INTRODUCTION I. A CITIZEN S GUIDE TO READING THE BUDGET DOCUMENT

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1 INTRODUCTION INTRODUCTION The County Executive Office (CEO) is pleased to present the FY Recommended Budget. The CEO budget proposal to the Board of Supervisors continues to reflect Orange County s disciplined approach to fiscal management and is consistent with the County s Strategic Financial Planning process. The budget recommendations will be presented and discussed at a Public Budget Hearing scheduled for June 10, The FY Recommended Budget continues to reflect the impacts of the local, State and National economies, minimal revenue growth, and the rising cost of doing business. The County continues to adjust to the effects of a slowly recovering economy with a focus on stabilizing the budget along with a renewed emphasis on infrastructure needs. The recessionary period was declared to have officially ended in 2009; however, recovery has been lackluster when compared to prior recoveries from economic downturns. Beginning in late 2011 and into 2013, economic activity reflected modest improvement over the prior years as evidenced by declines in unemployment, and increases in housing prices, manufacturing production, and commercial and retail sales. Most economists are forecasting modest to moderate growth to continue in 2014 and 2015, with potential for stronger growth in The County anticipates that there will be moderate growth going forward into FY ; however, it is anticipated that any growth in General Purpose Revenues will not be enough to offset costs which are anticipated to grow at a higher rate. This introduction contains a guide to reading the budget document, a brief description of the County s form of government, supervisorial districts, mission statement, and the County s strategic planning initiative. This introduction also reviews the State budget and economic factors influencing the County budget, provides summary budget information, and budget highlights in various program areas. I. A CITIZEN S GUIDE TO READING THE BUDGET DOCUMENT This document includes information that provides readers with a greater understanding of each department s mission, organizational structure, and performance results as a narrative context for the budget amounts. The introduction section of Volume I contains several charts and tables that provide an overview of issues affecting the budget, sources and uses of funds, and budgeted positions. Following the introduction are sections that present each department and fund in the County s seven program areas listed below: 1. Public Protection 2. Community Services 3. Infrastructure and Environmental Resources 4. General Government Services 5. Capital Improvements 6. Debt Service 7. Insurance, Reserves and Miscellaneous The presentation for each department within each program area includes: An Operational Summary including: Mission Budget at a Glance Strategic Goals Key Outcome Indicators (Performance Measures) Key Accomplishments of the current year An Organizational Summary including: Organization Chart Description of each major activity Ten-year staffing trend chart with highlights of staffing changes A FY Budget Summary including: Department s plan for support of the County s strategic priorities Changes included in the base budget County of Orange 13

2 II. ORGANIZATIONAL OVERVIEW Budget augmentations and related performance plans Recap of the department budget Highlights of key budget trends A matrix of the budget units under the department s control Volume II contains additional budget detail. Readers looking for more detailed budget information for a specific department can use the Index at the end of Volume II. Departments are listed in alphabetical order with the page number of that department s budget information. Department business plans have been incorporated into this document. A business plan sets forth long-term goals, discusses operational and budget challenges, identifies strategies for overcoming the challenges and making progress on those goals during the coming year, and identifies how success will be measured by using outcome indicators (key performance measures). II. ORGANIZATIONAL OVERVIEW Orange County s FY Recommended Budget presents the County s financial capacity and priorities in providing public safety and health, social services, environmental, and regional planning services for its residents. The County provides the public with a wide-ranging array of public services through its departments and through comprehensive community partnerships with public, private, and non-profit agencies. FORM OF GOVERNMENT The County is a charter county as a result of the March 5, 2002 voter approval of Measure V that provides for an electoral process to fill mid-term