PLACERVILLE, Calif. — The El Dorado County Board of Supervisors recently received a mid-year budget report along with projections of what to expect in the 2019-20 budget.

With both Chief Administrative Officer Don Ashton and Supervisor Brian Veerkamp in Washington, D.C., on county business, Shawne Corley, assistant chief administrative officer, was the one who provided the budget overview.

Cautiously optimistic, Corley reported the county is expected to end the fiscal year with a fund balance of $9.8 million which is $700,000 less than originally projected. But non-departmental revenues are expected to be $1.9 million more than budgeted due to higher than expected increases in sales and use tax revenue, transient occupancy taxes and increased interest earnings.

As county staff began preparation of the 2019-20 recommended budget, Corley said they expect an increase of 5 percent in property taxes and a 2 percent increase in sales tax revenue.

Expenses are projected to remain "status quo" with the focus on maintaining existing programs and services. At the same time, Corley noted that expenses continue to grow faster than revenues, especially since 2008.

Expected increases in expenditures include a 4 percent increase in salary and benefits. Corley noted that much of this growth is due to factors outside of the county's control such as increases in CalPERS obligations and increases in health and related benefit costs. In addition, the county is engaging in negotiations with employee groups so those costs could be higher than projected.

Top funding priorities are public safety, improving the county's infrastructure, including its buildings, roads and information technology, and good governance.

Corley also listed some of the major accomplishments that have been undertaken including moving ahead with construction of the new sheriff's facility, implementation of new technology infrastructure systems including the FENIX ERP system, the new Megabyte Property Tax System and the TRAKiT land use and permit processing system.

County's cannabis conundrum

The county also is in the process of developing and implementing a commercial cannabis program. The challenge being to create a system that pays for itself as the county works on coming up with a tax rate that covers all of the expected costs of legalizing cannabis sales in the county.

Corley noted that many different departments will have their budgets and staff affected by cannabis sales including the planning department, sheriff's department and tax collector's office.

As the report to the board noted, "Fees will be developed to partially cover costs; however, recent research shows that most jurisdictions are experiencing cost increase related to regulation and enforcement activities in excess of revenue from well-planned and supported fee structures."

Earlier in the morning, different department heads discussed the potential impact on their operations of the five cannabis-related measures that were approved by voters last November.

Sheriff John D'Agostini said he is considering the formation of a criminal interdiction team. The team would provide additional enforcement assistance related to cannabis legalization in the county as well as enforce laws related to illegal drugs, human trafficking and criminal activities, especially along the U.S. 50 corridor.

Commenting on the county's current efforts to come up with equitable tax and licensing schedule for marijuana sellers and growers, D'Agostini maintained that whatever revenue the county earns from cannabis will be lower than what it will cost to enforce the law, with the cost of a criminal interdiction team alone put at $1.1 million annually.

Other department heads affected by the legalization of cannabis also spoke with Karen Coleman, the county's treasurer-tax collector, saying that dealing with cannabis revenue has yet to be worked out as some banks don't want to handle cannabis related money because their deposits are federally insured and the federal government still considers cannabis a Schedule 1 drug.

Saying they are still in the infancy stage of working out the details, Coleman said they are checking with other counties to see how they handle the money issue.

State budget

Other factors affecting the county budget include Gov. Gavin Newsom's 2019-20 budget with additional revenue allocated for housing, homelessness, in-home supportive services and emergency preparedness and response programs.

Corley noted the governor is pressing counties to address regional housing needs and has proposed withholding transportation funding from areas where housing production does not meet planning targets. However, the county is not sure that threat will actually be implemented.

The budget also includes increased funding for homelessness, primarily for emergency shelters, navigation centers and supportive housing.

Earlier in February, the county reported it will receive $1.45 million in emergency aid grant funds from the state for a variety of housing programs geared toward the homeless including funds to rehab or build a homeless shelter.

Budget pressures

Discussing future pressures on the budget, Corley said one of the biggest is CalPERS cost increases as well as future increases related to labor negotiations and implementation of the Classification and Compensation Study. Corley noted the county has made progress in addressing compensation levels with the goal being to bring all classifications to the median point of comparable agency compensation levels.

Another source of budget pressure concerns county programs that traditionally have been funded by state and federal sources, specifically health and human services agency programs, behavior health and social services and the department of transportation/road fund. Corley noted that programs are growing to the point that the state and federal funds needed to operate them are insufficient, which means the county will have to use additional general fund dollars to cover them.

A third factor affecting future budgets is the need to maintain and replace aging infrastructure, with the staff reporting the need for a countywide capital improvement plan.