FY 2020-21 Budget Goals and Policies
Budget Development Policies
- Budget Process: County departments shall participate and cooperate during the budget development process to facilitate the creation of a budget based upon a collaborative effort between the Board of Supervisors, the Administrative Office, Department Heads, staff, and the community.
Each year, the Board of Supervisors shall set its priorities for the upcoming budget year. In most cases, this will be done in the Fall of each year in conjunction with the financial forecast provided by the County Administrative Office. The Board may at its discretion revisit its budget priorities and directives at any other point during the year.
The Administrative Office shall utilize the Board’s direction in order to create detailed instructions for use by departments in creating their respective budget submittals.Department submittals shall comply with the Board’s directives and both reductions and additions will be prioritized.The intent is that the overall Proposed Budget created by the Administrative Office will comply with the Board’s priorities and directives to the extent that available funding allows.
- Results Based Decision Making and Budgeting: The County is committed to providing efficient, high quality services that produce clear results for the public we serve. Budget requests and recommendations must be linked to measurable results that are responsive to communitywide priorities.
- County’s Vision Statement and Communitywide Results: The Board adopted communitywide results shall be used by all departments to strategically guide the budget preparation process. Departments will link all goals and funding requests to communitywide results.
- Departmental Goals and Performance Measures: Individual departments will establish goals that will facilitate achievement of the desired communitywide results. Departments will also develop meaningful performance measures that will be used to gauge the success of individual programs within a department. All requests to allocate additional resources to a new program or service must clearly demonstrate expected results in measurable terms. If additional funding is requested to augment an existing program or service, departments must identify actual results achieved to date in meaningful, measurable terms.
- Mission Statements: County departments shall have a department mission statement consistent with the County of San Luis Obispo’s overall mission statement.
- Budget Hearing in June: The budget hearing shall be conducted before the end of June; and the Board shall adopt a budget by July 1, unless extenuating circumstances arise, and the Board adopts a revised budget schedule for that particular year. Adjustment of final numbers based upon prior year end close, and legal adoption of the Final Budget shall occur no later than October 1st.
- Cost Allocation: Allocate Countywide overhead costs to all County departments based on the cost allocation and implementation plan developed annually by the Auditor‑Controller-Treasurer-Tax Collector-Public Administrator. Each department shall incorporate these allocations into their budget.
- General Fund Support: General Fund support is the amount of General Fund money allocated to a given budget after revenues and other funding sources are subtracted from expenditures. These net costs are used in developing budget recommendations and when reviewing budgets during the quarterly reporting process. Significant departures from the General Fund support amounts during the fiscal year may result in a recommendation to reduce expenditures to allow/ensure that the budgeted net cost would be achieved by the end of the fiscal year.
- Discretionary Programs: Review all discretionary programs to determine if they are a high priority program with communitywide benefits and demonstrated results. Preferences for funding of new discretionary programs are for those which will facilitate the achievement of Board adopted communitywide results utilizing non-General Fund revenue first, offsetting fee revenue (if appropriate) second, and General Fund last. All requests for discretionary funding must be accompanied by a performance plan that clearly describes actual and/or expected results in measurable terms. Additionally, departments will prioritize their funding requests for new, discretionary programs by focusing on those programs that are most effective in terms of achieving departmental goals and desired results. Departments must also consider, from a Countywide perspective, the potential effects of new programs and services on interrelated programs and desired communitywide results when developing requests.
Financial Planning Policies
- Balanced Budget: The County Administrative Officer shall present a balanced budget for all County operating funds, on an annual basis, to the Board of Supervisors for scheduled public hearings in June of each year. In accordance with the State Budget Act, Government Code §29009, available funding sources shall be at least equal to recommended appropriations.
- Ongoing Budget Administration: It shall be the responsibility of the County Administrative Officer to submit Quarterly Financial Status Reports to the Board of Supervisors. These reports shall provide a projection of expenditures and revenues, identifying projected variances. They may also include recommendations and proposed corrective actions which may include mid-year reductions.
