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   County of Contra
Costa FISCAL OUTLOOK(Auditor-Controllers
Perspective) December 5, 2005Presentation
to the Board of Supervisors Finance Committee
by Stephen J. Ybarra, Contra Costa County
Auditor-Controller  
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Fiscal Outlook

• The Countys Budget
• Unreserved Fund Balance
• The Great GASBY (43 45)

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The Budget

• General fund expenditures have exceeded revenues
  since FY 2002-03.
• The budget gap has primarily been filled by
  spending available fund balance.
• Fiscal Year Spent Fund Balance
• 2002-03 20,399,000 2003-04 11,827,0
  00
• 2004-05 19,687,000
• 2005-06 20,003,000
• projected

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Recent General Fund Budgets
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Structural Deficit How did we get here?

• The structural deficit largely is attributed to
  the following
• Increased costs for retirement, salaries, and
  health care.
• CCCERA retiree health care and COLA subventions
  to the general fund stopped mid FY 2002-03.

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Effect of CCCERA Subventions on General Fund
Unreserved Fund Balance
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Unreserved Fund Balance

• The Government Finance Officers Association
  (GFOA) formally recommends that the minimum level
  of unreserved fund balance in the general fund be
  no less than 5 to 15 percent of general fund
  revenue.
• The County is consuming fund balance at a rate of
  20 million per year. At this rate, the general
  fund balance will be zero by the end of FY
  2007-08.
• The Countys amount of unreserved fund balance in
  the general fund should be large enough to serve
  as a cushion against unanticipated budgetary
  shortfalls, disasters, and other contingencies.
• The Bond Rating agencies recommend adopting a
  formal minimum level of unreserved fund balance
  in the general fund.

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The Importance of Unreserved Fund Balance

• It is a mistake to place undue emphasis on the
  level of unreserved fund balance at any given
  moment. What is really important is the pattern
  of unreserved fund balance over time (e.g., ten
  years).
• Is fund balance normally in excess of minimum
  levels?
• How rapidly has unreserved fund balance been
  replenished in the wake of events requiring its
  use?

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County General Fund Unreserved Fund Balance
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GASB 43 45

• GASB 43 45 Other Post Employment Benefits
  (effective FY 2007-08)
• Requires that the annual retiree health care
  costs beyond pay as you go be recorded as a
  long-term liability in the Comprehensive Annual
  Financial Report (CAFR).
• An agency may choose to fund (i.e., set aside
  assets) or not to fund this liability.
• GASB does not require funding, but not funding
  could impact the Countys credit rating.
• Will have no impact on the on-going budget if the
  County chooses not to fund however, rising
  health care costs will continue to impact the
  budget if no changes are made.

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Recommendations

• Adopt a budget that is BALANCED Expenditures
  Revenues
• Adopt the Office of the County Administrators
  proposed policy for a formal minimum level of
  unreserved fund balance.
• Adopt the recommendations provided by the County
  Administrator, Treasurer, Auditor-Controller, and
  outside consultant(s) regarding the
  implementation of GASB 43 45.