Afternoon, everyone.

It's a little after four o'clock, Monday, May 18th.

I'd like to call to order the Board of Supervisors of Alameda County budget work group meeting.

Would the clerk please call the role to establish our quorum?

Certainly, thank you, President Halbert.

Present.

Thank you.

Taylor Aston Nielsen, present.

Anika Chattery.

Marcus Crawley.

Ursula Jones Dixon.

Excused.

Andrea Ford.

Present.

Brian Ford.

Present.

Donald Frazier.

Excused.

Jennifer Chan.

Beth Hodis.

Excused.

Susan Merritt Nietzsche.

Andy Martinez Patterson.

Excused.

Fred Sahaqan.

Sorry for mispronounce your name.

Fred.

Excused.

Yasinia Sanchez.

Excused.

Keith Snowdegrass.

Excuse.

Lena Tam.

Present.

Present.

Melissa Wilk.

Daniel Waldensbet Woldens and Bett.

Present.

Okay.

President.

Thank you.

And Alvaro Fuentes.

Present.

We have a quorum.

President Howard.

Thank you very much.

I'd like to welcome members of the public who are participating either in person or online.

Your participation is greatly appreciated.

Thank you.

If you are in person, would like to comment on items two or three.

Please fill out a speaker slip.

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Thank you.

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Thank you.

Thank you very much.

Our first item is welcome introductions.

I know this is our second uh budget work group.

Third is already our third.

We all know each other, so I'll just say welcome and uh move on to the second item, which is economic and state budget outlook.

I'll ask our uh county administrator to introduce this item.

Thank you, uh President Halbert.

So we will be presenting an update on the economic landscape, and Melanie Atendito from my office will present.

Um we will then be followed with an update on the governor's May revision, and we're fortunate to have Amy Costa from Full Moon Strategies, who represents us in Sacramento here with us today to share her perspectives from Sacramento and then Amy Schrago from my office will present a further update on federal and state uh impacts, and then we'll wrap up with another overview of our budget going into next year and the status of our current budget balancing efforts.

Thank you, Susan.

Well, we're getting the uh deck up, as the county administrator noted, um, we will start with a brief overview as we typically do of our economic updates, and then we'll pause and have our our guest speaker share uh state and federal updates to be followed by um updates uh locally as well as uh the budget update.

Um, so moving ahead to the economic context.

The unemployment rate locally is 4.5% compared to the state's 5.4% and the nation's 4.4%.

So as you can see, we're still above the historic lows that we experienced pre-pandemic.

And then I'll talk a little bit more about unemployment on the next couple of slides as well.

So last week at East Bay EDA's State of the East Bay events, this snapshot was shared of employment growth in the East Bay over the last 10 years.

So what's interesting to note here is you can see that the national trend looks quite different.

You can see that employment growth continued across the nation after 2020, but that stalled in the Bay Area and is especially slow in the East Bay.

You can see that the percentage growth there is the lowest for the East Bay at 3%.

And this slide should look familiar.

We presented a similar version in the past.

So we're continuing to see tech companies scale back after years of rapid growth during the pandemic as investments shift towards AI and automation and away from personnel, leaving tens of thousands of workers searching for limited opportunities and an increasingly competitive job market.

Most recently, Cisco announced another round of layoffs last week after reporting record revenue.

So this is just the latest in tech companies shifting more of its investments towards AI and away from personnel.

This next slide is also from JL JL, which presented the employment growth nationally and locally as well last week.

So this illustrates tech's case shaped expansion.

As you can see here, the average annual wages in tech have increased 25% between 2023 and 2024, while the total number of tech workers is down 6% over the same period.

And then as we always do, taking a look at real estate trends within our county, this is our most important local economic indicator and source of discretionary revenue.

According to the state association association of realtors in March, the median price in the county is 1.36 million, which is a 4% increase from February and down slightly from a year ago.

March home sales are up 32% compared to a month prior and down about 4% from a year ago.

And the rate of unsold inventory is down month to month and down 19% compared to a year ago.

Median time on the market is essentially unchanged for the month of March and up about 4% from a year ago.

And this next slide is just a reminder of the pressure environment for counties.

Counties face various pressures, sometimes competing with one another, often with limited resources.

So here you can just see some of the financial and policy pressures that counties face, including our own.

