[PPT] - ALAMEDA COUNTY BUDGET UPDATE Presented to the Alameda County Budget PowerPoint Presentation

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ALAMEDA COUNTY BUDGET UPDATE

Susan S. Muranishi, County Administrator Melanie Atendido, Principal Analyst Pete Coletto, Principal Analyst

Presented to the Alameda County Budget Workgroup March 13, 2019

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County Administrator’s Office

Economic Trends - National

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County Administrator’s Office

Prime Age (25‐54) Employment to Population Ratio

3 Economic Trends: National

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County Administrator’s Office

Manufacturing Employment

4 Economic Trends: National

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County Administrator’s Office

National Housing Starts

5 Economic Trends: National

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County Administrator’s Office

10‐Year less 2‐Year Treasury Yield Curve

6 Economic Trends: National

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County Administrator’s Office

Economic Trends - Local

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County Administrator’s Office

Alameda County Unemployment Rate

8 Economic Trends: Local

0% 1% 2% 3% 4% 5% 6%

3.4%

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County Administrator’s Office

Alameda County Median Home Value

9 Economic Trends: Local

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000

$732,250

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County Administrator’s Office

Alameda County Assessment Growth

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Source: Alameda County Assessor’s Office

Economic Trends: Local

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County Administrator’s Office

California Housing Permits vs Demand

11 Economic Trends: Local

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County Administrator’s Office

Key Economic Takeaways

Near‐term economy remains robust, driven by a strong labor market
More ‘dovish’ guidance from Federal Reserve on Jan 29‐30 meeting providing

support to markets

Longer‐term concerns remain
National housing market softer
Economic data out of Europe & China suggests their economies are slowing –

U.S. / China trade talks ongoing

Some major cyclical corporations cut growth forecasts
Yield curve close to inverting (inversion is a reliable indicator of a future

recession)

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Bottom Line: Economy at the moment remains strong, but risks look larger than this time last

year. We know the next inevitable recession is coming, we just do not know when it will arrive.

Economic Trends: Local

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County Administrator’s Office

Federal & State Budget Update

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County Administrator’s Office

Federal Update

Split control in Congress
House priorities include ethics & election reform, infrastructure, drug pricing, voting rights, immigration, and climate

change

Senate is expected to prioritize nominations
Health & Human Services Title X family planning rule change – California and 18 other States have filed suit

to block changes in the grant program

Debt ceiling re‐imposed March 2 after 1‐year suspension ended ‐ Preliminary estimate of the Bipartisan

Policy Center is that unless the debt ceiling is raised, the Treasury Department will no longer to meet all the country’s financial obligations in full and on time in fall 2019

President released $4.7 trillion proposed budget
Sharp cuts to domestic spending, increases to defense
$8.6 billion in wall funding

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County Administrator’s Office

State Update – Governor’s Budget

Governor proposed $209 billion budget ($144

billion general fund)

Invests $13.6 bil in ‘budgetary resiliency’ ($4.8 bil

to unfunded pension liabilities, $4.8 bil to build reserves including ‘rainy day fund’, $4 bil to pay

utstanding debt)
Most new funding one‐time
Emphasis on housing and healthcare

15 State Budget Update

This Photo by Unknown Author is licensed under CC BY-SA

This Photo by Unknown Author is licensed under CC BY-NC-ND

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County Administrator’s Office

Governor’s Budget Overview – ‘Rainy Day Fund’

16 State Budget Update

$1.6 $3.7 $6.7 $10.8 $13.5 $15.3 $16.8 $18.3 $19.4 $0.0 $5.0 $10.0 $15.0 $20.0 2014‐15 2015‐16 2016‐17 2017‐18 2018‐19 2019‐20 2020‐21 2021‐22 2022‐23

Dollars in Billions

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County Administrator’s Office

Governor’s Budget Overview – IHSS Proposal

Invests State General Fund to ‘re‐base’ county Maintenance of Effort

(MOE) payments to be lower than what they would be under current law

Lowers MOE inflator from 7% to 4%
Ends realignment growth transfer from Mental Health to IHSS
Permanently restores 7% IHSS hours cut
Increases county share of cost for locally negotiated wage increases once

State minimum wage hits $15/hr (currently scheduled for Jan 1, 2022) New MOE arrangement could be unwound by State in future budgets

17 State Budget Update

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County Administrator’s Office