vacancies on the Board of Supervisors. Before Measure V, as a general law County, mid-term vacancies would otherwise be filled by gubernatorial appointment. In all other respects, the County is like a general law county. A five-member Board of Supervisors governs the County. Each elected member serves a four-year term, and the Board annually elects a Chair and Vice Chair. Each district varies in geographical size; however, the populations are relatively equal at approximately 600,000 residents. The members of the Board of Supervisors by district are as follows: SHAWN NELSON, CHAIRMAN, from the Fourth District, representing the communities of Anaheim (portions of), Brea, Buena Park (portions of), Fullerton, La Habra and Placentia. PATRICIA BATES, VICE CHAIRMAN, from the Fifth District, representing the communities of Aliso Viejo, Dana Point, Irvine, (portions of), Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente and San Juan Capistrano. JANET NGUYEN, SUPERVISOR, from the First District, representing the communities of Fountain Valley (portions of), Garden Grove, Santa Ana, and Westminster. JOHN M. W. MOORLACH, SUPERVISOR, from the Second District, representing the communities of Buena Park (portions of) Costa Mesa, Cypress, Fountain Valley (portions of), Huntington Beach, La Palma, Los Alamitos, Newport Beach, Seal Beach, and Stanton. TODD SPITZER, SUPERVISOR, from the Third District, representing the communities of Anaheim (portions of), Irvine (portions of), Orange, Tustin, Villa Park, and Yorba Linda. STRATEGIC PLANNING INITIATIVE The County strives to fulfill its mission: Making Orange County a safe, healthy, and fulfilling place to live, work, and play, today and for generations to come, by providing outstanding, cost-effective regional public services. The County is committed to providing Orange County residents with the highest quality programs and services as articulated in its mission statement. Supporting the County s mission is a set of vision statements for business and cultural values (please see the following table A): 14 County of Orange

3 III. ECONOMIC OUTLOOK FOR FY Table A VISION STATEMENT FOR BUSINESS VALUES We strive to be a high quality model governmental agency that delivers services to the community in ways that demonstrate: Excellence - Provide responsive and timely services Leadership - Leverage available resources as we partner with regional business and other governmental agencies Stewardship - Seek cost-effective and effective methods Innovation - Use leading-edge, innovative technology VISION STATEMENT FOR CULTURAL VALUES We commit to creating a positive, service-oriented culture which: Attracts and retains the best and the brightest Fosters a spirit of collaboration and partnership internally and externally Supports creativity, innovation, and responsiveness Demonstrates a can-do attitude in accomplishing timely results Creates a fun, fulfilling and rewarding working environment Models the following core values in everything we do: Respect Integrity Caring Trust Excellence III. ECONOMIC OUTLOOK FOR FY Key factors that influence the local Orange County economy include the unemployment rate, job growth, inflation, housing market, incomes, and taxable sales. External and internal indicators provide information about the state of the Orange County economy. The County routinely monitors: (a) how well the local economy performs relative to surrounding counties, the State and the Nation (External Indicators); and (b) how well the local economy performs relative to its own historical trends (Internal Indicator). In terms of the external indicators, Orange County s economy routinely out-performs local surrounding counties, the State, and National economies. External indicators for 2014 reflect that the local economy is experiencing a moderate recovery, trending more favorable when compared to State and National economies. In terms of internal (historical) trends, current and projected indicators forecast that economic recovery at the local level will continue to be slow and moderate. This section provides trend data for various external and internal indicators that summarize the current and projected outlook of the Orange County economy. County of Orange 15