Some of the financial pressures include rising costs with increased service demands and unfunded mandates.

Policy pressures include changing federal priorities and limited ability to raise revenue.

As we always point out, roughly two-thirds of our counties' general fund budget comes from state and federal sources.

Thank you.

Good afternoon.

As noted, I'm Amy Costa, and I very proudly represent Alameda County before the legislature and the governor on all matters Sacramento.

Last week started kind of the official beginning of our budget season in Sacramento, where the May revision was released with updated revenue, caseload numbers, and so it's it's much more accurate than what we see in the governor's proposal in January and gives a much better sense of where we might ultimately land when the budget is negotiated and enacted.

The constitutional deadline for the budget is June 15th, although frequently what we've seen in recent years is it's more likely to be enacted closer to July 1, the start of the fiscal year for the state.

Oh, it's a PDF, so I don't know if I think it's a PDF, so you may have to scroll through the images if that works.

Great.

We use Google, and the county I know uses PowerPoint.

So hopefully the clerk can help with my slides.

In the interest of time, I'll start while they pull up the visual.

I know there have been a lot of conversations in the Powell committee about revenues and whether or not revenues would be part of the picture.

We did see in the Senate's proposal, they did propose a revenue, and we actually see in the governor's may revise a couple of different revenue proposals that he's including.

And I highlight that because of course they require two-thirds vote, and in an election year, we don't really know whether or not they will ultimately be dispensed with in the budget act.

One of them is actually an extension of an existing tax.

It is a limitation on net operating loss that the governor is proposing be extended and slightly tweaked.

And it would allow businesses to choose the greater of $5 million or 50% of their tax liability.

And they are estimating that that change would garner about $850 million in the budget year for the state.

The other one that's gotten a lot of press that you may have read about over the weekend is the digital software taxation, and that would be to tax software, whether it's physical or even subscription, which would be different for the state of California, and that would garner about 450 million dollars initially.

And then lastly, and there's been a lot of debate about the managed care organization tax, mostly because it was changed pretty dramatically by the feds.

Can we go to the next visual?

I know Melanie talked about the economic outlook, and obviously the Department of Finance puts one out in addition with the budget.

And there's a lot of headwinds on the Department of Finance notes there's weaker growth for both USA and California.

Long term, the big question mark is AI and its viability and what that will mean to both the stock market stock market as well as job growth, and what those gains may look like.

And then, of course, there's many risks, as we know.

There's potential geopolitical pressures, we have the war in Iran, continued uncertainty about federal federal policy, immigration policies, and energy prices and inflation.

One of the things that's notable in the administration's proposal is that the revenue surges we're seeing, because we are seeing about 16.5 billion above in revenues compared to January, which is significant, have only happened three other times.

The dot com boom, the real estate bubble in the mid-2000s, and then the surge we saw after COVID-19.

The administration's forecast assumes a moderation in stock market growth versus a correction.

And the reason I point that out is because in every single one of those other economic kind of surges, we did see significant stock market corrections.

And so to the degree that we see a stock market correction in budget year or beyond, it will actually increase the gap that the state has to fill.

Next image.

They are proposing a $15.1 billion in that reserve fund.

They're also proposing a little over 10 billion in the Prop 98.

This is the K-14 funding mechanism reserve.

And then the State Fund for Economic Uncertainties.

This is kind of the balance of the state's checkbook.

This is the reserve fund that's used when there are disasters or other unforeseen issues, and they are picking that at 4.5 billion.

So across the major reserve accounts, the state, the governor's May revision proposal puts about close to 30 billion dollars across those reserve accounts, given kind of some of the economic uncertainty I mentioned.

This is a bit of an eye chart, but I love this.

This is the Department of Finance's multi-year forecast.

As you know, they often look at things across three years, and you can see in 26, 27, 27, 28, 28, 29, 29, 30, we have negatives.

We're still in a situation where expenditures are outpacing the revenues.

And in this budget year, you know, he's putting spending at about 350 billion, of which 247 billion is general fund, which is a bit of a reduction from the January budget, but you can still see that the out years don't look great for the state.

And as I'm sure you've talked about, clearly in budget year plus one, a lot more of the HR one impacts take effect.

And so those are gonna on the natural increase the state's exposure to those increased expenditures.

