OC Budget Workbook FY 2010-11 - ADA

Return to the PDF Document Version of the 2010-2011 Budget Workbook.

Introduction

The County Executive Office (CEO) is pleased to provide you with the FY 2010-11 Recommended Budget. The CEO budget proposal to the Board of Supervisors continues to reflect 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 28, 2010 and discussed at a Public Budget Hearing scheduled for June 15, 2010.

The FY 2010-11 Recommended Budget reflects the impacts of the local, State and National economies, declining revenue growth and the rising cost of doing business. The County's local economy continues to be impacted by the recessionary period that began in 2007, declining revenue growth and increases in the cost of doing business. Impacts to County Departments have been significant beginning with the FY 2008-09 Budget and continuing into FY 2010-11 and likely going forward into FY 2011-12 and beyond. There have been recent signs of improvement in the economy, indicating that we may be moving into a period of economic recovery. Most economists agree that any recovery will be protracted over the next few years. The County does not expect trends of accelerated growth as experienced in prior downturns.

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 2010-11 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 biennial 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. 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 2010-11 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 Chair and Vice Chair, governs the County. Each district varies in geographical size; however, the populations are relatively equal at approximately 600,000 residents.

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

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

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

John M. W. Moorlach, 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.

Currently Vacant, the Fourth District represents the communities of Buena Park, Fullerton, La Habra, Placentia and portions of Anaheim. (The Fourth District Seat was formerly held by Supervisor Chris Norby who was elected to the 72nd Assembly District on January 12, 2010. The Fourth District Seat is to be filled pending the results of potentially both the Special Primary Election on June 8, 2010 and the November 2, 2010 General Election. The District remains staffed and continues to serve its constituents).

Patricia Bates, 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.

Strategic Planning Initiative

The County strives to fulfill its mission to:

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 2009-10

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). External indicators for 2010 project continued sluggishness in the local economy with respect to certain factors. The local economy is showing signs of earlier recovery when compared to the state and national levels. In terms of internal (historical) trends, current and projected indicators forecast that economic recovery at the local level will be slow, and in some cases indicators will show a continued decline, but declines at a slower pace than the last three years. 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 and the state of California. In March 2010, Orange County's unemployment rates was 10.1%, and compares to 12.6% for the State and 9.7% for the U.S. In contrast, rates for surrounding counties in Southern California were 12.3% for Los Angeles County, 15.1% for Riverside County, 14.8% for San Bernardino County and 11.0% for San Diego County for the same time period. Thus far, Orange County's unemployment rates for calendar year 2010 are 10.1% in January, 9.7% in February, and 10.1% in March. The five-year point-in-time unemployment rates for the month of March in Orange County are 3.9% for 2005, 3.4% for 2006, 3.5% for 2007, 4.5% for 2008 and 8.5% for 2009. Although the number of new claims for unemployment has decreased, unlike past recessions, we continue to experience job loss and declines in payroll, beyond the average 25 months of recover seen in past recessions.

According to Chapman University (December 2009 projections), Orange County's job growth is expected to increase slightly (0.1%) in 2010, remaining negative in the first half of the year with a drop in the unemployment rate occurring in the second half of 2010. If that pattern does occur, Chapman predicts that "this recession will be the deepest and longest recession (38 months) in Orange County since World War II." According to research conducted by Barron's (a well-known financial publication), recovery in the two prior recessions (World War II era and 2001) began on average within 25 months. Chapman predicts that Orange County will add a net of 1,000 jobs in 2010, primarily in the service sector, compared to a loss of 62,000 jobs in 2009. This compares to continued percentage decreases at the State of California (-0.5%) and slightly lower decreases 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 three years (2007 to 2009) there was a definite decline in job growth. From 2000 to 2009 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, 1.9 in 2006, -0.2% in 2007, -2.0% in 2008 and -4.4% in 2009. In 2010, the very small increase in growth of Orange County levels reflects positively when compared to continue declines in the state and national indicators. Job growth throughout the year will be monitored with cautious optimism.

Inflation, as measured by the Consumer Price Index (CPI), is expected to be slightly lower for Orange County relative to the State of California and nearly equal to the CPI at the national level in 2009. Chapman University projects the CPI at the national level to increase by 1.6%, decrease in California by -1.21%, and increase in Orange County by 0.8% in 2010. Comparisons of Orange County's historical CPI trends from 2001 to 2010 are sporadic at 3.4% for 2001, 2.8% 2002, 2.6% for 2003, 3.3% for 2004, 4.5% for 2005, 4.3% for 2006, 3.3 2007, 3.5 in 2008, -1.1% in 2009 and 1.9% projected for 2010.