4 COMPARATIVE EMPLOYMENT STATISTICS (March 2014 preliminary) Orange County s unemployment rate continues to be one of the lowest in the State, and is below that of all surrounding Southern California counties and the State. Preliminary March 2014 unemployment rates were: COMPARATIVE EMPLOYMENT STATISTICS (March 2014 preliminary) Total Labor Force No. of Employed % Unemployment United States 156,227, ,742, % California 18,659,400 17,155, % Los Angeles County 4,976,200 4,541, % Orange County 1,624,700 1,530, % Riverside County 960, , % San Bernardino County 872, , % San Diego County 1,593,800 1,441, % *Sources: Bureau of Labor Statistics; State of California Employment Development Department; not seasonally adjusted ORANGE COUNTY HISTORICAL EMPLOYMENT STATISTICS Year % Unemployment March % March % March % March % March % Overall, Orange County s unemployment rate continues to be better than the rates of peer counties, the State, and the Nation. Thus far, Orange County s unemployment rates for calendar year 2014 are 5.8% in March (preliminary), 5.9% in February, and 5.8% in January. In California, initial claims for unemployment increased by 11.5% and weeks paid increased by 0.0% from March 2013 to March Although the unemployment rate trend is positive, the recovery in the job market is still below the pre-recession highs in California and Orange County. Between March 2013 and March 2014, changes in employment are as follows: ORANGE COUNTY YEAR-OVER-YEAR EMPLOYMENT STATISTICS Number of Jobs Increase/ Percent Change Labor Force Sector (Decrease) Year-Over-Year Non-Farm Employment 31, % Professional & Business Services 10, % Construction 9, % Educational & Health Services 6, % Leisure & Hospitality 3, % Financial Activities (3,200) (2.85%) *Source: State of California Employment Development Department 16 County of Orange

5 ORANGE COUNTY HISTORICAL JOB GROWTH According to Chapman University (November 2013 projections), Orange County s job growth is expected to increase moderately by 2.5% in Forecast 2.5% *Source: Chapman University Economic & Business Review, November 2013 Job growth and personal income (forecasted to increase 5.5%) continue to be closely monitored. Inflation, as measured by the Consumer Price Index (CPI), is expected to be slightly lower for Orange County relative to the State and the National levels in 2013; but equal to the State level and slightly higher than the National level in Year Orange County California United States % -0.3% -0.3% % 1.3% 1.6% % 2.6% 3.1% % 2.2% 2.1% 2013 Estimate 1.4% 1.7% 1.5% 2014 Forecast 2.3% 2.3% 2.1% *Sources: Chapman University Economic & Business Review, November 2013 The real estate housing market has stalled somewhat in Southern California with March 2014 sales volume coming in at the second lowest level for the month in almost twenty years. On the other hand, median sales prices rose to the highest level in over six years. According to DataQuick Information Systems in a report issued April 15, 2014, March 2014 sales of new and resale houses and condos in the Southland were 26.9% below the average number of sales for March since DataQuick also reported that The impact of distressed properties continued to wane and Indicators of market distress continue to decline. ORANGE COUNTY HISTORICAL JOB GROWTH Year % Payroll Employment % % % % 2013 Estimate 2.0% CONSUMER PRICE INDEX County of Orange 17

6 PEER COUNTIES - COMPARATIVE HOUSING ANALYSIS Orange County 2013 Median family income per the U.S. Department of Housing and Urban Development (HUD) was estimated at $84,900 up by less than 1% from the 2013 median family income estimate for Orange County of $84,100. According to the Chapman University Economic & Business Review in November 2013, home buyers with a median family income of $84,100 needed approximately 32.1% of their gross income to pay for interest, principal and property taxes. This is lower than the 46.7% of gross income needed in 2006, but still higher than the 27.4% needed in PEER COUNTIES - COMPARATIVE HOUSING ANALYSIS County Median Home Price Unit Sales Median Family Income (as of March 31) % Change % Change 2014 Los Angeles $380,000 $435, % 6,962 5, % $60,600 Orange County $505,000 $580, % 3,063 2, % $84,900 Riverside $245,000 $288, % 3,532 3, % $60,700 San Bernardino $190,000 $230, % 2,406 2, % $60,700 San Diego $380,000 $427, % 3,762 3, % $72,700 Ventura $403,250 $430, % % $88,700 So. California $345,500 $400, % 20,581 17, % n/a *Sources: DataQuick (Housing)-Median Home Price as of March 31, 2014; and U.S. Housing and Urban Development (Income); Median Family Income is forecasted for 2014 using 2011 America Community Survey 5-year median income estimates. Foreclosure rates are calculated by dividing total County housing units per the U.S. Census Bureau by the total number of properties that received notices of default (new filings, foreclosure in process, not yet recorded) within the month. RealtyTrac, Inc. forecasts that 1 in 1,177 Orange County homes received a foreclosure filing in March Among peer counties, Orange County had the lowest foreclosure rate in March (see following table). For the first three months of 2013, there were 1,318 notices of default issued, and 311 trustee s deeds filed (completed and recorded). In calendar year 2013, there were a total of 5,575 notices of default and 1,736 trustee deeds issued. RealtyTrac reports that, to date, the average foreclosure sales price in Orange County was $466,000, approximately 20% lower than non-distressed home prices. FORECLOSURE STATISTICS Foreclosures Los Angeles County 1 in 1,002 Orange County 1 in 1,177 Riverside County 1 in 536 San Bernardino County 1 in 510 San Diego County 1 in 1,147 *Source: RealtyTrac, Inc. 18 County of Orange