Next slide.

So this is where I kind of show some of the HR one impacts in budget year.

Um these will grow in budget year plus one.

Right now, in the May revise, the administration is uh projecting about a 1.5 billion dollar increase in state costs associated with the policy changes in HR1.

They are estimating that the Medi-Cal enrollment will be about 44,000 disenrollments in budget year.

They are projecting that that figure will grow to 1.1 million individuals by 2029-30.

Um, and then of course, um there are a lot of new administrative things that both the county and the state will have to deal with, including redetermination requirements and other programmatic changes.

There are a lot of changes proposed in May revised for the Medi-Calm.

This has been one of the the bigger topics of debate in Sacramento, and obviously it is one of it is the largest and most growing program in all of the state is Medi-Cal.

Right now at May Revise, they're projecting the budget of uh 21.

Excuse me, 206.7 billion all funds.

Um their caseload projections are 13.9 million, about a third of California's population.

Um, they do have a couple of proposals for efficiencies within the program, which they are picking will result in about a $68 million dollar savings in budget year.

Um, and then there is also a proposal uh for uh immigration transition to restricted scope Medi-Cal being now set for uh July 1st, 2027, which is a nine-month delay from what they proposed at governor's budget.

And this population will shift for fee for service system effective January 1st, 2027.

The other big change, and this is a policy change that just happened a couple of years ago, is the asset test for Medi-Cal participants.

And so they are generating some general fund savings from changing that back to the way that it was.

Again, they're projecting the total cost of that program at $33.7 billion.

And there are some conforming changes that we just talked about in Medi-Cal, along with the asset test, as well as the delayed transition for restricted scope Medi-Cal non-citizens, and then they score the associated savings with those alignments.

CalFresh, another program that policymakers have talked about frequently given the big changes proposed under HR1.

They're projecting the total funding at $3.7 billion, direct benefits at $11.6 billion.

They're projecting 3 million households in the caseload, and they are proposing $30 million for county administrative costs.

I would note they also have included a three, $30 million one-time increase to food banks.

CalWorks, they are proposing the total expenditures at $9.4 billion.

They have the caseload at close to $345,000.

And they are proposing a $1.8% increase to assistance levels, which would be effective in October.

The next slide is a helpful chart that the urban counties put together.

I know many folks are engaged with their professional organizations, including CSAC, and the counties had some significant asks after the governor's budget to help defray some of the HR one and increased cost for counties.

And this is a nice chart that kind of shows you that really we didn't get much of what we requested in the May revise.

We had obviously some requests in for our eligibility work and some of the programs, which will be increased, given the workload associated.

Public hospitals obviously have been an area of concern because of these changes.

Indigent care, each of those received no new funding.

And then as I noticed, CalFresh, you know, the ask was for 103 million dollars for admin costs and they provided 30.

Behavioral health, there was a request there as well, and also received no funding.

So you can see, you know, in budget year, which is kind of the less of these requests, you know, we requested 1.9 billion kind of as part of the county family, and ultimately you could the governor is proposing about 104 million general funds and not nearly kind of what counties had put forward.

And you can see to the right, there is the out-year ask for budget year plus one, where some of these HR1 costs become even more intense for counties as well as for those on the caseloads.

Next.

There were a couple of proposals regarding housing and homelessness as well.

In the May revise, they are proposing 1.5 billion dollars in Ha hat funding.

That includes 1 billion for round six and a 500 million for round seven.

They've released some language around accountability around HAHAP that has to do with you know local housing elements and things that the governor has long talked about.

They're also including 6.2 million in annual funding for Caltrans specifically as encampment liaisons.

They also have some more cost efficiencies in affordable housing that they're proposing.

And then I noticed also in proposition 98, they're proposing $30 million dollars to local education agencies, specifically for students who are struggling with homelessness.

In public safety, they are projecting that the Prop 47 savings in the budget year will be about 89.1 million total.

They are offering no money for proposition 36 implementation.

They are projecting that for community corrections performance incentive grant at about 132.2 million.

And then they also are including 25 million dollars in one-time funding for VOCA funding to backfill some of the federal losses in that program.

So the next milestones on the subcommittees in each house began meeting today.

They will continue to meet to hear all of these items by issue area.

As I said at the top of the presentation, the constitutional deadline for the legislature to pass the budget is June 15th.

