By SCOTT PESZNECKER
Calaveras County could run out of money by the end of this fiscal year unless supervisors act quickly to curtail spending.
County Auditor/Controller Linda Churches said the county is now using reserve funds to pay employee salaries because the general fund is tapped out.
Churches said she expects property taxes and grants to generate at least $4 million in general fund money by June 30, the end of the fiscal year. But with payroll costs of about $540,000 every two weeks, the county will likely need about $3.8 million just to pay its employees through June.
And the county must pay back $984,697 it has borrowed from its $1.7 million reserve fund.
Do the math, and the county is headed for a deficit.
Churches said she will stop writing checks, if necessary, to keep the county out of the red.
But it's not too late for supervisors to take "corrective measures," perhaps by ordering a hiring freeze, spending limits or layoffs, she said.
Churches briefly explained the problem to supervisors at their meeting last week, during a time slot reserved for budget issues. Supervisors asked Churches and County Administrative Officer Tom Mitchell to analyze the situation and report back to them.
"We have a balanced budget, so my concern is: What's happened to our anticipated revenue?" Supervisor Merita Callaway said yesterday. "Are we concerned? Absolutely. Are we being cautious? Absolutely. Do we need to panic? No."
Mitchell said he will give supervisors an update when they meet Monday, and his full report will be ready for the March 22 meeting.
"I don't think it's accurate to say that the county is going to run out of money," Mitchell said. "I think it's accurate to say there are cash flow concerns the county has."
Mitchell declined further comment until next week, when he finishes his analysis.
Supervisors didn't approve this fiscal year's budget until last September because of the state budget standoff in Sacramento.
In the county's budget, administrators projected general fund revenues of $26.1 million for the year about $3.4 million less than the anticipated general fund expenditures.
To plug the gap, supervisors decided to use the $3.4 million cash left over from the year before.
"When you budget all your cash, there's always a chance you're going to spend it all," Churches said.
She called the general fund "a living budget" and said it is constantly altered by pay raises, department spending and unexpected county contracts.
The biggest problem, she said, are the increasing costs of salaries and benefits. The county will spend about $17.5 million on salaries and benefits this fiscal year an increase of $1.8 million over last year.
Salary and benefit costs will jump another $2 million next year.
"How are we not going to be cutting positions?" Churches said. "What are we going to do?"
All employees get 3 percent raises almost every year. Many employees get annual 5 percent "step" raises within their departments. Some employees get up to 5 percent if they take a different county job. And all employees get 5 percent longevity raises after working 5 years, 10 years, 15 years and 20 years.
It's not unheard of for an employee to get a 13 percent raise in a single year, Churches said.
Plus, the county is contributing more money to employee retirement and health benefits than it has in recent years.
"Before we keep giving more and more, we have to stop and say, what's going to happen five years from now if we take this action now?'" Churches said.
Facing their own budget concerns, supervisors in neighboring Tuolumne County ordered two furlough days unpaid days off for all county employees which saved the county about $150,000.
Tuolumne County is also locked in a hiring freeze until the end of June, which saves up to $60,000 a month.
Calaveras County hasn't taken such measures.
Callaway said her board has lots of options and should get through the year without issuing pink slips.
If needed, Callaway said, the county could pay bills by borrowing money from "designated" funds, such as the Solid Waste Trust Fund. Designated funds, like trust funds, accumulate over several years through special taxes or county service charges.
"I think the board needs to look at the total situation and then make a decision," Callaway said.
Mitchell was optimistic about the budget last week, after voters approved Propositions 57 and 58 the $15 billion bailout bond measure and the balanced budget measure. The day after the election, Mitchell said he no longer anticipated layoffs of county employees.
Before the March 2 election, Mitchell and supervisors had not ruled out layoffs, furlough days or other means to make ends meet.
The state measures do not calm Churches, though.
Even if county supervisors find a way to reduce spending and break even this year, there will still be no cash leftover for next year.
That's $3.4 million that supervisors would have to cut from next year's general fund, and $5.4 million when including payroll increases.
"This is a new issue, I think for all of us," Churches said.