According to DataQuick Information Systems the real estate housing market throughout the State of California experienced substantial decline in 2009. Three significant indicators of housing market trends significant are median sales price, number of sales, and foreclosure rates. The median sales price in Orange County was $432,000 in March 2010, representing a 12.2% year-over-year increase from March 2009 when the median sales price was $385,000. Even though this represents an increase, when compared to Orange County's March 2006 median of $629,000, one can see that there is still a large disparity. Orange County compares favorably to other Counties who experienced increases of 9.7% in Los Angeles County, 5.9% in Riverside County, 1.3% in San Bernardino County, 15.8% in San Diego County, and 14.3% in California during the same time period. Orange County median home prices in March 2010 remained higher relative to surrounding counties and the State; $432,000 for Orange County, $329,500 for Los Angeles County, $198,000 for Riverside County, $152,000 for San Bernardino County, $330,000 for San Diego County, and $255,000 for the State of California.

With respect to sales, 2,652 homes were sold in Orange County in March 2010 compared to 2,433 in March 2009, representing an increase of 9.0%. The counterpart increases in sales for surrounding counties and the State were 13.0% in Los Angeles County, -5.7% in Riverside County, 2.0% in San Bernardino County, 6.9% in San Diego County, and 3.0% in California.

In terms of foreclosures, relative to the first quarter of 2010 (January, February and March) Orange County experienced a decrease in homes lost to foreclosure of -7.5%, from 2,146 during the first quarter of 2009 to 1,985 during the first quarter of 2010. This compares to counterpart changes in foreclosure rates of -0.91% for Los Angeles County, -19.1% for Riverside County, -7.8% for San Bernardino County, +0.7% for San Diego County, and -1.7% for the State of California. In effect, during 2009 and moving into 2010, Orange County foreclosures continue to compare favorably, relative to the trends of all surrounding Counties and the State.

Chapman University is projecting that even though weak job and income growth generally have a negative impact on housing demand, there has been a sharp pickup in the County's housing affordability index which has a positive impact on demand. Factors that impact this improvement in affordability include lower home prices and lower mortgage rates as compared to 2006 data just prior to the start of the current economic downturn.

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 $86,100 in 2009 (up from $84,100 in 2008). This compares to $62,100 for Los Angeles County, $74,900 for San Diego County, $64,500 for Riverside County, $64,500 for San Bernardino County, $70,400 for the State of California and $64,000 for the U.S during the same time period. As of the date of publishing, HUD has not adjusted these limits.

Taxable sales in Orange County are forecast by Chapman University to increase by 2.6% in 2010. This compares to an increase of 3.4% for the State of California (Note - California's initial projections over the last two fiscal years have been overly optimistic and revised downward throughout each year). Taxable sales in Orange County increased by 0.3% in 2001, 0.6% in 2002, 5.9% in 2003, 8.8% in 2004, 6.5% in 2005, 3.9% in 2006, 1.0% in 2007 and 0.2% in 2008. A decrease of -2.4% was realized in 2009.

In summary, most indicators reflect that the economic condition of Orange County is better than or comparable to surrounding counties, the state and the nation. With respect to historical (internal County) trends, some level of recovery is anticipated in areas such as housing and areas of projected continued decline are forecast to decline at a slower rate than the last year.

State Legislation and Budget

The Governor released the FY 2010-11 State Budget Proposal on January 8, 2010, which proposed a combination of spending reductions, alternative funding, fund shifts and additional federal funds to close a projected $19.9 billion budget gap. The projected gap is comprised of a current fiscal year (2009-10) shortfall of $6.6 billion, a FY 2010-11 shortfall of $12.3 billion and a $1 billion draw down from reserves. As in prior years, the State proposes balancing their budget with one-time funding, borrowing, shifting revenue allocations and minimal spending cuts. The plan also includes inflows of additional Federal funds which if not provided, will "trigger" alternative program reductions and revenue increases, including elimination of significant health and social services programs.

On January 12, 2010, the State Legislative Analyst's Office (LAO) released an overview of the Governor's budget proposal and concluded that the Governor's budget reasonably estimated the problem, but with some downside risk resulting from a optimistic estimate of both revenues and expenditures, as well as a variety of lawsuits that threaten to expand the State's budget problems. The LAO went on to suggest that Federal relief, if any, will total far less than the Governor's request and that there is no way to avoid reprioritizing State finances The LAO referred to the "trigger" cuts in some cases to be draconian and suggested a consideration of targeted changes to continue benefits to only the most vulnerable recipients.