And often it actually happens July 1, the beginning of the fiscal deadline, when we get kind of the grand deal put together between the administration and the legislature.

I would note I think revenues will be one of the issues that will be debated.

As I mentioned, the Senate had revenues in their plan, what's kind of called the Walmart tax.

It would be a tax on corporations that have many of their employees enrolled in safety net programs.

The governor has several revenue measures, and the assembly has none.

And in the assembly's narrative, they really said they did not want to increase revenue.

So I think that'll be one of the kind of architectural points that they're gonna have to decide between the three parties.

With that, I'm happy to turn it over to Amy Shrago unless there's any questions.

So let me just understand properly.

Yes, but I would note for the rainy day fund, they've used that over the last two years.

So that would be the balance in that particular account.

The other thing that's kind of unique that they're doing for the first time is they created what was known kind of as a holding account, and that was established in 2024.

They're actually proposing to put in, I think it's about 4.7 billion into that account to float it basically into next fiscal year.

At the same time, we know that people are going to suffer loss of insurance, our health safety network is going to suffer people and their families will suffer, but we're putting 20, 15, 25, 30 billion away in additional reserves, and I think CSAC's asking for 1.9 billion to support the safety net.

So is anybody talking about that?

Some would like to see the reserves greater.

And I would say one of them, the budget stabilization act or the rainy day fund, it's actually driven by constitution.

It's under Prop 2.

And so when you see these huge surges in revenue, they actually are by law required to put a certain amount in reserve.

And that really came out of the last time we had really bad budget years.

We did not have any reserves to speak of.

Um it was actually an assembly proposal at the time and went to voters.

I would note the governor did preview one proposal that is included here, speaking to the safety net, which is he's proposing 300 million ongoing, which is an increase of 110 million above the governor's budget in January, to provide for premium subsidies for those in the exchange.

Um and this would be specifically for enrollees that are up to 200% of the federal poverty level.

Um I think to your point about the CSAC proposal, clearly a concern is that the admin costs for counties in things like redetermination, able-bodied work requirements, it's simply not going to be sufficient what they're proposing based on the estimates because what CSAC put forward was really what they receive from all of the counties as our projected costs.

And so there's a huge delta between those two.

So while revenues are forecasted to increase constitutionally, a rating day fund has to be filled up.

But I think I heard you say that they've spent it down to zero until now.

So there's some mechanism for requiring to fill it up, but no mechanism to keep it so they can spend it down throughout the year.

Um, all driven by constitution.

And I think it's a 50% cap on what you can spend, but about two budget cycles ago, um, they pre-paid basically that they were gonna use the BSA in future budget years.

And so this marks the end of that kind of budget deal.

Um, and so you can see they're putting in um a little bit more.

I will say that as I said, in particular the assembly in their budget plan really emphasized uh building up those reserves, um, in part because we know that the impacts of HR1 are going to be even more pronounced in 27-28.

Um, and I think some of it is just people's risk tolerance.

You know, how comfortable do you feel that many of the revenues we are seeing are driven by cap gains and driven by AI stock market?

And um, you know, they do point out, I mean, there's a couple Bay Area companies, Anthropic, you know.

If if some of them have an IPO, it could completely change.

Um, but you know, we're also seeing a lot of stock market volatility of late.

I guess it's just unfortunate that at a time when we need it most, we were caught with zero and a constitution that requires us to add to it.

Okay.

I just needed to understand that better.

I didn't know about those.

Okay, thank you.

Next.

So um I have uh some federal budget and um then just uh um may revise, particularly as it impacts Alameda County.

Um so on the federal side, the House and Senate are in session this week.

Um, before going out on Memorial Day recess, they are continuing their reconciliation discussions.

Uh, they have a June 1st deadline imposed by the president, and so they are uh working towards meeting that.

Um, the reconciliation um uh framework is for 72 billion dollars in funding for immigration and customs enforcement and customs and border patrol uh to last through the remainder of President Trump's term.

That is an addition to the 75 billion dollars that they received in the one big beautiful bill act.

And it also there's an inclusion of a billion dollars for the secret service through um Department of Homeland Security for security infrastructure related to the president's ballroom project.

Um, so as you can tell, there are there's things in here that there are not bipartisan agreement about.