7 ORANGE COUNTY TRENDS Taxable Sales in the 2nd Quarter Taxable sales in Orange County are forecast by Chapman University to increase by 6.0% in 2013 and 6.4% in This compares to a projected increase of 5.0% for the State included in the Governor s FY Proposed Budget. Board of Equalization reports taxable sales two years in arrears. ORANGE COUNTY TRENDS Taxable Sales in the 2nd Quarter For the 2nd Quarter / Calendar Year Taxable Sales (Billions) Percent Change 2014 (f) $ % 2013 (f) $ % 2012 $ % 2011 $ % 2010 $ % 2009 $ % 2008 $ % *Source: Chapman University Economic & Business Review, November 2013 In summary, most indicators reflect that the economic condition of Orange County is better than or comparable to surrounding counties, the State, and the Nation. With respect to historical (internal County) trends, some level of recovery is anticipated in most economic sectors but growth is expected to be modest to moderate. STATE LEGISLATION AND BUDGET The Governor released the FY State Budget Proposal on January 10, 2014, which continues the State s investment in schools; provides funding for the expansion of health care coverage to California residents; and accelerates payments for the State s prior deficit financing bonds. The budget outlines $151 billion in expenditures, proposes a $2.3 billion reserve by the end of , and pays down $1.6 billion in budgetary debt from past years. Overall General Fund spending is projected to grow by 8.5% with the majority of the spending growth in education and supplemental bond payments. The Governor, in the budget introduction, stresses that maintaining a stable budget will require fiscal control. Two of the potential major risks include the remaining budgetary debt and hundreds of billions of dollars in long term liabilities. In addition, the 2012 Budget Act assumed and spent the revenue provided by Proposition 30. The proposition provides a temporary revenue stream, with the sales tax component expiring at the end of 2016, and the income tax increases expiring at the end of In January 2014, the State Legislative Analyst s Office (LAO) released an overview of the Governor s budget proposal and concluded that the Governor s plan places California on a stronger fiscal footing and continues the State s financial progress. The LAO advises that only limited and targeted ongoing program commitments be made with projected additional revenues in order to avoid future budget pressures. In January, Governor Brown proposed changes to the Rainy Day Fund to stabilize the State s finances during swings in capital gains revenues, and to provide greater protection for schools from deep reductions that were the result of the most recent recession. More recently, the Governor called a special session of the Legislature for April 24, 2014 to replace the Rainy Day Fund on the November ballot with a dedicated reserve that would allow the State to pay down its debts and unfunded liabilities. The County continues to monitor State fiscal policy on an ongoing basis for potential funding impacts. Any impacts as a result of the final State budget will be addressed during the fiscal year as they become known. MAJOR REVENUE AND EXPENSE ASSUMPTIONS The County budget includes a wide variety of funding sources. The budget recommendations are based on the following revenue assumptions: County of Orange 19

8 2013 STRATEGIC FINANCIAL PLAN State and Federal funding sources are estimated by departments based on established funding allocation formulas, caseload projections, and the latest State and Federal budget information. The Assessed Roll of Values was up by 3.36%. The change in assessed values for FY is projected at 2.0% Health & Welfare Realignment revenue from the State allocated to Health, Mental Health, Social Services, and Probation is projected at $168.4 million based upon current program and revenue trends. Additional 2011 State Realignment revenue included in the County s budget for Sheriff, Probation, Health Care Agency, District Attorney, and Public Defender includes approximately $65.8 million in State funding which includes $4 million of estimated growth monies (exclusive of funding allocated to Local Law Enforcement) allocated to support the costs associated with realigned public safety responsibilities regarding adult felony offenders to counties under the 2011 Realignment legislation, AB 109. The one-half cent Public Safety Sales Tax (Proposition 172) funds are