, reducing amounts paid to county mental health plans.
• Mental Health Services Act (Prop. 63) revenues are expected to decrease above prior year projections by $177.2 million in the current year and $105.2 million in FY 2008-09.
• CalWORKs funding is maintained for current level of service and administration. $90 million will be provided to counties to implement program improvements that lead to better outcomes and increased work participation rates and $140 million to restore county administration. A 4.25% CalWORKS cost of living adjustment for recipients will cost $134.4 million. The pay performance incentive funding for FY 2007-08 is eliminated, but $40 million is still available to be paid in FY 2008-09 for counties that achieve improved performance in the current year.
• County foster family home base rates will increase by 5% effective January 1, 2008.
• Transitional Housing Program funding increased by $19.7 million to fully fund counties with existing approved plans.
• CalWORKs Child Care would receive an $88.3 million increase based on estimated caseload growth.
• Adult Protective Services funding cut by 10% or $6.1 million.
• Child Welfare Services funding for counties to be reduced in FY 2008-09 by $168.1 million (potential reduction of $5.5 million for Orange County).
• Various changes to the In-Home Supportive Services (IHSS) program resulting in 18% reduction in service hours allowed, and reductions to county administration of $10.2 million.
• Proposed reductions to foster care and adoptions program rates of $6.8 million in the current year and $81.5 million in FY 2008-09.

Infrastructure & Environmental Resources

• Transportation funding (Propositions 42 and 1B): Prop. 42 was fully funded at $1.5 billion. No Prop. 1B funding allocated in FY 2008-09 for local streets and roads. Allows counties to compete for the $300 million Infill Incentive Grant portion of Proposition 1C housing funds.

General Government

• Past claims for mandated cost reimbursement were scheduled to be paid over a 15 year period. Two years worth of SB-90 mandated cost reimbursements were paid in FY 2006-07. State payments to local government for FY 2008-09 claims are deferred to the next year. The FY 2008-09 includes $139 million to reimburse claims for costs incurred before July 1, 2007, of which $75 million is for the third payment for costs incurred before July 1, 2004.
• Reduction of $5.1 million in FY 2008-09 to State Library which will reduce support to local libraries.

Major Revenue and Expense Assumptions

The County budget includes a wide variety of funding sources. The budget recommendations are based on the following revenue assumptions:

• State and Federal funding sources are estimated by departments based on established funding allocation formulas and caseload projections and the latest State budget information.
• Total property taxes are projected to increase by 3.2%. This is slower growth based on anticipated declines in unsecured and supplemental property taxes as well as in the property transfer tax.
• Total sales and other taxes to the General Fund are projected to increase by 1.5% based on trend data and estimates by California State University Fullerton forecasts; Hinderliter, De Llamas & Associates (sales tax consultant to the County) and the State Board of Equalization.
• Vehicle license fees are projected to increase by 1.5% based on State projections, California State University Fullerton forecasts and trend data.
• Health & Welfare Realignment revenue from the State allocated to Health, Mental Health, Social Services and Probation is projected to decrease 3.8% from prior year budget.
• The one-half cent Public Safety Sales Tax (Proposition 172) funds are allocated 80% to the Sheriff's Department and 20% to the District Attorney by Board policy. The amount for FY 2008-09 is projected to decrease 4.6% from the prior fiscal year.
• The interest rate on cash balances in the County Investment Pool administered by the County Treasurer is expected to be 3.8%, a decrease from the average 4% over the past 12 months.

Assumptions for various categories of expenses include:

• Labor costs are centrally calculated based on approved positions and historical vacancy factors. One to two step merit increases are assumed for employees who are eligible. Actual merit awards are based on the employee's performance evaluation. No base building wage increase appropriations are built into the departmental budgets as these are subject to negotiations and approval by the Board of Supervisors. As negotiated agreements are completed, current budget status will be reviewed and the need for budget adjustments will be determined. No Performance Incentive Program (PIP) appropriations are built into the departmental budgets as this program is currently a time-off award only. A 2.5% Management Pay for Performance Program increase is budgeted as approved by the Board of Supervisors on April 22, 2008.
• Retirement costs are expected to remain fairly level. The County did not issue a short-term pension obligation bond in January 2008 as in past years.
• Employee health insurance costs are expected to remain fairly level.
• Retiree medical cost for most bargaining units is budgeted at 3.5% of payroll. This rate reflects the modified plan approved by the Board in the fall of 2006. The modified plan fully funds the annual required contribution.
• Inflation on other services and supplies is generally allowed at 3% with higher rates for fuel and medical supplies.

