The Mid-Year Budget Gap
A county with a $420 million general fund is four months into the fiscal year. Property tax receipts are 5% below forecast ($9 million gap). Sheriff overtime is 18% over budget ($3.2 million), and health insurance claims are 12% over ($4.1 million). The general fund reserve is 6.5%. The board has promised no layoffs. There are 60 funded vacancies, mostly in public works and health. The union contract requires 60 days' notice for layoffs. An 18-position state grant expires in five months and funds 70% of those salaries. A performance-based budgeting pilot shows four programs with low outcome-per-dollar, but two are mandated. The county must close a $14 million gap this year and expects a similar gap next year. The county has already imposed a hiring freeze on non-critical positions.
1. Recommend a sequencing of options and criteria for closing the gap, distinguishing one-time from recurring measures.
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Sequencing. First, confirm whether the $14 million is recurring or one-time. Property tax and health claims look recurring; overtime may be partly one-time. Use one-time measures for a one-time gap and structural measures for a recurring gap. Options: hiring freeze and vacancy savings across 60 vacancies, but protect direct-service and revenue-generating roles; overtime controls in the sheriff's office with shift review, not arbitrary caps; a health-plan audit and pharmacy review; a discretionary spending freeze; program reductions guided by performance data; and a reserve draw.
Criteria. Legal mandates, public safety, equity impacts, recurring savings, speed, and labor-contract constraints. Because the board promised no layoffs, prioritize attrition, vacancies, and non-personnel reductions this year. But tell the board plainly that a structural gap next year likely requires position elimination or revenue action. A plan that closes this year with one-time money only shifts the problem.
2. How should the county use the performance-based budgeting pilot in making reductions?
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Use performance data as a screen, not an automatic cutter. Four low outcome-per-dollar programs matter, but two are mandated; cutting them may cost more in compliance or federal penalties. For the other two, compare outcome per dollar with alternatives, check whether low performance reflects measurement lag or client severity, and give the department a chance to improve. Publish the criteria and data so cuts are not seen as political. Protect programs serving high-need populations unless equivalent services exist. The pilot's value is in showing trade-offs, not in producing a ranked hit list.
3. How much reserve should be used, and how should the county manage labor relations and the expiring grant?
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A 6.5% reserve is below a 10% target; drawing it to 4% could harm the bond rating. Use no more than $4-5 million, and only for one-time costs. Pair the draw with a board resolution to restore the reserve over three years. On labor, give the union early notice, share the gap calculation, and bargain over overtime and vacancy impacts. Because layoffs require 60 days' notice, do not wait until month nine. For the expiring grant, decide now whether to absorb 18 positions or plan a transition; 70% state funding means the county's 30% share is small but recurring. Communicate monthly with the board and public.