- Long-Term Financial Planning: The County Administrative Office will annually develop a financial forecast of General Fund revenues and expenditures for the coming fiscal year and will provide the Board with a longer-term fiscal outlook. The purpose of the financial plan shall be to: 1. guide the Board in the development of its budget priorities, 2. provide the Board with the information it needs to direct County departments in their creation of budget proposals, and 3. assist the Board in the implementation of budget balancing plans and solutions.
- Use of "One-Time" Funds: One-time revenues shall be dedicated for use for one-time expenditures. Annual budgets will not be increased to the point that ongoing operating costs become overly reliant upon cyclical or unreliable one-time revenues. In the face of economic downturns or significant State cuts in subventions for locally mandated services, the use of one-time funds may be permitted to ease the transition to downsized or reorganized operations.
- Funding of Reserves/Contingencies/Designations: In times when the County has adequate discretionary funds to restore or enhance programs and services that have been scaled back in difficult budget years, there shall be a balance between the restoration of these programs and services and the funding of the County’s reserves, contingencies and designations that have been used to balance the budget in prior years. Further, it should be recognized that the funding of reserves, contingencies and designations is essential to ensuring the long-term fiscal health of the County.
- Funding of Self Insurance Internal Service Fund Reserves: Self-Insurance Internal Service fund reserves are to be maintained between the 70% (minimum) and 90% (conservative) confidence levels. This funding range is consistent with guidelines set by the County’s excess insurance carrier and industry norms. The setting and maintaining of reserve levels is based upon annual actuarial studies and internal analysis. Annual charges to departments shall be set to generate the funding necessary to maintain reserves between the 70% and 90% confidence levels.
- Enhance Cost Efficiency: County departments should review multi-departmental programs and services in order to enhance coordination and cost efficiency for streamlined achievement of communitywide objectives and results.
- Consolidation of Programs: County departments should consolidate programs and organizations to reduce County costs while maintaining or increasing existing levels of service. Before service level reductions are proposed, i.e. if budget cuts are required, department heads will determine if consolidation of departmental or Countywide programs or services would be cost effective.
- Privatization of Services: County departments are encouraged to identify and recommend opportunities for cost savings whenever possible, including the privatization of services that are beneficial to the County and legally possible. Analysis will include review of existing services, including the possibility of using existing personnel and the development of a transition process for those services approved for privatization. In implementing significant new services, a thorough cost and program analysis shall be conducted to ascertain if privatizing will result in reduced costs, increased services and accountability.
- Reductions: Reductions shall be evaluated on a case-by-case basis, in a fashion consistent with Board approved budget policies, to reach the appropriations level required within the available means of financing. When budget reductions are necessary, departments will prioritize their service programs and propose reductions in areas that are least effective in terms of achieving departmental goals and desired results. Departments must also consider the potential effects on interrelated programs and desired communitywide results when developing budget reductions.
- Investing in Automation: The Board recognizes that cost reduction, cost avoidance and process efficiency can be enhanced by utilizing automation. Proposals for investments in automation, particularly computer automation, must measurably demonstrate how cost savings will be achieved and/or how services will be improved. It is important that countywide benefits, compatibility with existing systems, and potential liabilities are fully addressed. All proposals for major automation improvements will be reviewed and approved by the Information Technology Executive Steering Committee prior to formal Board approval.
- Cost Recovery Through Fees: Utilize fees to recover costs where reasonable and after all cost saving options have been explored. Exceptions will be reviewed on a case‑by-case basis. County departments will review fees annually to ensure that they meet statutory requirements, fall within the range of fees being charged by comparator counties and achieve cost recovery.
- Parks Cost Recovery: As a publicly financed park and recreation system, the County of San Luis Obispo Parks and Recreation Department provides a basic level of service free to the public, in exchange for tax dollars. However, fees and charges and other methods to recover costs are considered a responsible and necessary means to supplement tax revenue and regulate park use where appropriate.
In establishing fees and charges, the County of San Luis Obispo Parks and Recreation Department will determine the direct costs of providing services and establish goals to recover those costs. The appropriate level of cost recovery will be based on an assessment of how individuals benefit from the service provided. If the benefit is to the community as a whole, it is appropriate to use taxpayer dollars to completely, or primarily, fund the service. Examples of services that primarily provide community benefits are hiking and biking trails, play areas, community parks, practice putting greens, and large natural areas.