December 2007 Strategic Financial Plan

The Strategic Financial Plan (SFP) process provides the framework for balancing available resources with operating requirements, implementing new programs and facilities and serves as the foundation for the annual budget. This framework enables the Board to make annual funding decisions within the context of a comprehensive, long-term perspective. Since 1998, the Strategic Financial Plan has been updated annually to review revenue and expense forecasts. New priorities are identified and considered as part of a comprehensive update of the plan.

The Strategic Financial Plan contains five elements:

• Economic Forecast
• General Purpose Revenue and Fund Balance Available Forecast
• Program Cost Forecast
• Strategic Priorities
• General Fund Reserves Policy

In November 2007, the County Executive Officer and department heads met to consider and rank the County's strategic priorities. This resulted in the following top ten priority list:

1. County Facilities Master Plan
2. Probation Day Reporting Center
3. District Attorney High Tech Crime Unit Expansion
4. James AMusick Facility Expansion
5. Hall of Finance & Records (Bldg12) Vertical Louver Removal and Install Aluminum/Glass Curtain Wall
6. Affordable Housing
7. Adult Re-entry Program
8. Inmate Re-Entry Plan
9. Inpatient Beds
10. Task Force Review Aimed at Catching Killers, Rapists and Sex Offenders (TracKRS) Unit Expansion

These strategic priorities were built into the Strategic Financial Plan that included an assumption of a gradual decline and leveling of General Fund Balance Available, modest general purpose revenue growth and continuation of the State's 15 year repayment of past mandated cost claims. The spending side included assumptions of 2% growth in departmental Net County Cost limits for FY 2008-09 and FY 2009-10 and 3% growth thereafter, a modest amount of potential budget augmentations, and $44.6 million in Net County Cost funding for one of the top ten strategic priorities. The plan was balanced for the next five years and was approved by the Board on December 18, 2007. The annual update of this plan is scheduled to begin in September of 2008.

IV. Overview of the FY 2008-09 Recommended County Budget

Basis of Budgeting

The County's budget and its accounting system are based on the modified accrual system. The fiscal year begins on July 1. Revenues are budgeted as they are expected to be received or as they are applicable to the fiscal year. Consistent with the Governmental Accounting Standards Board (GASB) ruling 33, typically only revenues expected to be received within 60 days of the end of the fiscal year are included. Fund Balance Available (FBA) is estimated and adjusted for increases or decreases to reserves. Revenues plus FBA equals total available financing.

Expenses are budgeted at an amount sufficient for 12 months if they are ongoing and in their full amount if they are one-time items. In each fund, expenses and increases to reserves must be balanced with available financing.

Budget Development

In late December 2007, the CEO issued the following budget development policies and guidelines to all County departments as a starting point for the budget development:

Consistency with Strategic Financial Plan and Business Plan Concepts: Base operating budget requests shall be consistent with the priorities and operational plans contained in the December 2007 Strategic Financial Plan and the approved departmental business plans as resources are available. Department heads are responsible for using these planning processes along with program outcome indicators to evaluate existing programs and redirect existing resources as needed for greater efficiency, to reduce cost and minimize the requests for additional resources. A certification regarding the evaluation of existing resources is required as part of the budget request submittal.

Salaries & Employee Benefits: The Salary and Benefits Forecasting System (SBFS) in BRASS (the County's budget system) will set the regular salary and employee benefits base budgets. The vacancy factor will be set at the historical actual calendar year 2007 vacancy rates.

Budgeted extra-help positions must comply with the MOU provisions. Those that do not are to be deleted with a corresponding reduction in the extra-help account.

Services & Supplies: Services and supplies shall be budgeted at the same level as actual use during last fiscal year and current year projections to the extent they are necessary to support business plan and Strategic Financial Plan goals.