So it is unclear if they'll meet their June 1st deadline.

Um, and then uh yesterday the House um introduced the transportation um bipartisan transportation bill called the Building Unrivaled Infrastructure and Long Term Development for America's 250th Act to build America 250 Act.

It is the um bipartisan transportation surface transportation reauthorization bill.

Um so we will see what happens there.

They did work really hard to try to keep that as a bipartisan bill.

And just as a refresher, the surface transportation reauthorization is typically a five-year plan to fund the transportation infrastructure in our country.

So just a quick recap about the May revise, as Amy said, for counties, it is not particularly great.

We didn't get the things that we'd asked for.

It does reduce immediate risks for deeper cuts and does continue funding for some core programs.

And as it relates to Medi-Cal and Health Services, you know, we administer one of the largest Medi-Cal caseloads in the state.

And so both social services and health care will face major eligibility redetermination workload increases, both on the Medi-Cal side, and then for folks that fall off Medi-Cal on the indigenous side.

And so the resources we need for the applications, renewals, you know, customer service type work are not at the level that we need.

And so we anticipate, you know, increased in our uninsured population, higher demand for indigenous care services, increased pressures on Alameda Health System and our other safety net hospitals, and an increased and uncompensated care for folks seeking uh seeking care without any coverages.

And so, you know, just to keep in mind that we see this not only in our own system, but then also in the Alameda Health System population.

There are also changes to immigration-related Medi-Cal and for us here, that could look like service disruptions for those populations and an increased increased pressure on our county systems as we um as we try to enroll those folks in our local Indigenous program.

And then as it relates to behavioral health, as Amy mentioned, um no resources in the May revise to mitigate the Prop One impacts, and so and just another increased county cost pressure, and then additional strain on behavioral health is people are unenrolled from Medi-Cal.

So at the same time that we are they're losing coverage on Medi-Cal programs are being changed as it relates to Prop One.

Um so that is also a challenge.

And then for homelessness and housing, um, just to as Amy mentioned that the dollars related to it, but for us, the um the part of the the new requirements are not a challenge for us.

We already put up local resources, unlike some other communities, but it is a challenge when the oversight requirements or the accountability requirements that they're calling them are such that we have you know exponentially more work to document what we're doing.

Um we're not opposed to accountability requirements at all, but the types of things that the state is putting in place can be burdensome to our system as trying to already deliver services at um uh, you know, with restricted resources.

And then as it relates to CalFresh, similar to Medi-Cal, while there is one-time funding for administering programs, it is not, uh it is not sufficient to meet the demand.

And um, you know, we anticipate like increased increased calls and visits to our offices and um increased need for food support from our community partners, and while there are some resources in the May revise, it's not enough to meet the demand.

And in IHSS, um, uh the the impacts to to that are something that I think we're still working through exactly what that's gonna look like, but there is going to be an increased administrative burden to the county um and a potential loss of eligibility for for some recipients.

On the good news front, there is as it relates to public safety and realignment.

Um, we the estimates are projecting moderate growth, and so that that is that's good news for us, and that is important because the realignment resources are for a wide range of programming from behavioral health, social services, public safety, probation, and juvenile justice.

And we're still seeing, you know, Prop 47 savings and to support our programming as it relates to Prop 47, and we deliver many programs through those resources.

And so on the public safety side, there is some good news aside from no resources being allocated for the implementation of Prop 36.

And just to recap, there are impacts and risks to this may revise.

We are going to see increased caseloads for health and human services, higher pressures on our safety net as people are being disenrolled from programs, and then continued responsibilities as it relates to homelessness on the reporting for the state with less resources.

And we will see you know more public health and behavioral health demands, while our fiscal contribution from both the state and the feds are being reduced.

Thank you.

Um I will just go quickly over the current year budget.

So the final the approved fiscal year 2526 budget recommends a balanced $6.1 billion in spending for county programs and services, general fund appropriations total $4.3 billion, which is an increase of $300 million from the fiscal 2425 approved budget.

The budget supports a workforce of nearly 10,500 full-time equivalent positions, which is an increase of nine FTE from the prior year approved budget.

When we look at budget balancing strategies for the current year, we have one-time strategies totaling 61 million and ongoing strategies totaling 45 million.