This Photo by Unknown Author is licensed under CC BY-SA-NC

Governor’s Budget Overview – Impacts On Counties

Housing/Homelessness

$500 mil to local governments to site and build emergency shelters,

navigation centers, and/or supportive housing

$500 mil to expand State Housing Tax Credit program
$750 mil for short term planning and production grants for housing
$500 mil to expand mixed income loan program to develop housing
$100 mil to augment Whole Person Care (requires local match)
Revamping Regional Housing Needs Assessment process & tying SB 1

transportation funding to meeting housing goals

Other Targeted Investments:

Immigration rapid response
Census count

18 State Budget Update

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County Administrator’s Office

Governor’s Budget Overview – Impacts On Residents

Health Care

Expands Medi‐Cal to undocumented young adults
Leverages State buying power through Medi‐Cal to lower prescription drug costs
Institutes State individual health insurance mandate
Uses fines from mandate non‐compliance to augment subsidies on Covered

California exchange

Alzheimer’s Care
Health care workforce development

Other Safety Net Programs

Doubles State Earned Income Tax Credit from $500 mil to $1 bil
Increase CalWORKS grants to 50% of the federal poverty level
SSI Advocacy

Child Care & Early Education

Universal pre‐school for 4 year olds (200k slots by FY 22)
6 months paid parental leave (not funded in budget)
$750 mil for facility development to promote full‐day kindergarten
$50 mil for pilot child savings accounts

19 State Budget Update

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County Administrator’s Office

5-Year Budget Forecast

Presented at December 11, 2018 Alameda County Board of Supervisors Retreat

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County Administrator’s Office

5 Year Forecast Assumptions & Drivers

Assumptions:

Continued Strong Economy
No Major Federal or State Policy Changes
No New Unfunded Programs
$1.35 IHSS Wage Supplement starting Jan 1, 2019
$0.40 IHSS Wage Supplement starting Jan 1, 2020
No Other Major Changes to Labor Agreements
Elimination of Adult Public Protection Fees

Major Drivers:

Labor Costs – Salary, Benefits & Pension (S&EB)
Increased Operating Costs Outpacing Revenue Growth
IHSS Costs

21 5‐Year Budget Forecast

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County Administrator’s Office

Key Revenue Growth Rates

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6.00% 6.00% 5.50% 5.00% 4.50% 4.50% 4.50% 4.00% 3.50% 3.25% 3.00% 2.50% 4.00% 3.50% 3.25% 3.00% 2.50% 2.00%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 Projection FY 19/20 Forecast FY 20/21 Forecast FY 21/22 Forecast FY 22/23 Forecast FY 23/24 Forecast Property Tax Measure A Prop 172 5‐Year Budget Forecast

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County Administrator’s Office

Budget Gaps & Balancing Strategies (millions)

23 $49.7 $37.8 $41.3 $44.7 $34.5 $17.4 $27.3 $30.9 $23.8 $31.4

$67.1 $65.1 $72.2 $68.5 $65.9

FY 14/15 FY 15/16 FY 16/17 FY 17/18* FY 18/19

One‐Time Ongoing

*FY 17/18 Budget Gap excludes the $40 million estimated IHSS cost shift that was restored in VBB as part of new MOE arrangement

5‐Year Budget Forecast

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County Administrator’s Office

5 Year Forecast – Projected Budget Gap (millions)

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$64.9 $88.2 $132.3 $161.3 $201.6

FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24

5‐Year Budget Forecast

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County Administrator’s Office

Budget Gap ‐ Forecast Comparisons

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$73 $91 $112 $142 $60 $84 $109 $141 $168 $68 $100 $130 $164 $193 $66 $71 $97 $142 $171 $212 $65 $88 $132 $161 $202

FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24

Jan 2016 Forecast July 2017 Forecast Jan 2018 Forecast July 2018 Forecast Dec 2018 Forecast Actual Budget Gap*

5‐Year Budget Forecast

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County Administrator’s Office

Recession Scenarios

Mild Recession Scenario Assumptions:

Recession begins FY 19/20
Revenue deviation from trend approximately half of “Great

Recession” impact on revenue actuals

Revenue deviation from trend lasts 2 years
Spending at “Base Case” forecast level

Severe Recession Scenario Assumptions:

Recession begins FY 19/20
Revenue deviation from trend modeled after “Great Recession”
n revenue actuals
Deviation from trend lasts 4 years
Spending at “Base Case” forecast level

26 5‐Year Budget Forecast

This Photo by Unknown Author is licensed under CC BY-SA

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County Administrator’s Office