Fees and Charges for Services: Departments are responsible for identifying total cost for programs with fees and to set fees at full cost recovery for the entire fiscal year. Full cost recovery includes direct and indirect costs, overhead and depreciation for the period during which the fee will be in effect. If fees are set at less than full cost recovery, the reason for subsidy should be given. Fees that are set by State law shall be implemented in accordance with those laws.

Revenue and Grants: Program revenues (e.g. State and Federal programs revenues) are to be used to offset the department's proportional share of operating costs to the full extent of the program regulations. Local matching funds should normally be at the legal minimum so that the General Fund subsidy (backfill) is minimized. Program revenues are to be used for caseload growth.

One-time revenues shall be limited for use on non-recurring items including start-up costs, program or reserve stabilization, capital expenses and early debt retirement.

New revenue sources pending legislation or grant approval should not be included in the base budget request. They should be considered during the quarterly budget report process (i.e. when legislation is passed or grants awarded).

Net County Cost (NCC): NCC limits for the next five years are based on the current budget, adjusted for one-time items and annualization of current year approved ongoing augmentations. Due to the slowing economy, the limits were reduced from the 2007 SFP planned growth of 2% to 0% growth. There is a continued need to carefully manage the growth in the use of General Purpose Revenues.

Departments shall submit budget requests at or below the NCC limits. The CEO/Budget Office is authorized to automatically reduce, if necessary, the appropriation requests of any budget that exceeds the established NCC limit.

Reserves and Contingencies: The County General Fund currently contains formal reserves, appropriations for contingencies, appropriated reserve-type funds and reserves held by others. The purpose of these reserves is to protect community programs and services from temporary revenue shortfalls and provide for unpredicted, sudden and unavoidable one-time expenditures. Certain departments and non-General Funds have other reserves dedicated to specific programs and uses.

Balanced Budget: The General Fund requirements will be balanced to available resources. Budgets for funds outside the General Fund are to be balanced to Available Financing without General Fund subsidy unless previously approved by the Board or CEO. Available Financing shall be determined by an accurate projection on June 30 Fund Balance Available (FBA) and realistic estimates of budget year revenues and any planned decreases to reserves. If available financing exceeds requirements, the difference should be put into reserves for future use.

Augmentations (Requests for New or Restored Resources): All augmentation requests must include outcome indicators that clearly outline the department's intended outcome(s) resulting from the additional resources. They must be ranked in order of the department's priority for approval. The department head must certify that all potential alternatives for redirecting existing resources have been examined and that there are no lower priority items that can be reduced or eliminated in order to free up existing resources. This certification will be contained in the budget cover letter from the department head to the CEO.

Approved augmentations will undergo an outcome indicator review for two subsequent years as a condition of continued funding. Departments will report on outcome indicator results (to the extent data is available by budget submittal due date) of the performance expectations in a format that will be provided as a separate package. Augmentations will be funded if the CEO and department agree that:

• They meet the performance expectations
• They merit continuation
• They are still relevant to the department's business plan
• Sufficient funding exists

Program Budgets Outside the General Fund: It is the department head's responsibility to ensure that the proposed use of program funds is consistent with the available financing and legal restrictions on funds, the department's business plan, the County's strategic priorities and has been coordinated with the appropriate stakeholder groups external to the County.

In context of these policies and guidelines, departments prepare current year projections of expenses and revenues and requests for the next fiscal year. The CEO/County Budget Office reviews the requests, meets and discusses the requests with the department and prepares final recommendations for the Board. These recommendations are presented to the public via a budget workshop and then to the Board of Supervisors during public budget hearings. Operating and capital budgets are prepared in this single process and presented together in this budget book.

