Faced with indefinite economic stagnation wrought by the COVID-19 pandemic, county staff has proposed a budget for the upcoming 2020-21 Fiscal Year that cuts general fund spending by $5.8 million, or roughly four percent. And there may be more cuts to come.

“The budget before your board today is in many ways a placeholder,” Assistant County Administrative Officer Alicia Hayes told the Board of Supervisors at the outset of a virtual budget hearing this afternoon. She said staff will return to the board in the fall to adjust for any additional losses.

The county’s budget outlook has changed dramatically in just a few short months. Back on February 11, the Board of Supervisors was looking to increase General Fund allocations to each county department by five percent during the 2020-21 fiscal year. We all know what happened next.

On March 4, Governor Gavin Newsom declared a state of emergency, and on March 19 he issued a statewide shelter-in-place order. The economic impacts have been severe. To date, local businesses have reported more than $40 million in losses, at least 16 businesses have closed permanently, more than 2,500 jobs have been lost and more than 13,000 unemployment claims have been filed.

County staff anticipates “significant reductions in revenue,” according to a budget briefing document, with losses in sales tax, transient occupancy tax and code enforcement fines and fees.

To compensate for some of those losses, staff is recommending a variety of measures, including a temporary halt in contributions to the general reserve, the Project Trellis cannabis marketing contribution, contingencies and retirement accounts. The county is also looking to cut costs through voluntary furloughs, reduced office hours, reductions in overtime, holding positions vacant and other measures.

Even with all these mitigation efforts, the total proposed budget for the upcoming fiscal year comes in at $465.4 million, which represents an increase of $13.8 million — or 3 percent — over 2019-20. In that budget briefing document linked above, Chief Administrative Officer Amy Nilsen explains that the increase comes from a variety of sources, including $7 million in reimbursement from the state and federal governments for activities from the Department of Health and Human Services.

As happens every year, county department heads submitted a list of additional funding requests, but at today’s afternoon hearing Hayes said the County Administrative Office is not recommending that any of those requests be granted.

Auditor-Controller Karen Paz Dominguez, who has butted heads with the CAO since assuming office early last year, called in to the hearing with a number of procedural questions, seeking clarification about the book-keeping specifics for such county activities as inter-fund lending, negative interest, depreciation and amortization. 

Hayes responded that the proposed budget is essentially “a spending plan” and insisted that it meets all state Budget Act requirements and is in compliance with recommendations made from external auditors.

During board discussion on the proposed budget, Third District Supervisor Mike Wilson said there have been discussions in the community and across the country recently about budgets for law enforcement and how that relates to other services such as public health and mental health. He asked staff about opportunities for community members to weigh in on conversations about priorities for government spending, saying budgets have “a moral component to them.”

Nilsen said the public will have opportunities to give feedback throughout the year, particularly during the first-quarter, mid-year and third-quarter budget reports.

Fifth District Supervisor Steve Madrone suggested reducing the proposed budget even further, saying “tightening our belts now would make the pain and suffering [in future years] be much less.” He also asked that the board look at the supplemental budget requests one by one, and so Hayes read them aloud. 

Those entreaties include a $75,353 request from Arcata Veterans, who have lost revenue from their inability to rent out their hall, a $132,045 request from First 5 to address adverse childhood experiences and a $95,000 request intended to help launch the Peninsula Community Services District.

Wilson spoke on behalf of First 5, saying the return-on-investment when spending to protect the community’s youngest and most vulnerable are “literally exponential.” 

Fourth District Supervisor Virginia Bass said it would be “short-sighted” not to invest in the Peninsula Community Services District because “so many other things are depending on it” — including major economic development projects. That investment “will pay dividends in the long run,” she said.

And Madrone spoke up on behalf of a $25,000 request from the Westhaven Volunteer Fire Department, which is struggling because the pandemic forced the cancelation of its annual Blackberry Festival fundraiser.

Second District Supervisor and Board Chair Estelle Fennell said frugality is in order. “”It is great to invest in things that will take us a step further, but I think today is not the day,” she said.

And toward the end of the afternoon session, First District Supervisor Rex Bohn offered a helping hand to the Westhaven Volunteer Fire Department. “I’d love to work [Madrone] to raise the money,” he said. Then, addressing Madrone directly, he added, “You raise half; I’ll raise half. I’d be more than willing to work with you.”

Madrone responded, “I think that’s a fantastic offer and would be the talk of the town: Madrone-Bohn raising money together.”

The budget hearing was scheduled to continue at 5:30 p.m. Monday, and the final budget adoption will come before the board at its June 23 meeting.