CAO Unveils Plan to Fix Budget Crisis

The county must set aside all of this year’s tobacco settlement money, continue a freeze on hiring and put all new programs on hold if it hopes to get its financial house in order, the county’s new chief administrative officer said Friday.

The belt-tightening plan unveiled by Harry Hufford in preparation for next week’s midyear budget workshop was designed to address systemic financial problems created by a disastrous health agency merger, as well as questionable, long-term budget practices such as failing to budget pay raises for county employees.

“There is more hard work ahead,” Hufford said. “There is still the issue of funding next year’s budget and the issue of department heads who are spending beyond their budgets.”

The good news, Hufford said, is that if his plan is followed, the county could eliminate its $5-million budget deficit and solve the financial crisis revealed two months ago when the previous county administrator quit after only four days, saying Ventura County’s finances were a mess.

Hufford’s first sweeping recommendations on how to bring stability to the county’s $1-billion budget come six weeks after he was brought on board to replace David Baker. Reaction to Hufford’s plan was mixed. Supervisors Kathy Long and John Flynn said they supported his recommendations.

“I think it’s a very cautious and conservative position and I support him,” said Long, chairwoman of the Board of Supervisors. “He’s doing what we hired him for.”

But Supervisor Frank Schillo said Hufford took the easy way out in looking at the tobacco dollars as the primary bailout.

“I’m really disappointed with this proposal,” he said. “This tobacco money should not be used for taking care of our financial problems. It should be used to provide new services for the mentally ill and for the [county’s public] hospital.”

Supervisors Susan Lacey and Judy Mikels could not be reached, but both have indicated previously that they would be willing to use at least of portion of the tobacco dollars to bail the county out of its current financial squeeze.

Supervisors already have voted to use $3.1 million of this year’s $10.6 million in tobacco dollars to pay the first installment of a $15.3-million federal lawsuit settlement. Hufford is recommending the remainder, $7.5 million, be earmarked for the general fund to offset other unanticipated expenses.

Meanwhile, the hiring freeze instituted by Hufford last month, as well as a halt on new spending, has saved $3.9 million. Applying the $7.5 million in tobacco dollars, and the higher-than-expected revenue from other areas, would leave the county with a healthy $11.4-million fund balance in June, Hufford said.

If the board follows Hufford’s advice when it meets Tuesday, it will mean putting on hold a wish list of new projects, including Schillo’s $4-million plan to build more supervised housing and a psychiatric residency program for mentally ill county residents.

Advocates for the mentally ill cheered Schillo’s plan--after years of complaints that their loved ones lacked sufficient housing and other services.

Hufford said if supervisors ignore his advice they will eat away at the county’s general fund balance, the safety net the board carries over into each new budget year.

Even with Hufford’s plan, the fund balance going into the 2000-01 budget year in July would be short of the $15 million the board budgeted for this year.

Hufford said if supervisors are bent on spending the tobacco dollars, their only other option is to order at least $7.5 million in cuts to existing programs, a move Schillo indicated he would prefer but one Hufford warned could severely impair services to county residents.

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Much of the county’s financial difficulties are related to unanticipated costs in the Health Care Agency. In addition to a costly federal Medicare lawsuit over billing practices, the health agency overran its administrative budget by $814,000.

The county’s public hospital, administered by Health Care Agency Director Pierre Durand, is projecting a $2.5-million budget overrun.

Many of those costs stem from audits and reviews of the county’s health department by state and federal agencies following an April 1998 decision to merge the county’s mental health and social services departments. County officials say the merger, which was later rescinded, was intended to improve services to the mentally ill.

But the merger debacle is not the only reason the county needs to rein in spending, Hufford said. The county’s informal policy of not budgeting for pay raises makes it difficult to estimate actual expenses in any given year, he said.

The district attorney’s office, for instance, is expected to be $566,000 over budget at year’s end, primarily because of hefty pay raises granted to prosecutors last year. And a portion of the Health Care Agency’s administrative overrun is due to pay raises that were not budgeted, Hufford said.

Other departments projected to outspend their budgets are the Human Service Agency’s foster care program and the public defender’s office.

Long said she intends to continue Hufford’s conservative course into the next budget year if necessary, even if it means deeper departmental cuts.

Flynn, on the other hand, wants to begin expanding services for the mentally ill as soon as the new budget year begins July 1. In the interim, he said, supervisors should go forward with planning such projects.

The Oxnard supervisor said he is confident the county can afford such spending in the next budget year because property values--and therefore tax revenue--will very likely increase. He is also confident the state Legislature will begin refunding property tax dollars it has diverted from counties since 1992.

“Harry’s a numbers guy who says, ‘This is what’s on the table,’ ” Flynn said. “I’m a political guy who says, ‘This is what’s going to happen.’ I support Harry but we have an absolute moral imperative to provide housing for people with brain disorders.”

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The payouts to local governments from the state’s settlement against the tobacco industry can be used to cover virtually any aspect of governmental operations. But because the settlement was designed to help governments recoup the cost of caring for sick smokers, many politicians have felt that at least a portion of the settlement dollars should be used for health care.

Still, some nearby governments have found other needs must take priority.

Earlier this week, Los Angeles Mayor Richard Riordan advocated setting aside the entire $300 million the city is to receive to cover lawsuits anticipated from the unfolding Rampart Division police scandal, the worst corruption scandal in the city’s history.

In comparison, the $7.5 million Hufford wants to use represents only one year’s installment of the county’s settlement. The county is expected to receive an average of $9 million annually over 25 years.

’ There is more hard work ahead. There is still the issue of funding next year’s budget and the issue of departments... beyond their budgets.’