Preceding the budget program sections, the following charts and schedules are provided as an overview of the budget:

1. Total County Revenue Budget
2. Total County Financing
3. Total County Revenues by Source
4. Total County Appropriations by Program
5. General Fund Sources & Uses of Funds
6. General Fund Appropriations by Program
7. General Purpose Revenue
8. General Fund Net County Cost by Program
9. Public Safety Sales Tax
10. Health & Welfare Realignment
11. Total County Budget Comparison by Agency/Department
12. Provision for Reserves Summary
13. Position Summary
14. Summary of Net County Costs
15. County of Orange Organization Chart

Highlights of the FY 2008-09 Recommended Budget

Total Budget

• Total County Budget is $6.6 billion, an increase of 11.8% from the prior year adopted budget.
• Total budgeted positions are 18,705 in the base budget, an increase of 0.12% from the prior year adopted budget. Approval of recommended augmentation requests would decrease the total position count by 15.
• Total General Fund Budget is $3.1 billion, an increase of 3.5% from the prior year adopted budget.
• General Purpose Revenues (excluding General Fund Balance Available and changes to reserves) are $617 million, an increase of 1.7% over current year projected General Purpose Revenues.
• General Fund Balance Available (FBA) is projected to be $70 million by the end of the current year as shown in the following table ( Table B):

Total Budget

	FY 2005-06 Actual	FY 2006-07 Actual	FY 2007-08 Projected
Beginning FBA July 1	$ 166.8	$ 148.7	$ 129.6
Changes to Reserves	(50.1)	(38.9)	8.5
Revenues	2,836.0	2,996.2	3,004.2
Available Financing	2,952.7	3,106.0	3,142.3
Expenditures/Encumbrances	(2,816.4)	(2,990.0)	(3,083.8)
Changes in Encumbrances	12.4	13.6	11.5
Ending FBA June 30	$ 148.7	$ 129.6	$ 70.0

Specific Program Highlights

This section provides highlights of the base budgets and approved augmentations for the County budget programs and departments.

Public Protection

District Attorney

• Establishment of a new DNA crime laboratory to automate DNA analysis for volume crimes, maximizing resource allocation and achieving the goal of expeditiously solving and preventing crime.

Sheriff Court Operations

• 4 positions added (offset by deletion of four positions by Sheriff-Coroner Agency 060) for required building security at the new Community Court.

Probation

• The department is adding three positions and appropriations to fund the use of Continuous Electronic Monitoring with Global Positioning System (GPS) technology as authorized by SB 619 and SB 1178.

Community Services

In-Home Supportive Services (IHSS)

• A $1.2 million augmentation was rolled into base to increase funding to the level required to meet IHHS provider wage increases. $6.1 million in reductions are proposed for restoration to meet mandated service levels.

Infrastructure and Environmental Resources

Resources & Development Management Department (RDMD)

• Approved augmentations include a $1.2 million in General Funds to be transferred from the Trial Courts (Agency 081) to RDMD for expenses related to Court janitorial services and building maintenance. RDMD already manages the contracts for these services and efficiency is sought by allowing RDMD to manage the related appropriations.
• Two new positions were added for the continuing acquisition of land and easements and performing of relocations necessary to construct the Federal Santa Ana River Mainstem and proposed Prado Dam Projects, supporting the lead agency's efforts to build flood control improvements on the Santa Ana River.
• The base Road Fund budget includes $6.8 million in Measure M funding.

Dana Point Harbor Department

• The base budget includes funding to support the ongoing harbor revitalization projects.

Orange County Public Library

• The base budget includes $1.5 million in capital project funding for expansion of the Laguna Niguel branch, offset by revenues from the City.
• The Wheeler Branch Library open in 2008 as scheduled.

Integrated Waste Management Department (IWMD)

• Overall system tonnage is projected to be lower in FY 2008/09 by approximately 200,000 tons compared to the current year. Contracted and self haul tonnage is projected to continue to decrease and sanitation services revenue is projected to also correspondingly decrease.
• Major capital projects expenditures for FY 2008/09 include: Prima Deschecha Landfill Administration Green Building ($5.4M); Frank R. Bowerman Landfill Phase 8 East Flank Buttress Excavation Design ($2.3M); Frank R. Bowerman Landfill Slide & Buttress Area ($2.2M).
• IWMD continues to support the bankruptcy recovery debt obligations in the amount of $10.5 million.

