Trend and Analysis

The percentage of total expenditures that reside in the County’s fund balance is a critical indicator of the County’s fiscal well-being, sustainability and a significant factor in maintaining the County’s AAA bond ratings.  It also provides critical protection against financial risk due to the County’s limited ability to generate revenue as a result of charter-mandated and state-imposed tax caps or restrictions.  The County’s 5% charter-mandated restricted reserve and 2% policy-required committed operation reserve were established to control the County’s exposure to financial risks and provide reserves in the event of emergencies.  The County has successfully kept its General Fund balance above 7% of its annual budget.  However, the percentage has shown an increase from 8.3% in FY 2014 to 11.8% in FY 2016 due to improving revenues, effective monitoring of expenditures and sound fiscal decisions. The reserve level is expected to increase from 11.8% in FY 2016 to 13.8% in FY 2017 due to revenue increases in the collection of real property taxes and building permits along with continued expenditure monitoring.  However, it is important to note that the collection of these taxes is volatile as both are closely tied to the real estate market.  Therefore, continued gains in these taxes in the future are uncertain.  In FY 2018, the reserve level is projected to increase to 12.4% due to the growth in the overall budget. Fund balances are achieved through prudent revenue forecasting, effective expenditure monitoring and the application of sound fiscal policies (such as limiting use of fund balance to one-time nonrecurring expenditures).
The County continues to have a structural imbalance arising from the mismatch between limited revenue growth and significant service delivery cost increases.  This is largely driven by an expansion in base budget costs such as personnel compensation and fringe benefits based on collective bargaining agreements.  In FY 2018, the agency continues to focus on the implementation and maintenance of master data within the County’s enterprise resource planning (ERP) system.  The ERP system is expected to help facilitate priority-focused and program-based budgeting.  In addition, multi-year fiscal planning – including projections for operating budget levels in future fiscal years will be restored and expanded in order to execute a multi-year plan to reconcile the structural balance between revenues and expenditures.