Every effort is made to pursue ongoing strategies as they address the structural funding gap, while one-time strategies become the starting point of the funding gap for the following year.

So in the current budget for the in the budget for the current year, you can see that state and federal aid is two-thirds of our financing of the general fund.

So turning now to the 26-27 MOE budget.

So the Board of Supervisors adopted maintenance of effort policy guide submissions that represent year-over-year baseline changes.

So some key aspects of the MOE policy are outlined here.

So they include known salary and benefit changes as well as operational and internal service fund adjustments, a 4% cost of living adjustment for eligible CBO contracts, approved mid-year adjustments by the board, as well as align with the board's adopted vision 2036.

Here we're looking at the program area, and we see appropriations have increased by 78 million or 2%, and revenues are flat with less than a $2 million increase.

So in total, there's a net county cost increase of 76 million or 8% from the current year.

So in general government appropriations are $348 million.

Public protection and public assistance are both over $1.1 billion each.

Health care is over $1.3 billion.

On the revenue side, we see general government revenue at just under 200 million, public protection at 560 million, public assistance at 1.1 billion, and health care at 1.3 billion.

So this brings the total net county cost for the entire program area to 1,045 million.

Here we have the net county cost change by program.

So compared to the current year, general government has an increase of 6 million or 4%.

Public protection, $56 million or $10%, public assistance $6 million, 8%, and health care at $9 million or 4%.

So some of the notable changes in the program area, we have reductions in both expenditures and revenues of 43 million related to the transition of MHSA to BHSA as a result of Prop 1 and public protection.

We have a decline in public safety, sales tax revenue of $33 million.

We have a loss of $20 million in CalFresh revenue, which also includes impacts of HR1.

There are revenues to the managed care plan, which are decreasing by 10 million because of payment restructuring, a projected increase of 12 million for election costs, IHSS is increasing by 18 million.

We have an increase of medical care financing for AHS and St.

Rose of 24 million, and then we have internal service fund increases of 33 million and a net salary and benefit increase of 41 million.

So here is some additional detail on the internal service fund adjustments.

So information and technology is decreasing by 3 million due to the completion of several projects.

Communications and radios has a significant increase to replace emergency communication radios.

Building and maintenance is increasing by 19 million.

We have an increase of 4 million in motor vehicle and an increase of 7 million for risk management.

Here is some of the detail on the salary and benefit adjustments.

So cost of living is increasing by 72 million, health and dental insurance by 10, and then we have workers' compensation increasing by 30 million.

We also have an overtime increase of 17 million.

So we're also seeing a savings of 93 million as a result of the prepayment of unfunded liabilities.

So together, that results in a net salary and benefit adjustment of 41 million.

So here's a few more details on some of those net program changes.

So we have a 4% board approved COLA, which results in an increase of $4 million.

We have $6 million in San Rita jail service contracts, $1.3 million in expert witness costs for both the district attorney and the public defender, a five million increase to indigent defense.

On the revenue side, there's an $8 million increase in realignment revenues, a $14 million increase related to election services, $1.5 billion for property transfer tax, $1 million decrease in recording fees, $4 million decrease in federal contract revenues and public protection, and an increase in half million from the public police protection CSA and a $1 million increase in unincorporated revenue.

Here we are looking at non-program.

So capital and major maintenance have a total appropriation of $125 million with revenue of $75 million for a net cost of $50 million, contingency and reserves is $137 million with revenue of $12 billion, and the net cost of $125.

Debt service is $54 million with revenue at $12 for a net cost of $38 million.

And non-program expenses and revenues are $68 million with revenues of $1.2 billion for a net cost of negative $1.2 billion.

Combined the net county cost of the non-program area is $954 million.

So now looking at that compared to the current year, we have capital and major maintenance increasing by $50 million, contingency and reserves by half a million, debt services decreasing by $8 million, and non-program expenses and revenue is decreasing by $27 million.

So on the non-program side, we have a net county cost increase of 15 million.

So here are some of the details on the 15 million dollar change.

So we have the, so we talked about the first three.

So moving on to the general liability and reserves.

Last year we made a one-time contribution to the general liability reserves of $75 million due to the increasing volume and cost of claims.

This year we're making a one-time contribution to the workers' compensation program.