Recession Scenarios

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$2,500 $2,700 $2,900 $3,100 $3,300 $3,500 $3,700 $3,900 FY 18 FY 19 FY 20 Forecast FY 21 Forecast FY 22 Forecast FY 23 Forecast FY 24 Forecast

Millions

Base Case Appropriations Base Case Revenues Mild Recession Revenues Severe Recession Revenues 5‐Year Budget Forecast

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County Administrator’s Office

Recession Scenarios Budget Gap (millions)

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Fiscal Year Base Case Mild Recession Severe Recession

2019‐20 $64.9 $100.2 $135.1 2020‐21 $88.2 $161.8 $233.9 2021‐22 $132.3 $184.7 $332.8 2022‐23 $161.3 $212.7 $442.2 2023‐24 $201.6 $251.1 $475.1

5‐Year Budget Forecast

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County Administrator’s Office

County Budget Drivers

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County Administrator’s Office

This Photo by Unknown Author is licensed under CC BY-SA

Major Budget Drivers

Increasing health and retirement costs
Program costs rising faster than revenues
A greater share of State revenues to counties

being directly tied to sales tax and vehicle license fees means counties will feel an immediate impact during an economic downturn

Exposure to State and federal budget and/or

policy changes

30 County Budget Drivers

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County Administrator’s Office

Governor’s Budget Overview – Areas of Concern

State Budget Architecture

Aggressive Revenue Assumptions
Current & budget year revenue projections very close to LAO
Major change from previous Governor who presented much lower than LAO projections in his January budget
Economic Slowdown – Finance Director projecting $70 bil revenue drop over 3 years in recession scenario
Future year caseload growth assumptions optimistic ‐ especially for MediCal

Specific Policies

Homelessness funding retaining large city carve‐out despite support for local collaboration
Administration has testified new homeless funding will not go out like HEAP
IHSS lower inflation factor welcome, but IHSS is still a large County general fund cost that is compounding at

a high rate. New inflation factor (4%) is still higher than inflation factor under old MOE (3.5%). Counties will take a higher share of cost in future locally negotiated wage increases. State can always unwind arrangement if caseload comes in higher than expected

31 County Budget Drivers

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County Administrator’s Office

Pending Factors

Expiration of federal waivers (Title IV‐E and Medicaid) that provide significant

revenue to the County and its partners

Rising pension and health benefit costs
Infrastructure costs
Pending litigation
Disaster Costs ($18 billion impact Statewide from 2017 fires)
Economic downturn
State & federal actions – 60‐65% of County General Fund Budget is from State

& federal sources when including Medicaid Charges for Services

32 County Budget Drivers

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County Administrator’s Office

Vision 2026

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County Administrator’s Office

Vision 2026

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County Administrator’s Office

Shared Vision

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Thriving and Resilient Population

Individuals and communities are empowered to overcome adversities and supported so they can grow, flourish and be self‐sufficient.

Safe and Livable Communities

Safe and secure communities with accessible infrastructure including open space and recreational facilities, and facilitates the availability of diverse and affordable housing.

Healthy Environment

Comprehensive utilization of environmentally sustainable practices that conserve natural resources while reducing pollution and harm to the environment.

Prosperous and Vibrant Economy

Emergence, robust growth and profitability of all businesses across a diversity of sectors, that also create employment opportunities for all residents.

The County Budget, along with all other County activities, will be guided by Vision 2026

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County Administrator’s Office

County Budget Guidelines

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County Administrator’s Office

Budget Strategy & Guidelines

All Departments to submit a Maintenance of Effort budget
Departments to include a 3.5% Cost‐Of‐Living Adjustment for eligible

contracts with Community‐Based Organizations

Departments to identify funding that supports the Homelessness

Action Plan

Budgets to align with Vision 2026

37 County Budget Guidelines

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County Administrator’s Office

County Budget Schedule

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County Administrator’s Office

County Budget Schedule

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County Administrator’s Office

Key Budget Dates

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

ISF budget requests due January 25, 2019

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Last Board meeting for mid‐year adj. February 5, 2019

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Non‐ISF budget requests due March 1, 2019

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Budget narratives due March 1, 2019

 CBO and Human Impacts due

March 15, 2019

 Children’s Svcs and Unincorp. budgets due

March 27, 2019

 Early Budget Work Session

Early April 2019

 Reduction targets to depts.

April 2019

 VBB plans submitted by depts.

May 2019

 Proposed Budget submitted

Early June 2019

 Final Budget adopted

Late June 2019