allocated 80% to the Sheriff s Department and 20% to the District Attorney by Board policy. Receipts for FY are projected to increase 3% based on State and economists projections and trend data. The interest rate on cash balances in the County Investment Pool administered by the County Treasurer is expected to average 0.58%, reflecting an increase of 0.21% from FY revised projections of 0.37% (March 2014 Treasurer s Monthly Investment Report). Assumptions for various categories of expenses include: Labor costs are centrally calculated based on approved positions and historical vacancy factors. One to two step merit increases are assumed for employees who are eligible. Actual merit awards are based on the employee s performance evaluation. No base building wage increase appropriations are built into the departmental budgets as these are subject to negotiations and approval by the Board of Supervisors. As negotiated agreements are completed, current budget status will be reviewed. Retirement costs are expected to increase this year by approximately 12.8% when compared to costs included in the FY Adopted Budget. Base rates, depending on bargaining group, may range from an increase of 0.8% to an increase of 18.0%. Employee health insurance costs are expected to increase on average by approximately 8.03%. Retiree medical cost is budgeted between at 0.6% to 4.1% of payroll depending on bargaining group. This rate reflects the modified plan approved by the Board in June Retiree medical rates will be updated mid-year once the results of the 2013 actuarial valuation are known. Services and supplies shall be budgeted at the same level as actual use during last fiscal year and current year projections to the extent they are necessary to support business plan and Strategic Financial Plan goals STRATEGIC FINANCIAL PLAN The Strategic Financial Plan (SFP) process provides the framework for aligning available resources with operating requirements, implementing new programs and facilities and serves as the foundation for the annual budget. This framework enables the Board to make annual funding decisions within the context of a comprehensive, long-term perspective. Since 1998, the Strategic Financial Plan has been updated annually to review the financing necessary to carry out programs and services. New priorities are identified and considered as part of a comprehensive update of the plan. The Strategic Financial Plan contains five elements: Economic Forecast General Purpose Revenue and Fund Balance Unassigned Forecast Program Cost Forecast Strategic Priorities General Fund Reserves Policy On December 10, 2013, the Board of Supervisors adopted the County s 2013 Strategic Financial Plan. The Strategic Financial Plan included an assumption of zero General Fund Unassigned Fund Balance and modest General Purpose Revenue growth. The spending side included assumptions of 2% growth in departmental Net County Cost limits for FY 20 County of Orange

9 IV. OVERVIEW OF THE FY RECOMMENDED COUNTY BUDGET , followed by increases of 3% for FY through FY After factoring in the NCC Limit growth, departments still identified a 5-year cumulative budget gap of $177 million, or $286 million when partial reserve replenishment is taken into consideration. The $177M cumulative gap includes $46 million in reductions that would be required to meet the FY Net County Cost (NCC) limits. The plan emphasizes that the County must remain diligent, and budgetary control is necessary to maintain balance and realize continued results from the actions Departments have already taken, beginning in IV. OVERVIEW OF THE FY RECOMMENDED COUNTY BUDGET BASIS OF BUDGETING The County s budget and its accounting system are based on the modified accrual system. The fiscal year begins on July 1. Revenues are budgeted as they are expected to be received or as they are applicable to the fiscal year. Consistent with generally accepted accounting principles, revenues are recognized when they are measurable and available. The County s availability criterion is 60 days after the end of the fiscal year. Expenses are budgeted at an amount sufficient for 12 months if they are ongoing, and as needed in either partial or full amounts if they are one-time items. In each fund, expenses and increases to obligated fund balances must be balanced with available financing. BUDGET DEVELOPMENT The following budget development policies and guidelines are used by all County departments as a starting point for budget development: Consistency with Strategic Financial Plan and Business Plan Concepts: Base operating budget requests shall be consistent with the priorities and operational plans contained in the 2013 Strategic Financial Plan and the departmental business plans as resources are available. Department heads are responsible