And then on non-program financing, there's a loss of $61 million of one-time revenues and an increase of 11 million in interest increase of 14 million in property taxes and 9 million in motor vehicle ERAF.

5.5 million for indirect cost reimbursements and 6 million in other non-program revenues.

So together, this results in a funding gap of 91.4 million.

So here we can see the gaps we have closed in the county since the implementation of ERAF, which totals 2.7 billion.

What you'll see in the slide here is in red, we have a funding gap of 91.4 million, but as I mentioned previously, we are seeing significant savings in retirement, and without those savings, we would have had a gap of more than 180 million.

So turning now to budget balancing.

So this year, we are closing the preliminary funding gap by working with the county administrator's office, working with county agency and department heads through a combination of strategies, including reviewing all program revenues to identify additional ongoing adjustments, a review of program budgets to identify further cost reductions, reviewing vacant funded positions, other available departmental funds, non-program revenue expenses based on additional current data, and consider other current wide strategy county wide strategies to reduce the net counting cost and continuing to reduce the reliance on one-time strategies, including prior year savings.

This is where we are at currently.

So we again want to remind everyone we are looking to close a gap of 91.4 million.

And so far, we're uh we've identified about 50 million in strategies, so about 40 of that is related to additional revenue.

We're looking at cost reductions of three million.

We have ongoing salary and benefit adjustments of 10 million, and this also includes the deletion of vacant funded positions, and then we have other solutions totaling 1 million.

So here again, we list our pending factors that could impact the developing year.

So we have the county's labor negotiations and workforce challenges that can also significantly impact the long-term outlook.

We also know that there is pending litigation and settlements that are impacting our insurance costs in addition to the overall hardening of the insurance market.

We have the prospect of potential fraudal and state audit disallowances.

Um we also have unfunded capital needs, the implementation of state programs and policy changes, such as Prop One, and then there are also global finances and the impact of climate disasters, have the potential to do significant economic harm.

And then lastly, the potential of an economic downturn is always a concern given our heavy reliance on state and federal funding.

So we always have to keep in mind the goal to maintain our triple triple designation.

So this is the highest possible ratings from the three major rating agencies.

We'll also need to keep in mind the capital improvement plan.

We have over a billion of unfunded capital costs over the longer term horizon.

The board did adopt a long-range capital financing plan, including the establishment of a special capital construction fund.

We talked about most of these next steps already, including, you know, continuing to review and analyze the impact of the governors may revise.

In addition, we'll continue to consider technology solutions and other efficiency initiatives to streamline our operations.

As we always do, we'll continue to collaborate with labor community partners and unincorporated area residents to identify strategies to maintain a balanced budget and continue to provide critical services to our diverse communities.

We have presented to a couple of the municipal advisory councils already.

We'll have another presentation tonight with the Castro Valley Mac, in an effort to, as we had previously committed, increased budget transparency with our unincorporated area residents.

And then as we already talked about, we'll continue to work with agency and department heads to close uh the remaining structural funding gap through a combination of strategies.

And then lastly, we have a look at the remainder of our budget development timeline.

The presentation of the proposed budget is scheduled for Thursday, May 28th at noon.

We will uh formally open the budget hearings on June 18th and plan to uh continue the hearing to the week of June 22nd.

Thank you for that presentation.

I note that we have savings identified in buckets.

Could you go to that page of savings?

Right before that, yeah.

Next page.

I don't know.

This strategy is the other way.

No.

There, that one reductions.

So it would be helpful to just understand what that additional identified revenue is that sales tax increases that are higher than expected or what?

Ongoing cost reductions of 3.1.

What is what reductions?

Um salary and benefit adjustments.

Are we saying that we're going to cut salary or benefits by 10 million?

And I mean, just do we have a so this is actually a work in progress just to show you how we are tackling and closing the 91 billion dollar gap.

So right now we're about 60% of the way there, and obviously, there's a lot more detail related to this.

We're really this is focused primarily on the program area side.

We've been working with each of the department heads.

They're all working collaboratively with us to make contributions to help close the funding gap.

So I don't have the specifics in terms of all of the revenue, but it's a combination of you know, scrubbing our numbers again, looking at more at updated information to get better revenue estimates.

And so I think across all the program areas, there's been some improvement in revenues.

We're also looking at our property tax sales tax, unincorporated revenues, any revenue that we get.