John Wayne Airport

• The Airport continues to work closely with the Transportation Security Administration (TSA), Federal Aviation Administration (FAA), and Airport Police Services (Orange County Sheriff-Coroner Department) to ensure the continued implementation of federally mandated security regulations.
• The Airport is implementing the Airport Improvement Program that includes improvements to the Terminal C, B1 Parking Structure, passenger loading bridges, and various other projects.
• Two positions are added, one Administrative Manager I to maintain a federally compliant Emergency Operations plan and one Procurement Contract Specialist to provide quality vendor service and reduce backlog.

General Government

County Accounting & Payroll System (CAPS)

This budget includes an augmentation to transfer $5.6 million from designated reserves to fund the cost of the CAPS Upgrade Project.

Treasurer Tax-Collector

• Budget includes an augmentation to add one Administrative Manager II for portfolio management to support the findings of the PFM Asset Management LLC report.
• $169,340 in General Fund dollars is added to support the newly established Revenue Enhancement Unit.

Capital Improvements

Capital Projects

• The base budget includes $2.24 million for new maintenance and repair plan projects for various County facilities, $0.92 million in new departmental capital projects and re-budgeted projects of $32.5 million. The base budget includes $19.5 million reimbursement revenue from the Central Utilities Facility Cogeneration project bond proceeds, $1.7 million reimbursement from Sheriff's 800 MHz Fund 15L, and $3.8 million revenue from the Designated Special Revenue Fund 15S.

Data Systems Development Projects

• The base budget includes $3.3 million for countywide Information Technology projects funded by Net County Cost. The base budget also includes $2.7 million for the development of the new Assessment Tax System (ATS) and $3.8 million for the development of the new Property Tax Management System (PTMS) funded from designated project reserves previously approved by the Board of Supervisors.

Debt

The adopted budget funds all debt obligation payments. Budgets displayed in Program VI include amounts for annual payments on the County's refunded debt financing of the Juvenile Justice Center, Manchester parking facilities, and debt financing of infrastructure improvements in the County's Assessment Districts, Community Facilities Districts and the Orange County Development Agency. Although the County's former Pension Obligation Bonds were economically defeased, this budget reflects the payments made by the trustee from escrow. This program also includes the debt associated with the County's Teeter program. Debt related to specific operations such as John Wayne Airport and Integrated Waste Management is included in Program III where the operational budgets for those operations are also found. Based on the County's Strategic Financial Plan and at current funding levels, the County is able to fulfill these debt obligations and sustain current and future services and operations.

V. Summary

This budget serves as a realistic plan of resources available to carry out the County's core businesses and priorities. It is consistent with the County's mission statement, the Strategic Financial Plan and departmental business plans. It follows the CEO budget policy guidelines, meets some of the departmental augmentation requests, incorporates impacts of the state budget proposals as known at this time, addresses important capital needs and provides adequate reserves.

VI. Next Steps

A Public Workshop on this recommended budget is planned for May 30, 2008. The Board of Supervisors will hold public hearings regarding this budget starting June 10, 2008. Results of those hearings will be incorporated into this budget and will be returned to the Board for adoption on June 24, 2008. The new fiscal year begins on July 1, 2008. During the fiscal year, the CEO will present the Board with quarterly budget status reports and recommend appropriate changes as needed, including changes which may arise from final County fund balances, final state budget impacts, new legislation, new grants awards, and other circumstances or conditions that may affect the budget.

Contacts regarding information in this report:

County Executive Office

Thomas G. Mauk
County Executive Officer
714.834.6200

Robert J. Franz
Chief Financial Officer
714.834.4304

County Budget Office

Frank Kim
County Budget Director
714.834.3530

Budget Planning and Coordination

• Mitch Tevlin, Manager 714.834.6748
• Margaret Cady
• Gina Angcaco
• Darlene Schnoor
• Craig Fowler
• Mar Taloma

Financial Planning

• Margaret Cady 714.834.3646

Public Protection & Community Services

• Michelle Aguirre, Manager 714.834.4104
• Kathleen Long
• Theresa Stanberry

Infrastructure and Environmental Resources, General Government, Capital Projects, Debt Service

• Anil Kukreja, Manager 714.834.4146
• Carolyn Keating
• Sheri Vukelich
• Michelle Zink