County FY 24-25 Mid-year review looks good and may improve

At its Feb. 28 meeting, the Riverside County Board of Supervisors reviewed the status of its current Fiscal Year 2024-25 budget.

At the middle of the fiscal year (which started July 1), the County Executive Officer, Jeff Van Wagenen, reported, “Overall discretionary revenue was increasing, as of now the contingency is holding, and the bottom-line number, year-end reserves are increasing.”

Projections of additional revenue have improved after both quarterly reviews. The revenue estimate grew $46 million at the end of the 1^(st) Quarter and another $36 million after the 2^(nd) Quarter to the current estimate of $1,299.7 million.

The largest projected growth of revenue continues to be the County’s property tax collections. This quarter the estimated increase is $18.5 million or 3 percent.

Interest earnings are also expected to grow by $18 million through the end of June.

“However, it’s important to note that the interest earnings increase may not be sustainable, could be a one-time uptick, and not likely to maintain the same trajectory in the coming year,” cautioned the Executive Office report to the Board.

One disappointing trend is the estimate for the Proposition 172 sales tax revenue. These funds are earmarked for public safety programs. This is the second quarterly review which forecasts lower collections. In June, when this budget was adopted, the estimate revenue for this purpose was $302.6 million, In November, the County projected the end of year total would fall $5.4 million. In the Mid-Year Review, the new estimate is $293.4 million, a decline of an additional $3.8 million.

But total reserves are forecast to be $731 million when the fiscal year ends, this is about $33 greater than the original estimate in June 2024.

“This is more than three times higher than when I started, but it’s not enough,” Van Wagenen told the Board. “We set a goal of two months of General Fund operating expenses, which is $775 million.”

In June, when the Board initially approved the FY 24-25 budget, it included $5 million for the contingency fund. With the growth in revenues since then, the current contingency fund allocation is $20 million. After approving some funding adjustments, the contingency balance is $17.9 million.

Van Wagenen informed the Board that he expects to request additional funding for several existing programs. The largest increase will be $1.5 million for the County Integrated System Delivery program, or RivCoONE.

He also mentioned that the Emergency Management Department may be requesting $450,000 for a matching contribution for the Mountain Top warning system. Van Wagenen was anticipating approval of a federal grant, which will likely require the County to match the federal grant funding. If a grant is awarded. EMD will bring a funding request to the Board.

In addition, he reported that the additional revenue allows the Board to add $250,000 to each supervisor’s unincorporated communities’ initiative fund.

This was roundly supported. “I’ve been looking at ways that we can invest more in our unincorporated communities,” said Supervisor Yxstian Gutierrez, 5^(th) District. “They are 20 percent of the County, and in some districts, they are more than 20 percent. As I have been going to Town Hall and HOA [Home Owner Association] meetings, I hear the frustration of people in these unincorporated communities.”

While the current County financial status remains good and gradually improving, the CEO advised the Board that future expenses are likely to begin increasing for several reasons: escalating costs related to maintaining service levels, the cost of new labor agreements with County employee organizations, and an eventual need to invest in repairing or replacing aging facilities.

While revenue sources, which the County has some control over, such as property taxes and interest, appear steady over the next few years, the future revenue from federal and state sources is uncertain and may begin to be reduced.

“. . . while we are seeing steady growth in discretionary revenue, we must remain vigilant in managing costs, adapting to external economic conditions, and addressing ongoing fiscal pressures as we continue to navigate a challenging financial environment,” the CEO warned the Board.

The 3^(rd) Quarter financial review of the FY 2024-25 budget is expected in late May and the proposed FY2025-26 budget will be presented in June.