FY 2013-14 Recommended Budget - ADA

RETURN TO THE PDF DOCUMENT VERSION OF THE 2013-2014 RECOMMENDED BUDGET 

INTRODUCTION

The County Executive Office (CEO) is pleased to provide you with the FY 2013-14 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 24, 2013 and discussed at a Public Budget Hearing scheduled for June 11, 2013.

The FY 2013-14 Recommended Budget continues to reflect the impacts of the local, State and National economies, minimal revenue growth and the rising cost of doing business. The County continues to react to impacts of a sluggish economy. These impacts have been significant to County Departments beginning with the FY 2008-09 Budget and continuing into FY 2013-14. The recessionary period was declared to have officially ended in 2009; however, growth has continued to lag. Beginning in late 2011 and into 2012, economic activity reflected modest improvement over the prior year as evidenced by declines in unemployment, and increases in housing prices, manufacturing production, and commercial and retail sales. Most economists are forecasting modest to moderate growth to continue in 2013 and 2014, with potential for stronger growth in 2014. The County anticipates that there will be moderate growth going forward into FY 2013-14; however, it is anticipated that any growth in General Purpose Revenues will not be enough to offset costs which are anticipated to grow at a higher rate.

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.

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 2013-14 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 business plans and plan updates. 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).

Departments are currently developing a balance scorecard, a strategic planning document designed as a framework to achieve balance between vision and strategy, to monitor performance and maintain accountability, and to improve internal and external communications to determine how well programs are performing and meeting strategic goals. The balance scorecard intent is to align performance with funding and establish budgets consistent with performance trends and progress in meeting objectives.

II. ORGANIZATIONAL OVERVIEW

Orange County's FY 2013-14 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 governs the County. Each elected member serves a four-year term, and the Board annually elects a Chair and Vice Chair. 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:

SHAWN NELSON, CHAIRMAN , from the Fourth District, representing the communities of Anaheim (portions of), Brea, Buena Park (portions of), Fullerton, La Habra and Placentia.

PATRICIA BATES, VICE CHAIRMAN , from the Fifth District, representing the communities of Aliso Viejo, Dana Point, Irvine, (portions of), Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Mission Viejo, community of Newport Coast, Rancho Santa Margarita, San Clemente and San Juan Capistrano.

JANET NGUYEN, SUPERVISOR , from the First District, representing the communities of Fountain Valley (portions of), Garden Grove, Santa Ana and Westminster.

JOHN M. W. MOORLACH, SUPERVISOR , from the Second District, representing the communities of Costa Mesa, Cypress, Fountain Valley (portions of), Huntington Beach, La Palma, Los Alamitos, Newport Beach, Seal Beach, and Stanton.

TODD SPITZER, SUPERVISOR , from the Third District, representing the communities of Anaheim (portions of), Irvine (portions of), Orange, Tustin, Villa Park, and Yorba Linda.

STRATEGIC PLANNING INITIATIVE

The County strives to fulfill its mission :

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 the County's mission 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 Leadership - leverage available resources as we partner with regional business and other governmental agencies Stewardship - seek cost-effective and effective methods Innovation - Use leading-edge, innovative technology	Attracts and retains the best and the brightest Fosters a spirit of collaboration and partnership internally and externally Supports creativity, innovation, and responsiveness 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 2013-14