Services that provide a direct benefit to individuals or specific groups should be managed to recover a greater share of costs. Supervised or instructed programs, facilities and equipment that visitors can use exclusively, and products and services that may be purchased, are examples where user fees are appropriate. The County of San Luis Obispo Parks and Recreation Department should also consider available resources, public need, public acceptance, and the community economic climate when establishing fees and charges. In cases where certain programs and facilities are highly specialized by activity and design, and appeal to a select user group, the Department shall additionally consider fees charged by alternative service providers or market rates. Fees and charges can be set to recover costs in excess of direct and indirect costs, where appropriate, as a method of subsidizing other services.
- Fund Balance Available: Fund Balance Available (FBA), represents money available at the end of one fiscal year for use as a financing source in the next fiscal year. For the General Fund, FBA is a significant funding source.
As a part of budget development for the coming year, the Auditor-Controller-Treasurer-Tax Collector’s Office shall provide an estimate of current year General Fund FBA that will be available to fund the coming year’s budget. The first priority for FBA shall be fund the coming year’s operating budget, and the estimate shall be included as a financing source in the Recommended Budget. At year-end, the Auditor-Controller-Treasurer-Tax Collector’s Office shall provide the actual FBA from the prior year. If the actual FBA is greater than the estimated FBA, the excess may be allocated to the operating budget or to contingencies to address unanticipated expenditures, or it may be placed in a designation for future use. If the actual FBA is less than the estimated FBA, staff shall utilize the Board-adopted Budget Balancing Strategies and Approaches to develop and recommend to the Board, a strategy for bringing the budget back into balance.
- Pursuit of New Revenues/Maximizing Use of Non-General Fund Revenues: County departments are directed to pursue revenue sources, when reasonable, in support of the communitywide results sought by the County. Where not prohibited by law, departments will maximize use of non-General Fund revenues, existing designations and trust funds prior to using General Fund money to fund programs.
- Appropriations from Unanticipated Revenues: Appropriations from departmental unanticipated revenues will not be recommended unless the department is either reaching or exceeding its total departmental revenue estimates on a monthly or quarterly basis, or its revenues are in line with historical revenue trends for that department. Grant program revenues and appropriations will be considered on a case-by-case basis.
- Maintain or Enhance Revenue Generating Ability: Appropriate sufficient funds to maintain the capabilities of budgets that generate revenues in excess of their costs. Enhancements to such budgets will be dependent upon resulting revenues being in excess of the associated costs.
- Debt Management: The Board of Supervisors established a Debt Advisory Committee (DAC) in 1992 to serve as a centralized debt review mechanism. The Board has also adopted an Infrastructure Planning and Financing Policy, and a Local Goals and Policies document for Community Facilities Districts (Mello Roos CFDs). The DAC has adopted various operating guidelines such as a process for internally financing cash purchases rather than leasing capital equipment. The DAC has also reviewed each debt proposal from County departments or special districts and provided recommendations to the Board of Supervisors. A comprehensive Debt Management Policy was developed by the DAC and was adopted by the Board on December 14, 2010.
In practice, the County of San Luis Obispo uses debt financing to fund capital infrastructure necessary for provision of services for County residents. Debt financing provides a mechanism to spread the cost of such infrastructure to current and future years in which the improvements will be utilized. However, care is taken to not unduly burden future budgets with debt service costs. Long term debt may also be utilized where savings can be realized from refunding existing obligations for pensions or other benefits, or previously issued capital construction debt. The County may also employ short term financing to meet cash flow requirements.
The County of San Luis Obispo will not exceed its legal maximum debt limit as established by State Law. This amount is calculated annually based on 1.25% of the County’s total assessed valuation. The County also calculates certain ratios to compare the level of bonded debt outstanding to personal income and on a per capita basis. A chart making such comparisons is published annually in the County’s Comprehensive Annual Financial Report (CAFR).
- Funding of Contingencies and Reserves: For the General Fund place a minimum of 5% of available funds into contingencies. Additionally, place up to 15% of available funds into contingencies or reserves and any additional unrestricted funds into reserves, after departments' operational needs are funded.