The impact of the current State Budget as well as potential impacts from the Governor's FY 2010-11 continue to put further pressure on service levels, revenues and cash flows. The Federal Healthcare Bill may have additional impacts on the County. We are currently monitoring State and Federal fiscal policy on an ongoing basis for potential impacts to the County. Projections for impacts have not been included in the FY 2010-11 recommended budget. County budgets will be adjusted during the fiscal year, as the impacts become known.

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.
• The current year Assessed Roll of Values was down $1.23%. The change in assessed values for FY 2010-11 is projected at -2% (+/- 1%).
• State legislation authored by Senator Correa (SB 8) and adopted with the State's FY 2010-11 Budget Act, increases the County's annual property tax allocation by $35 million per year starting in FY 2010-11 and grows to $50 million per year starting in FY 2011-12. Even with SB 8 funding, total property tax revenue is projected to decrease by 1.3% in FY 2010-11, primarily due to the decrease in assessed valuations.
• Vehicle license fees are projected to increase by 2.0% based on State projections and trend data.
• Health & Welfare Realignment revenue from the State allocated to Health, Mental Health, Social Services and Probation is projected to increase approximately 3.3% based on current trends.
• 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 2010-11 is projected to increase 2% based on projections and trend data.
• The interest rate on cash balances in the County Investment Pool administered by the County Treasurer is expected to average 1.20%, reflecting an increase of 0.15% from FY 2009-10 projections of 1.05%.

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.
• Retirement costs are expected increase this year (base rates, depending on tier and bargaining group, may increase 10 to 12%). Retirement rates are anticipated to increase significantly in years thereafter due to the 21% investment portfolio loss in 2008.
• Employee health insurance costs are expected to increase on average by approximately 7.2%.
• Retiree medical cost for most bargaining units is budgeted at 2.5% of payroll. This rate reflects the modified plan approved by the Board in June 2009. The proposed budget plan fully funds the annual required contribution.
• Inflation on other services and supplies is generally allowed at 2.2% with higher rates for fuel and medical supplies.

December 2009 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

On December 15, 2009, the Board of Supervisors adopted the County's 2009 Strategic Financial Plan. Due to the current economic situation and the declining cash balance in the General Fund, no new strategic priorities were built into the plan. The Strategic Financial Plan 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 -6% growth in departmental Net County Cost limits for FY 2010-11, 1% in FY 2011-12, 2% in FY 2012-13 through FY 2013-14, and 3% growth in FY 2014-15. The plan identified funding shortfalls beginning in FY 2010-11 and growing each year to FY 2014-15. To bring the financial plan into balance, each department was tasked with developing reduction scenarios for each of the five years. Subsequent to adoption of the Strategic Financial Plan and due to the progression of impacts from the recession, Net County Cost budgeted limits were reduced 5% mid-year in FY 2009-10 and another 5% reduction was implemented for the FY 2010-11 budget year. The annual update of this plan is scheduled to begin in September of 2010.

IV. Overview of the FY 2010-11 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 generally accepted accounting principles, revenues are recognized when they are measurable and available. The County's availability criteria is 60 days after the end of the fiscal year. 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

The following budget development policies and guidelines used by 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 2008 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 2009 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 FY 2010-11 limits were reduced from the 2009 SFP planned reduction of -6% to a mid-year FY 2009-10 reduction of -5% and an additional reduction of -5% for the FY 2010-11 recommended budget. 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 2010-11 Adopted Budget

Total Budget

• Total County Budget is $5.4 billion, a decrease of 1.2% from the prior year adopted budget.
• Total budgeted positions are 17,521, a decrease of 374 positions or a 2% decrease from the current modified budget.
• Total General Fund Budget is $2.8 billion, nearly level with the prior year adopted budget.
• General Purpose Revenues (excluding General Fund Balance Available and changes to reserves) are $641 million.
• General Fund Balance Available (FBA) is budgeted at $20 million as shown in the following table (Table B):

Table B

(Million)	FY 2008/10 Actual	FY 2009/10 Actual	FY 2010/11 Projected
Changes in Encumbrances	$14.5	$17.1	$10.0
Fund Level revenues (GPR Variance)	$14.1	$-8.4	$4.2
Departmental NCC Savings	$33.8	$34.7	$5.8
Other Additional Savings	-	-	-
Ending FBA June 30	$62.4	$43.4	$20.0

Note: Other additional savings result from mid-year actions and unanticipated events including additional funding from the revised Teeter Program, sale of property, project deferrals and cancellations, and freeze on expenditures for services and supplies.