Key factors that influence the local Orange County economy include the unemployment rate, job growth, inflation, housing market, incomes and taxable sales. External and internal indicators provide information about the state of the Orange County economy. The County routinely monitors (a) how well the local economy performs relative to surrounding counties, the state and the nation (External Indicators) and (b) how well the local economy performs relative to its own historical trends (Internal Indicator). In terms of the external indicators, Orange County's economy routinely out-performs local surrounding counties, the state, and national economies. External indicators for 2013 reflect that the local economy is experiencing a moderate recovery, trending more favorable when compared to State and national economies. In terms of internal (historical) trends, current and projected indicators forecast that economic recovery at the local level will continue to be slow and moderate. This section provides trend data for various external and internal indicators that summarize 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. Preliminary March 2013 unemployment rates (April 19, 2013 release) were: Orange County 6.3%, compared to 9.4% for the State and 7.6% for the U.S. In contrast, rates for surrounding counties in Southern California were 9.9% for Los Angeles County, 10.5% for Riverside County, 10.5% for San Bernardino County and 7.7% for San Diego County for the same time period. Thus far, Orange County's unemployment rates for calendar year 2013 are 6.3% in March (preliminary), 6.6% in February, and 7.1% in January. The prior five-year point-in-time unemployment rates for the month of March in Orange County (final rates released) were 4.5% for 2008, 8.3% for 2009, 9.9% for 2010, 8.9% for 2011 and 7.9% for 2012. In California, initial claims for unemployment decreased by 7.7% and weeks paid decreased by 9.1% from March 2012 to March 2013. Although both trends are positive, the recovery in the job market is still below standard. Between March 2012 and March 2013, Orange County's nonfarm employment increased by 33,400 jobs. The professional and service sector realized an average increase of 8,000 jobs, and leisure and hospitality experienced an increase of 6,400 jobs. The largest year-over-year decline was reported by the government sector, losing a net of 500 jobs (Local government -900, and California +400). There was moderate growth in the construction (5.2%) and finance (5.8%) industries. Despite the gains over the past year, payroll employment is still below the pre-recession highs in California and Orange County.

According to Chapman University (November 2012 projections), Orange County's job growth is expected to increase slightly (1.8%) in 2013, a welcome improvement from the declines which began in 2007 and lasted through 2010. From 2008 to 2011 job growth in Orange County was -2.2% in 2008, -7.4% in 2009, -1.3% for 2010, 1.1% for 2011 and projected to be 1.8% for 2012 and 2013. Job growth and personal income (forecasted to increase 5.4%) continue to be closely monitored.

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 to the CPI at the national level in 2012 and 2013. Chapman University projects CPI at the national level to increase by 2.3% in 2012 and 3.1% in 2013. Increases forecasted for California are 2.3% in 2012 and 2.9% in 2013. Comparisons of Orange County's historical CPI trends from 2008 to 2012 are sporadic at 3.5% in 2008, -0.8% in 2009, 1.2% in 2010, 2.7% in 2011, and 2.2% and 2.8% projected for 2012 and 2013, respectively.

The real estate housing market continues to improve modestly throughout the State of California. According to DataQuick Information Systems in a report issued April 18, 2013, March 2013 sales of new and resale houses and condos sold statewide were up 31.5% from February 2013 and up 0.8% from March 2012. DataQuick also reported that "Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and peak levels reached several years ago."

The median sales price in Orange County was $505,000 in March 2013, representing a healthy 26.3% year-over-year increase from March 2012 when the median sales price was $400,000. Peer Counties all experienced increases in median sales price as follows: 24.2% in Los Angeles County, 18.4% in San Diego County, 22.5% in Riverside County, and 26.7% in San Bernardino County. The median price for the State during the same time period reflected an increase of 8.3%. Orange County median home prices in March 2013 remained higher relative to surrounding counties and the State; $505,000 for Orange County, $380,000 for Los Angeles County, $245,000 for Riverside County, $190,000 for San Bernardino County, $380,000 for San Diego County, and $313,000 for the State of California.

In Southern California, the number of unit sales was up, but increases in Los Angeles, Orange, San Diego, and Ventura counties were partially offset by decreased sales volume in Riverside and San Bernardino counties. With respect to sales, 3,063 homes were sold in Orange County in March 2013 compared to 2,856 in March 2012, representing an increase of 7.2%. The year-over-year change in sales for surrounding counties and the State were 2.8% in Los Angeles County, -6.0% in Riverside County, -4.2% in San Bernardino County, 16.2% in San Diego County, and 0.8% in California. In addition, gains have occurred in most price ranges with sales of homes between $300,000 and $800,000 increasing year-over-year by 29.5%, sales for $500,000 or more increasing by 40.2% from a year earlier, and sales of $800,000-plus homes growing by 33.4% year-over-year.

