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Orange County’s public sector is issuing warnings about belt tightening with the county’s interim CEO ordering department heads to put a freeze on hiring, slash discretionary spending and reduce service levels over the next three months amidst concerns about a possible budget shortfall.
The concerns come as multiple cities this fall asked their residents to approve new sales taxes in the November election, citing budget shortfalls and tax revenue not keeping up with spending.
[Read: Here’s Where OC Voters Stand on Sales Tax Increases in 2024]
In a memo to staff on Jan. 3, interim County CEO Michelle Aguirre raised concerns about the county’s current and future income streams, noting their revenues aren’t keeping up with their expenses.
“The (strategic financial plan) forecasts national, state and local economies being below trend growth, and the County is already experiencing this trend in the current fiscal year,” Aguirre wrote in a memo co-signed by Kim Engelby, the county’s new chief financial officer.
Aguirre – herself a former County CFO – also pointed out how the county’s outstanding liability from the Airport Fire, which burned over 23,000 acres after a county public works crew accidentally started the blaze, could end up costing “hundreds of millions of dollars.”
“Based on the issues identified above, immediate budget restrictions and cost saving measures are necessary to close any gaps that may occur,” Aguirre wrote.
While the county’s general fund revenues are expected to grow each year, they won’t grow as fast as before, Aguirre wrote, referencing the 2024 county strategic plan (link to doc).
“Growth is expected to be moderate and below prior peak experience,” county staff wrote in the strategic plan.
Any vacant positions at the county funded by the general fund are now frozen according to Aguirre’s memo, with a few carve-outs including ones approved at the CEO’s discretion.
Discretionary spending by department heads is now cut to “those essential to maintain operations,” but the memo noted department heads could still purchase equipment and approve travel and discretionary overtime.
Aguirre also ordered department heads to reduce service levels for unfunded mandates.
“Departments are to review the functions, programs and services they are mandated to provide along with the service levels currently provided to find ways to implement cost saving measures,” Aguirre wrote.
Supervisor Katrina Foley highlighted how Gov. Newsom’s proposed budget, released on Monday, didn’t hold any “draconian cuts,” but said county staff would have to review it in depth.
“All of our department heads are analyzing the budget to determine if there are any impacts to their departments,” Foley said in a Tuesday interview, noting social services were most at risk because the department was predominantly funded by the state.
“So when the state makes cuts to the budget, it impacts our social services budget directly. It’s almost exclusively funded by the state,” Foley said.
Supervisor Vicente Sarmiento agreed with Foley on the necessity of protecting the county social services agency, but said it’s too soon to know where the final budget will land.
“We expected there would be some cost saving measures, some budget restrictions that would be introduced,” Sarmiento said in a Tuesday interview. “It doesn’t come as a surprise.”
He also noted that it remains unclear just how much impact payouts from the Airport Fire will have on future budgets.
“Because it’s so open ended right now we can’t really forecast too much before the deadline for claims to be filed,” Sarmiento said. “That’s what’ll give us a better picture.”
In a statement on Monday, supervisor Janet Nguyen praised staff for staying on top of the budget, adding that supervisors would be studying the budget.
“I’m concerned about any potential budget deficit and will work with my colleagues to overcome challenges. I’m pleased to see that we are being proactive on this issue and will be studying the budget to make sure we are spending funds wisely,” Nguyen wrote.
Aguirre noted that all those restrictions could be changed once county staff review the governor’s proposed budget, and that departments “are required to be proactive with all cost saving measures and efficiencies.”
“General Fund/(Net County Cost) is the funding source of last resort,” Aguirre wrote.
“Collectively, we must prepare to mitigate any potential impacts to critical public health and safety services for the community we serve.”
Noah Biesiada is a Voice of OC reporter and corps member with Report for America, a GroundTruth initiative. Contact him at nbiesiada@voiceofoc.org.
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