TO: Board of Supervisors
FROM: Ryan J. Alsop, County Executive Officer
REPORT BY: Daniel Sanchez, Senior Management Analyst
SUBJECT: Strategic Financial Plan and Budget Policy
RECOMMENDATION
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Approve the Fiscal Year 2024-25 Strategic Financial Plan and Budget Policy. (No Fiscal Impact, Discretionary)
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BACKGROUND
As the FY2024-25 budget process begins, the CEO proposes revisions to the Strategic Financial Plan and Budget Policy that will guide staff in developing the FY2024-25 Recommended Budget. The proposed FY2024-25 budget policies build on prior budget policies, while being updated to reflect the current conditions of the organization. Staff will return in late February with the 5-Year Forecast.
Several substantive changes are proposed this year. Previously the Budget Policy and Strategic Financial Plan were separate documents. Both documents address fundamentally similar issues and consolidation better serves the users. The Strategic Financial Plan and Budget Policy also includes proposed changes:
1. General Reserves are currently 13% of appropriations in operating funds less transfers and is recommended to increase to 15% to reflect approximately two months’ operations per Government Finance Officers’ Association best practices for entities with stable revenues. Further, staff recommends deletion of Assignment for Fiscal Uncertainty at 10% and Appropriation for Contingency at 3% in all funds except internal service funds because the designations provide no operational or policy benefit. The CEO will recommend the Board retain available fund balance at budget adoption to access when operating needs occur during the year. The Board must take an action to appropriate available fund balance.
2. Recognize Excess Educational Revenue Augmentation Fund in year earned and discontinue treatment as one-time revenue. While the amount does fluctuate, historical data is available for estimation purposes, and the variance will be positive with conservative estimates.
3. General Fund transfers to the Health and Human Services Agency, Roads, and Fire special revenue operating funds methodology will provide for a minimum amount equal to the prior year’s contribution and remove references to specific amounts and formulas. Fire Fund is an addition to this section of the policy to recognize its dependency on the General Fund.
4. General Fund transfers of excess one-time revenues to Capital Reserves will be considered along with reducing liabilities, but not required.
The annual Strategic Financial Plan and Budget Policy works with the 5-Year Forecast to guide the annual Recommended Budget, as well as any mid-year budget adjustments. The Strategic Financial Plan and Budget Policy provides long-term strategies to allow the County to provide services through periods of economic uncertainty and provide consistent application of sound financial principles. The document primarily focuses on the General Fund and certain related operating funds. As a long-term plan, the Strategic Financial Plan and Budget Policy does not attempt to lay out a detailed blueprint for every scenario. It guides the organization to maintain financial stability while continuing essential services and meeting the Board’s priorities and has been updated to reflect current market conditions.
The annual 5-Year Forecast will provide the Board with an overview of the General Fund discretionary revenue outlook. The Forecast is based on continuing the existing level of service and known variables. The amounts provided in the 5-Year Forecast are high-level assumptions and are intended to reflect general trends.
The Strategic Financial Plan and Budget Policy is adopted by the Board annually at the beginning of the budget cycle and provide specific direction to staff in developing the Recommended Budget for the coming fiscal year. It provides enough detail to allow staff to adjust the expenditures in the Recommended Budget to the resources that are projected to be available.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
No |
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Is it currently budgeted? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
The Strategic Financial Plan and Budget Policy guides staff to develop the annual Recommended Budget for the upcoming fiscal year. |
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Is the general fund affected? |
No |
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Future fiscal impact: |
All appropriations will be presented in future budget actions. |
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Consequences if not approved: |
The current Strategic Financial Plan and Budget Policy remain in effect. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.