The number of homes in default (the first step in the foreclosure process), relative to the first quarter of 2013 (January, February and March) in Orange County, decreased by 65.4% from 3,733 during the first quarter of 2012 to only 1,282 during the first quarter of 2013. This compares to decreases in rates of default for Southern California counterparts of: 65.2% for Los Angeles County; 67.4% for Riverside County; 64.7% for San Bernardino County; 64.8% for San Diego County; and 67.0% for the State of California. The actual number of trustee deeds recorded (actual homes foreclosed on) also reflected year-over-year changes as follows: -62.4% for Orange County; -53.1% for Los Angeles County; -58.1% for Riverside County; -49.8% for San Bernardino County; -52.6% for San Diego County; and -55.1% statewide.

Home sales activity picked up in 2012 due, in part, to an improvement in affordability and increases in rents. Dr. Esmael Adibi, of Chapman University, states that "the supply of new homes is increasing and that should put upward pressure on the inventory of unsold homes in 2013. But recent statistics regarding shadow inventory, foreclosures and notices of default are all encouraging." Chapman is projecting that single-family resale housing prices in Orange County will grow by approximately 6.8% in 2013.

Orange County 2013 Median family income per the U.S. Department of Housing and Urban Development (HUD) was estimated at $84,100 down from the 2012 median family income estimate for Orange County of $85,300. This compares to $61,900 for Los Angeles County; $62,600 for Riverside County; $62,600 for San Bernardino County; $72,300 for San Diego County; $69,600 for the State of California; and $64,400 for the U.S for the same time period.

Taxable sales in Orange County are forecast by Chapman University to increase by 5.9% in 2012 and 5.4% in 2013. This compares to a projected increase of 6.1% for the State of California included in the Governor's FY 2013-14 Proposed. Per the State Board of Equalization (BOE), taxable sales growth in Orange County was 0.2% in 2007, -6.4% in 2008, -14.7% in 2009, 4.3% in 2010, and 8.5% in 2011. BOE reports taxable sales two years in arrears.

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 most economic sectors but growth is expected to be modest to moderate.

STATE LEGISLATION AND BUDGET

The Governor released the FY 2013-14 State Budget Proposal on January 10, 2013, which proposed a balanced budget for the first time in over a decade. This is the outcome from budget reductions made in the last two years, and the passage of Proposition 30 last year. The budget outlines $98.5 billion in revenue and $97.7 billion in expenditures, maintains a $1 billion reserve, and pays down budgetary debt from past years. Overall General Fund spending is projected to grow by five percent with the vast majority of the spending growth in education and health care.

The Governor, in his executive summary, stated that the State's budget remains balanced only by a narrow margin as a number of major risks and pressures threaten the new-found fiscal stability, including the accumulation of billions of dollars in debt incurred in prior years. In addition, the 2012 Budget Act assumed and spent the revenue provided by Proposition 30. The proposition provides a temporary revenue stream, with the sales tax component expiring at the end of 2016, and the income tax increases expiring at the end of 2018.

In January 2013, the State Legislative Analyst's Office (LAO) released an overview of the Governor's budget proposal and concluded that the Governor's plan transitions the budget from multibillion dollar annual deficits to a "baseline" budget, whereby state-supported program and service levels established in 2012-13 generally continue "as is" in 2013-14. The State has reached a point where its underlying expenditures and revenues are roughly in balance and is likely continue into 2014-15. The LAO notes there are still considerable risks to revenue estimates given uncertainty surrounding federal fiscal policy related to the debt limit and sequestration as well as the volatility inherent in the State's revenue system.