Specific Program Highlights

This section provides highlights of the base budgets and approved augmentations for the County budget programs and departments. Due to the continuing decline in County-wide revenues and trending down of programs, many Departments have proposed significant cuts in the current year proposed budget. Departments have worked diligently maintain programs and minimize impacts on services.

Public Protection

District Attorney

• In order to maintain a balanced budget, the District Attorney submitted potential cuts of $13.9 million. All programs within the District Attorney's office will be impacted at some level by the proposed cuts with a maximum potential of 90 positions to be reduced. $7.8 million is being recommended for restoration with the Department to determine priority of need and allocation. The restorations are targeted to support core staffing that is required to provide effective prosecution services. Additional detail of service impacts are provided in the Budget Augmentation Book.

Probation

• Due to reduced revenues and County funding limitations, the Probation Department submitted $2.1 million in proposed reductions with a maximum potential of 20 positions to be reduced, The entire $2.1 million and 20 positions are being recommended for restoration in order to meet core services.

Public Defender

• Public Defender submitted $6.0 million in proposed reductions with a maximum potential of 47 positions to be reduced of which $1.8 million and 18 positions are being recommended for restoration.

Sheriff-Coroner

• Due to the decline in Proposition 172 revenue and County funding limitations, the Sheriff-Coroner submitted $53.9 million in proposed reductions with no reduction in positions. $17.0 million us being recommended for restoration with the Department to determine priority of need and allocation. Additional detail of service impacts are provided in the Budget Augmentation Book.

Other Public Protection

• Request to increase General Fund support of the Alternate Defender and Trial Courts of $429,809 and $2.6 million respectfully is recommended as services are mandated and other revenue sources are declining. Additional detail of service impacts are provided in the Budget Augmentation Book.

Community Services

• Significant Community Service impacts were realized in FY 2008-09, FY 2009-10 and again in FY 2010-11 due to State funding shortfalls. There are no requests for restoration of in FY 2010-11.
• The Health Care Agency is requesting an additional $7.6 million to cover increased enrollment in the Medical Services Initiative (MSI) program. Partial one time funding of $2.0 million is recommended.

Infrastructure and Environmental Resources

OC Public Works

• The base budget includes $1.1 million in ongoing funding to support the restructuring of Building and Safety Planning and Development Services as approved by the Board on March 16, 2010.

General Government

County Accounting & Payroll System (CAPS)

• The proposed budget includes $7.3 million in appropriations offset by revenue from financing proceeds for the implementation of the CAPS Human Resources/Payroll System upgrade. This Base Budget also includes the debt service payment of $1.8 million drawn from the General Fund to cover financing costs.

Capital Improvements

Data Systems Development Projects

• This budget includes debt financing to fund continuing costs of ongoing projects including $1.0 million for the development of the new Assessment Tax System (ATS) and $6.5 million for the development of the new Property Tax Management System (PTMS). This Base Budget also includes the debt service payment of $1.7 million drawn from the General Fund to cover the financing costs.
• The proposed budget includes $2.3 million in new funding from Net County Cost and $1.2 million in existing Net County Cost (total of $3.5 million) for one-time upgrade of voice and data network infrastructure. The current infrastructure is obsolete and runs on separate environments which are expensive to maintain. The new structure will allow the County to convert to Voice Over IP (VOIP) at a future date with projected savings over cost recoverable within a ten-year period.

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.

Cash Flow Management

In July 2009, the County of Orange issued $150 million in Tax and Revenue Anticipation Notes (TRANs) to finance seasonal cash flow requirements during Fiscal Year 2009-10. The proceeds from the TRANs cover anticipated cash deficits resulting from the uneven flow of revenues. County General Fund expenditures occur in relatively level amounts throughout the year, while receipts follow an uneven pattern. Secured property tax installments, which represent the largest component of general purpose revenues, are primarily received in December and April of each year. Additionally, State payment deferrals in FY 2009-10 resulted in delays to the reimbursement of many health and human service programs administered by the County. The County will have fully repaid the TRANs borrowing by the end of May 2010 from available cash balances within the General Fund. For FY 2010-11, the County anticipates issuing TRANs in an amount not yet to be determined, and expect to close in July 2010.

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

The new fiscal year begins on July 1, 2010. 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 Dulong
• Craig Fowler
• Darlene Schnoor
• Mar Taloma

Strategic 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 and Debt Service

• Anil Kukreja, Manager 714.834.4146
• An Tran
• Sheri Vukelich
• Michelle Zink

This County budget document is also available on-line.