Derry

Neil Derry
Posted: 06/06/2010 05:51:16 PM PDT

This is my first full budget cycle as the newest member of the Board of Supervisors. As a candidate, many people approached me to provide insight into the workings of San Bernardino County government. As a newly elected supervisor, many more provided their perspective and painted their colorful pictures. However, I was determined to educate myself and observe the inner workings firsthand so that I could arrive at my own conclusions instead of being influenced by the biases of others.

It became clear that the manner in which our county was being run was dysfunctional and that the existing leadership either intentionally misled the Board of Supervisors or failed to fully recognize and address the budgetary pressures that are and will continue to impact us for the next several years.

For over a year, our former county administrative officer told me that our county was in fantastic shape because he foresaw the worsening economic situation and took dramatic steps to minimize the impact of declining revenues. During last year’s budget discussions, the Board of Supervisors approached employee bargaining units in good faith and armed with this information called upon all employees to forgo raises so that we could ride out the Great Recession and avoid layoffs.

While cities and other counties throughout the region grappled with crippling budget deficits, decreases in the level of services and heavy layoffs, my colleagues and I took great satisfaction in being
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able to manage our strained budget and continue to provide services to our citizens at comparable levels. Even more importantly, through attrition, retirements and deferral of raises by county employees, we managed to avoid countywide layoffs.

Over the course of several months, I grew suspicious that our financial footing wasn’t as firm and sound as we were told. Greg Devereaux, our new county administrative officer, has been going over every aspect of our budget with a fine-tooth comb and, unfortunately, his reports have confirmed my suspicions.

The county’s largest source of revenue is property taxes and our largest expense is employee salaries and benefits. With the real estate crash and the ballooning costs associated with employee pensions, the fiscal noose is tightening around us.

How bad is it? To the tune of $90 million this year and another $50 million next. And frankly, it could get worse.

There is a significant lag between the erosion in real estate prices and the property tax revenue the county receives. All the homes that are being advertised as short sales, or have been foreclosed but not resold to another buyer, are being taxed at values that have yet to reset in full when ownership eventually changes hands.

Whereas municipal governments are sales tax dependent and are in the process of bottoming out with respect to declining revenues, ignoring state raids on local redevelopment funds, county governments are in the middle of the downswing that will continue for several years.

As revenue declines over the next couple of years and subsequently bottoms out, financial models portend significant financial hardship due to rising expenses and pension obligations that show no sign of plateauing in the foreseeable future.

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