The impact of the current State Budget as well as potential impacts from the Governor's FY 2013-14 Proposed Budget continue to put further pressure on service levels, revenues, and cash flows. The County is currently monitoring State and Federal fiscal policy on an ongoing basis for potential funding impacts. Projections for impacts have not been included in the FY 2013-14 recommended budget as there is still a high degree of uncertainty as to how final State and Federal budgets will impact localities. 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, caseload projections, and the latest State budget information.
• The current year Assessed Roll of Values was up by 1.92%. The change in assessed values for FY 2013-14 is projected at 2.0%.
• Health & Welfare Realignment revenue from the State allocated to Health, Mental Health, Social Services, and Probation is projected at $192.4 million based upon current program and revenue trends.
• Additional State Realignment revenue included in the County's budget for Sheriff, Probation, Health Care Agency, District Attorney, and Public Defender includes approximately $66.2 million in State funding (exclusive of funding allocated to Local Law Enforcement) allocated to support the costs associated with realigned public safety responsibilities regarding adult felony offenders to counties under the 2011 Realignment legislation, AB 109.
• 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. Receipts for FY 2013-14 are projected to increase 4.5% based on State and economists' projections and trend data.
• The interest rate on cash balances in the County Investment Pool administered by the County Treasurer is expected to average 0.30%, reflecting a decrease of 0.08% from FY 2012-13 revised projections of 0.38%.

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 to increase this year by approximately 12.8% when compared to costs included in the FY 2012-13 Adopted Budget. Base rates, depending on bargaining group, may range from an increase of 0.8% to an increase of 18.0%. Retirement rates are anticipated to continue to increase in future years through FY 2014-15 primarily due to the actuarial smoothing of 2008 investment portfolio losses.
• Employee health insurance costs are expected to increase on average by approximately 8.03%.
• Retiree medical cost is budgeted between at 0.6% to 4.1% of payroll depending on bargaining group. This rate reflects the modified plan approved by the Board in June 2009. Retiree medical rates will be updated mid-year once the results of the 2013 actuarial valuation are known.
• Inflation on other services and supplies is generally allowed at 2.0% with higher rates for fuel and medical supplies.

2012 STRATEGIC FINANCIAL PLAN

The Strategic Financial Plan (SFP) process provides the framework for aligning 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 the financing necessary to carry out programs and services. 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 Unassigned Forecast
• Program Cost Forecast
• Strategic Priorities
• General Fund Reserves Policy

On December 18, 2012, the Board of Supervisors adopted the County's 2012 Strategic Financial Plan. Due to a projected sluggish economic recovery and declining cash balances in the General Fund, no new strategic priorities were built into the plan. The Strategic Financial Plan included an assumption of zero General Fund Unassigned Fund Balance, 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 1% growth in departmental Net County Cost limits for FY 2013-14, followed by increases of 2% for FY 2014-15, and 3% for the remaining three fiscal years beginning with FY 2015-16 through FY 2017-18. After factoring in the NCC Limit growth, departments still identified a 5-year cumulative budget gap of $239.0 million. This cumulative budget gap includes $34.1 million in reductions that would be required to meet the FY 2013-14 Net County Cost (NCC) limits. The FY 2013-14 base budgets submitted by Departments balanced the funding gap by limiting funding requests and through anticipated improvements in budgeted revenue. The significance of rising retirement and health and benefits costs, coupled with the potential risks associated with continued deferral of capital maintenance projects, make it necessary to continue to place emphasis on cost reductions. The plan emphasizes that the County must remain diligent, and budgetary control is necessary to maintain balance and realize continued results from the actions Departments have already taken, beginning in 2007. Since that time, service cuts have been made and further reductions and/or new revenues will be necessary to achieve an operating plan that is sustainable over the long-term. The annual update of the Strategic Financial Plan will begin in September of 2013.

IV. OVERVIEW OF THE FY 2013-14 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 criterion is 60 days after the end of the fiscal year.