for using these planning processes along with program outcome indicators to evaluate existing programs and redirect existing resources as needed for greater efficiency, to reduce cost and minimize the requests for additional resources. A certification regarding the evaluation of existing resources is required as part of the budget request submittal. Salaries & Employee Benefits: The Salary and Benefits Forecasting System (SBFS) in BRASS (the County s budget system) sets the regular salary and employee benefits base budgets. Salary and employee benefits are reduced to account for vacant positions based on the average number of vacant positions during calendar year 2013 (through pay period 26). Budgeted extra-help positions must comply with Memorandum of Understanding provisions. Those that do not are to be deleted with a corresponding reduction in the extra-help account. Services & Supplies: Services and supplies shall be budgeted at the same level as actual use during last fiscal year and current year projections to the extent they are necessary to support business plan and Strategic Financial Plan goals. Fees and Charges for Services: Departments are responsible for identifying total cost for programs with fees and for setting fees at full cost recovery for the entire fiscal year. Full cost recovery includes direct and indirect costs, overhead, and depreciation for the period during which the fee will be in effect. If fees are set at less than full cost recovery, the reason for subsidy should be given. Fees that are set by State law shall be implemented in accordance with those laws. Revenue and Grants: Program revenues (e.g. State and Federal programs revenues) are to be used to offset the department s proportional share of operating costs to the full extent of the program regulations. Local matching funds should normally be at the legal minimum so that the General Fund subsidy (backfill) is minimized. Program revenues are to be used for caseload growth. One-time revenues shall be limited for use on non-recurring items including start-up costs, program or reserve stabilization, capital expenses and early debt retirement. New revenue sources pending legislation or grant approval are not included in the base budget request. They will be considered during the quarterly budget report process (i.e. when legislation is passed or grants awarded). Net County Cost (NCC): NCC limits are based on the current budget, adjusted for one-time items and annualization of current year approved ongoing augmentations. The FY budget policy includes 2% growth in the limits consistent with the 2013 SFP. County of Orange 21

10 HIGHLIGHTS OF THE FY RECOMMENDED BUDGET Obligated Fund Balances, Reserves and Contingencies: The County General Fund currently contains obligated fund balances, appropriations for contingencies, appropriated reserve-type funds, and obligated fund balances held by others. The purpose of these obligated fund balances is to protect community programs and services from temporary revenue shortfalls and provide for unpredicted, sudden, and unavoidable one-time expenditures. Certain departments and non-general Funds have other obligated fund balances or reserves dedicated to specific programs and uses. Balanced Budget: The General Fund requirements will be balanced to available resources. Budgets for funds outside the General Fund are balanced to Available Financing without General Fund subsidy unless previously approved by the Board or CEO. Available Financing shall be determined by an accurate projection of June 30 Fund Balance Unassigned and realistic estimates of budget year revenues and any planned changes to obligated fund balances. Augmentations (requests for new or restored resources): All augmentation requests require outcome indicators (performance measures) that outline the department s intended outcome(s) resulting from the additional resources. They have been ranked in order of the department s priority for approval. Department heads have certified that all potential alternatives for redirecting existing resources have been examined and that lower priority items have been reduced or eliminated in order to free up existing resources. Previously approved augmentations undergo an outcome indicator review for two subsequent years as a condition for continued funding. Departments report on outcome indicator results (to the extent data is available by budget submittal due date) of the performance expectations. Prior year augmentations are funded if the CEO and department agree that: They meet the performance expectations They merit continuation They are still relevant to the department s business plan Sufficient funding exists Program Budgets Outside the General Fund: It is the department head s responsibility to ensure that the proposed