- Matching Funds ‑ County Share: No increased County share for budgets funded primarily from non‑General Fund sources if State funding is reduced, unless increased County share is mandated. The Board of Supervisors, at its discretion, may provide County "overmatches" to under‑funded programs to ensure or enhance specified levels of service. Proposed “overmatches” shall include the specific, measurable goals and results expected to be attained at both the “required” and the “overmatched” funding levels.
- "In‑Kind" Contribution: Where matching funds are required for grant purposes, provide as much "in‑kind" contribution (resources already allocated by the County that will be expended in any case) as allowed, instead of hard dollar matches.
- Carry forward of Expenditures: Expenditures carried forward from one year to the next (e.g. encumbrances) shall only be spent on the intended expenditure. If the actual expenditure is less than the amount carried forward, the remaining funds shall not be spent on something else without prior approval of the Administrative Office.
- Savings from Vacant Positions: Salary and benefit savings resulting from vacant positions shall first be used to offset salary increases before requesting re-allocation of the savings to other expenditures that achieve communitywide objectives and results.
- Non‑Emergency Mid‑Year Requests: Mid‑year budget (including staff requests) or capital project requests of a non‑immediate nature requiring a transfer from contingencies are recommended to be referred to the next year's budget deliberations. Mid‑year requests with other funding sources or which can be absorbed within a department's budget are considered as needed.
- Funding for Independent Special Districts: As independent special districts are autonomous government agencies fully independent of the County in governance, the provision of services, and funding, the County shall not subsidize an independent special district with County General Fund monies nor should any property tax exchange result in a net fiscal loss to the County.
Capital Project Policies
Review and evaluate projects based upon their cost, scope, countywide significance, correlation to facility master plans, and relation to communitywide objectives and results.
The following criteria shall be used in evaluating projects:
- Ability to address a critical need or threats to health and safety
- Connection to mandates or legal requirements
- Existence of non-General Fund funding source(s)
- Impact on General Fund or other budgetary impacts to existing services due to costs for staffing, operations and maintenance
- Impact to Board approved service levels
- Potential to save water/energy
- Consistency with County plans, goals and priorities
Proposed projects shall include the project’s anticipated impact on current and future operating costs. Projects will be recommended for approval that are 100% revenue offset or have their own funding source (such as golf courses and Lake Lopez), which meet one or more of the above criteria and would be reasonable in terms of scope or cost.
Projects should utilize energy and resource efficiencies such as “green building” (LEED) and Low Impact Development (LID) techniques and strategies to reduce ongoing utility and maintenance costs.
Library Projects: Consider funding new library buildings or major improvements to existing libraries only if at least 50% of the cost of the project is provided by the community in which the facility is located. The funding required from the community may be comprised from a variety of sources, including grants, school districts, special districts, cities, community group funding, private donations, or fees generated for specific use in libraries. The County's portion of this funding formula will be financed from the Library budget (Fund 1205), grants, gifts, the General Fund or fee revenues generated for specific use in libraries.
Maintenance Costs: Consider cost of ongoing maintenance before recommending capital projects, acquisition of additional parklands or beach access way projects.
Master Plans: Consider approving projects included in master plans if they have their own funding sources or if they are requested from other sources which identify an operational need for the facility.
Grant Funded Capital Projects: For grant funded projects, when a County match is required, budget only the County share if receipt of grant money is not expected in the budget year. If there is a reasonable expectation that the grant revenue can be received during the budget year, budget the entire project amount including revenues.
Encumbrances: The Auditor‑Controller-Treasurer-Tax Collector-Public Administrator is authorized to encumber capital project money appropriated for a specific capital project at the end of each fiscal year, if work has been undertaken on that project during the fiscal year. Evidence that work has been undertaken would be in the form of an awarded contract or other item upon which the Board of Supervisors has taken formal action.
Phasing of Large Capital Projects: For capital projects which will be undertaken over several fiscal years, develop full project scope and estimated costs in the initial year.
Facility Condition Assessments: Continue the on-going assessment of the maintenance needs of County facilities, and consider funding critical and potentially critically projects as identified.
Americans with Disabilities Act (ADA): Consider funding a portion of the projects identified in the County’s ADA Transition Plan update.