In preparation of the FY 2013-14 Budget and to facilitate GASB 54 requirements, in January 2013, the Auditor-Controller established or renamed the Fund Balance Reserves and Designations in CAPS+ with one of the five new GASB 54 categories (Nonspendable, Restricted, Committed, Assigned, and Unassigned). These new categories will be referred to collectively as Obligated Fund Balances. GASB 54 does not apply to Internal Service and Enterprise funds. Fund Balance Unassigned is estimated and adjusted for increases or decreases to obligated fund balances. Revenues plus Fund Balance Unassigned 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 obligated fund balances must be balanced with available financing.

BUDGET DEVELOPMENT

The following budget development policies and guidelines are 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 2012 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 2012 vacancy rates (through pay period 26).

Budgeted extra-help positions must comply with 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 are not included in the base budget request. They will 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. The FY 2013-14 budget policy included 1% growth in the limits consistent with the 2012 SFP. Departments were directed to submit budget requests at or below the NCC limits. Due to uncertainty regarding growth in General Purpose Revenues, and impacts of pending legal actions, Departments have submitted 10% contingency reduction plans.

Obligated Fund Balances, Reserves and Contingencies : The County General Fund currently contains obligated fund balances, appropriations for contingencies, appropriated reserve-type funds and obligated fund balances held by others. The purpose of these obligated fund balances 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 obligated fund balances or 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 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 of June 30 Fund Balance Unassigned and realistic estimates of budget year revenues and any planned changes to obligated fund balances.

Augmentations (requests for new or restored resources) : All augmentation requests require outcome indicators that outline the department's intended outcome(s) resulting from the additional resources. They have been ranked in order of the department's priority for approval. Department heads have certified that all potential alternatives for redirecting existing resources have been examined and that lower priority items have been reduced or eliminated in order to free up existing resources.

Previously approved augmentations undergo an outcome indicator review for two subsequent years as a condition for continued funding. Departments report on outcome indicator results (to the extent data is available by budget submittal due date) of the performance expectations. Prior year augmentations are 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, and 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 prepared current year projections of expenses and revenues and requests for the next fiscal year. The CEO/County Budget Office reviewed the requests, met and discussed the requests with the department, and prepared 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 Obligated Fund Balances, Reserves & Designations Summary
13. Position Summary
14. Summary of Net County Costs
15. County of Orange Organization Chart

HIGHLIGHTS OF THE FY 2013-14 RECOMMENDED

Total Budget:

• Total County Base Budget is $5.4 billion, a 4.0% decrease from the prior year adopted budget.
• Total budgeted positions are 17,554, an increase of 297 positions from the prior year adopted budget.
• Total General Fund Budget is $2.9 billion, a 4.6% decrease from the prior year adopted budget.
• General Purpose Revenues are $675.5 million.

Specific Program Highlights:

This section provides highlights of the base budgets and recommended augmentations for the County budget programs and departments. Due to increases in costs which continue to outpace growth in sources, many Departments have proposed reductions which are included in the current year recommended budget. Departments have worked diligently to manage their budgets and have reduced some funding gaps identified in the 2012 Strategic Financial Plan. Departments continue to consistently maintain programs and minimize impacts on services.

Due to the continued uncertainty related to stability of General Purpose Revenues and other General Fund revenue sources, General Fund Departments were requested to submit contingency plans to implement a potential 10% Net County Cost reduction. A total of $70.0 million in Net County Cost contingency reductions were submitted but are not recommended for implementation at this time.

Public Protection

District Attorney

• The District Attorney submitted $4.6 million in proposed reductions with a maximum potential of 38 positions to be reduced. All programs within the District Attorney's office will be impacted at some level by the proposed reduction. The recommended restoration is $1.7 million and all positions, with the remaining funding derived from savings and revenues not known at the time of budget submittal. Restoration is targeted to support core staffing that is required to provide effective prosecution services. Additional detail of service impacts are provided in the FY 2013-14 Budget Augmentation Requests document.