use of program funds is consistent with the available financing and legal restrictions on funds, the department s business plan, and the County s strategic priorities; and has been coordinated with the appropriate stakeholder groups external to the County. In context of these policies and guidelines, departments prepared current year projections of expenses and revenues and requests for the next fiscal year. The CEO/County Budget Office reviewed the requests, met and discussed the requests with the department, and prepared final recommendations for the Board. These recommendations are presented to the public and Board of Supervisors during public budget hearings. Operating and capital budgets are prepared in this single process and presented together in this budget book. Preceding the budget program sections, the following charts and schedules are provided as an overview of the budget: 1. Total County Revenue Budget 2. Total County Financing 3. Total County Revenues by Source 4. Total County Appropriations by Program 5. General Fund Sources & Uses of Funds 6. General Fund Appropriations by Program 7. General Purpose Revenue 8. General Fund Net County Cost by Program 9. Public Safety Sales Tax 10. Health & Welfare Realignment (1991) 11. Total County Budget Comparison by Agency/ Department 12. Provision for Obligated Fund Balances, Reserves & Designations Summary 13. Position Summary 14. Summary of Net County Costs 15. County of Orange Organization Chart HIGHLIGHTS OF THE FY RECOMMENDED BUDGET Total Budget: Total County Base Budget is $5.4 billion, a 1% increase from the prior year adopted budget. * Total budgeted positions are 17,719, an increase of 91 positions from the prior year adopted budget. 22 County of Orange

11 Specific Program Highlights: Total General Fund Budget is $3.0 billion, a 3.0% increase from the prior year adopted budget. General Purpose Revenues are $661.8 million, consistent with the Auditor-Controller s Second Available Financing estimate, and $34.8 million more than the current year-end estimate of $627.0 million. Specific Program Highlights: This section provides highlights of the base budgets and recommended augmentations for the County budget programs and departments. Due to increases in costs which continue to outpace growth in sources, some Departments have proposed reductions which are included in the current year recommended budget. Departments have worked diligently to manage their budgets to consistently maintain programs and minimize impacts on services. Public Protection District Attorney The District Attorney submitted $8.9 million in proposed reductions with a maximum potential of 74 positions to be reduced. The recommended restoration of $6.7 million and all positions is required to support core staffing for effective prosecution services. The remaining $2.2 million will be derived from vacant position savings. In addition, three Welfare Fraud Investigator positions are being added to the budget, offset by revenue from the Social Services Agency, for In-Home Supportive Services fraud investigations. Probation Probation submitted $1.9 million in proposed reductions with a maximum impact of 20 position reductions. Full restoration of the funding and positions is recommended for approval. Public Defender Public Defender submitted $6.4 million in proposed reductions with a maximum potential impact on 58 positions. Full restoration of the funding and positions is recommended. Contingent upon Board approval of implementation of Laura s Law, an additional $475 thousand and four new positions are recommended to support the program. Sheriff-Coroner Due to increases in expenditures and County funding limitations, the Sheriff-Coroner submitted $32 million in proposed reductions with a potential maximum impact on 164 positions. All positions and $22 million in funding are recommended for restoration. The Sheriff-Coroner and County Executive Office will work closely throughout the fiscal year to manage the $10 million funding gap to ensure no impacts on public safety or staffing. Community Services OC Community Resources OC Community Resources is requesting, and the CEO recommends, an additional $4.2 million to develop and operate two year-round emergency shelters. This recommendation is consistent with the County s ten-year plan to end homelessness. Social Services Agency The recommended budget includes a request of $6.9 million for the General Relief program, which is not recommended at this time. Caseloads will be monitored throughout the fiscal year to determine if a mid-year adjustment for funding is required. Infrastructure and Environmental Resources OC Waste & Recycling (OCWR) The recommended budget includes the ability to borrow up to $3 million from OCWR to fund costs associated with the James A. Musick jail expansion. All borrowed funds will be repaid within three years and upon receipt of reimbursement from the State. General Government Assessor The recommended base budget for the Assessor includes a $6.2 million reduction in appropriations to meet the Net County Cost limit of which $4.4 million is recommended for restoration. CEO Budget will work with the Assessor to develop an action plan for living within the restoration amount without negatively impacting the Assessment Rolls. County of Orange 23