Public Defender

• Public Defender submitted $3.7 million in proposed reductions with a maximum potential of 37 positions to be reduced. The reduction in funding would require that the Department begin reducing caseloads immediately. Restoration of $1.9 million is recommended, with the remaining funding derived from savings not known at the time of budget submittal. Additional detail of service impacts are provided in the FY 2013-14 Budget Augmentation Requests document.
• An additional $560 thousand service level expansion is recommended in support of a new case management system.

Sheriff-Coroner

• Due to increases in expenditures and County funding limitations, the Sheriff-Coroner submitted $15.8 million in proposed reductions with no reduction in positions. Due to funding limitations, only $12.0 million is recommended for restoration. Additional detail of service impacts are provided in the FY 2013-14 Budget Augmentation Requests document.

Community Services

• The FY 2013-14 recommended budget includes a request of $2.6 million for General Relief which is not recommended due to General Fund funding limitations. Caseloads and funding impacts will be monitored throughout the year.

Health-Care Agency

• The Health Care Agency is requesting an additional $2.0 million to cover increased enrollment in the Low Income Health Program (LIHP). One-time funding of $2.0 million is recommended.

OC Community Resources

• OC Community Resources is requesting an additional $4.0 million to develop and operate three year-round emergency shelters which is not at this time and will be considered during the 2013 Strategic Financial Plan.

Infrastructure and Environmental Resources

OC Public Works

• The recommended base budget for OC Public Works includes a $196,096 reduction in appropriations to meet Net County Cost Limits; restoration and ongoing funding is recommended. Detail of potential service impacts are provided in the FY 2013-14 Budget Augmentation Requests document.

General Government

Assessor

• The recommended base budget for the Assessor includes a $3.7 million reduction in appropriations to meet Net County Cost Limits of which $1.5 million is recommended for restoration. Detail of potential service impacts are provided in the FY 2013-14 Budget Augmentation Requests document.
• Additional service level expansion of $862,051 is recommended in support of Assessment Tax System (ATS) costs ($582,051), and equipment refresh ($280,000).

Human Resource Services

• A $150,000 reallocation of Net County Cost from County Executive Office to Human Resource Services is recommended to reconcile to actions taken in the FY 2012-13 2nd Quarter Budget Report.
• Additional one-time service level expansions of $830,000 are recommended in support of Information Technology projects ($200,000); online Equal Opportunity Employment Training ($110,000); labor negotiation services ($350,000); and investigative personnel services ($170,000).

Registrar of Voters

• One-time service level expansion of $2.4 million is recommended for the June 2014 Primary Election.

Treasurer-Tax Collector

• The recommended base budget includes a $909,572 reduction in appropriations to meet Net County Cost Limits; a one-time restoration of $500,000 is recommended while a fee study is conducted.

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, and Community Facilities Districts. Although the County's former 1996 and 1997 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

The County did not issue Tax and Revenue Anticipation Notes (TRANs) in FY 2012-13 and will continue to monitor cash flow needs in FY 2013-14.

The County issued short term taxable Pension Obligation Bonds to prepay, at a discount, a portion of the County's 2013-14 pension obligation. The bonds were issued on January 14, 2013 in the amount of $268 million at rates ranging from 0.58% to 0.76%.

IV. 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.

V. NEXT STEPS

Public Budget Hearings will be held on June 11 and 12, 2013, with final Budget Adoption scheduled on June 25, 2013. The new fiscal year begins on July 1, 2013. 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:

Robert J. Franz, Interim County Executive Officer
714.834.6200

Frank Kim, Interim 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
• Kathleen Long
• Gina Dulong
• Darlene Schnoor
• Mar Taloma
• Craig Fowler

Financial Planning

• Kathleen Long 714.834.7410

Public Protection & Community Services

• Margaret Cady, Manager 714.834.3646
• Jaime Martinez
• Dana Shultz

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

• Anil Kukreja, Manager 714.834.4146
• An Tran
• Sheri Vukelich
• Theresa Stanberry

This County budget document is available on-line at:

• http://ocgov.com/gov/ceo/deputy/finance/