12 Debt Auditor-Controller The Auditor-Controller is requesting restoration of $964 thousand including funding for nine vacant positions. Funding of $482 thousand is recommended for restoration, which will allow the department to fill approximately half of the vacant positions. Funding of the remaining amount will be re-evaluated during the County s 2014 Strategic Financial Planning process in preparation for development of the FY Budget. County Counsel Contingent upon Board approval of implementation of Laura s Law, an additional $193 thousand and one new position are recommended to support the program. An additional $1 million is recommended for the cost of outside legal services. Registrar of Voters One-time service level expansion of $5.5 million is recommended for the June 2014 Primary Election. Treasurer-Tax Collector The recommended base budget includes an $849 thousand reduction in appropriations to meet the Net County Cost limit. Restoration of $424 thousand is recommended. Funding of the remaining amount will be re-evaluated during the County s 2014 Strategic Financial Planning process in preparation for development of the FY Budget. Debt The adopted budget funds all debt obligation payments. Budgets displayed in Program VI include amounts for annual payments on the County s refunded debt financing of the Juvenile Justice Center, Manchester parking facilities, and debt financing of infrastructure improvements in the County s Assessment Districts, and Community Facilities Districts. Although the County s former 1996 and 1997 Pension Obligation Bonds were economically defeased, this budget reflects the payments made by the trustee from escrow. This program also includes the debt associated with the County s Teeter program. Debt related to the specific operations of John Wayne Airport is included in Program III where the operational budgets for those operations are also found. Based on the County s Strategic Financial Plan and at current funding levels, the County is able to fulfill these debt obligations and sustain current and future services and operations. Cash Flow Management The County did not issue Tax and Revenue Anticipation Notes (TRANs) in FY and will continue to monitor cash flow needs in FY The County issued short term taxable Pension Obligation Bonds to prepay, at a discount, a portion of the County s pension obligation. The bonds were issued on January 14, 2014 in the amount of $325 million at rates ranging from 0.65% to 0.83%. IV. SUMMARY This budget serves as a realistic plan of resources available to carry out the County s core businesses and priorities. It is consistent with the County s mission statement, the Strategic Financial Plan and departmental business plans. It follows the CEO budget policy guidelines, meets some of the departmental augmentation requests, incorporates impacts of the State budget proposals as known at this time, addresses important capital needs and provides adequate reserves. V. NEXT STEPS Public Budget Hearings will be held on June 10, 2014, with final Budget Adoption scheduled on June 24, The new fiscal year begins on July 1, During the fiscal year, the CEO will present the Board with quarterly budget status reports and recommend appropriate changes as needed, including changes which may arise from final County fund balances, final State budget impacts, new legislation, new grants awards, and other circumstances or conditions that may affect the budget. Please see the following page for contacts regarding information in this report: 24 County of Orange

13 COUNTY EXECUTIVE OFFICE: * CONTACTS REGARDING INFORMATION IN THIS REPORT: COUNTY EXECUTIVE OFFICE: Michael B. Giancola, County Executive Officer Frank Kim, Chief Financial Officer COUNTY BUDGET OFFICE: Michelle Aguirre, County Budget Director Budget Planning and Coordination Mitch Tevlin, Manager Kathleen Long Gina Dulong Craig Fowler Darlene Schnoor Mar Taloma Financial Planning Kathleen Long, Manager Public Protection & Community Services Vacant, Manager Kim Olgren-Potter Dana Schultz Infrastructure and Environmental Resources, General Government, Capital Projects and Debt Service Anil Kukreja, Manager Jaime Martinez Sheri Vukelich Theresa Stanberry This County budget document is available on-line at: INTRODUCTION County of Orange 25