We're doing updated projections to try to refine those estimates.

Same, you know, ongoing cost reductions is pretty minimal, three million dollars out of a six billion dollar budget, but you know, trying to, you know, turn over every rock and see what we can do to close the funding gap without having major program reductions or certainly um layoffs.

Um salary and benefit adjustments are largely um, as was mentioned.

There are um some bill, some unf some vacant funded positions that have been vacant for a very long time.

So we're looking at scrubbing some of those and reducing some positions.

So that's primarily what that would reflect as opposed to any change in um salaries or benefits.

Got it.

So nobody's salary is going down, but we're getting rid of vacant positions that have been vacant for a long time.

Positions.

Okay.

Thank you.

Any other questions from the group?

Supervisor Tim.

Yeah, thank you for the presentation.

I know you still have was it 46.1 million dollars left to try to fill reach the 91.4.

I have a couple questions.

What kind of feedback are you getting from the max on a presentation?

The presentations have been mostly informational in terms of updating them on the status of budget development.

We did hear some concerns at the most recent presentation about potential service impacts and stressed with uh this was at the Eden Mac meeting, stressed with that member of that.

In general, when we do look at budget balancing, we we historically have tried to avoid strategies, balancing strategies that involve any sort of service impacts.

We've always tried to prioritize um avoiding any impacts on our most vulnerable populations.

Okay.

Um I think what's troubling is uh the may revive is not going to help essentially is what I'm hearing.

And especially um even on the homeless front, we're not gonna get any relief because funding is going to be restricted to 500 million statewide next year.

So when I look at the um, you know, our historical gaps, this is the highest year in 33 years.

We had not had the uh pension savings, and every year we seem to be looking at the same strategies, whether we're looking at um vacant positions, and just like last year we had to fill 105 million dollar budget deficit.

So this year, the 40 million dollars in additional revenues, you said it was a combination of our sales tax, property tax, and other um programmatic revenues that come in through each of the departments.

So those are a multitude of revenue sources.

The actual amount that we have to date is not yet obviously complete.

We're still you know working on that analysis, but it includes both you know program revenue as well as our discretionary, but you know, just be mindful on the program side.

We know that our costs continue to increase.

We're not getting increases from the state and federal government to keep pace, you know, with our cost increases, and you know that our assessed valuation you know has gone down.

So we're seeing a flattening across all areas, certainly on the revenue side.

And so you're correct, supervisor.

I mean, we have a structural funding gap, and our goal has always been to um not reduce programs if possible, not cut positions, you know, not have layoffs, and so that's resulted in us using a multitude of strategies, including many that are one time, which we know are not recurring.

So when we talked about the current year budget, we use 60 million, 60 million dollars of one-time strategies.

So already we start with 16 with a 60 million dollar shortfall that we have to um fill in the the next year.

So I mean, we have a structural funding gap like many other jurisdictions have, and you know, we've been kind of whittling away at it.

If we want to eliminate that structural gap completely, it's gonna take more serious reductions.

Um, I I know we have a structural problem going forward.

It's just that um when I hear about what other neighboring counties are doing, like you know, Santa Clara County's budget is what 14 billion dollars.

And why are they having to look at laying off 435 positions?

Well they also have four hospitals that they manage um you know directly and um you know they have the same kind of structural issues that that we do.

And yet we've been more prudent in terms of I mean if you look at our growth over the years we haven't cut positions but we also have an increased staffing.

It's really remained relatively flat at this 10,000 we were maybe up to 12,000 full-time equivalents and we have you know pluses and minuses but the board's policy that we've adhered to is that we don't add in mid-year positions without identified funding.

And so if you look over the horizon our staffing the number of physicians has been very flat that doesn't mean our salaries haven't increased our benefits haven't increased our pension costs have increased and we can bring back some of those slides because we have some of that information.

I'm just not sure how you're gonna get another 46.1 million dollars in cuts.

Well we're working around the clock to do that and I'm looking across the table at some of our um department uh head partners as well and you know I think it really you know means and I think that you know they all know and they can speak for themselves I mean looking at some strategies some that we've looked at before some you know maybe new strategies that we're looking at and you know we're continuing to look at um you know our revenues all of our revenues as well but you know you're absolutely right it's not that it's not easy um and it also means that there's things that um both the board and department heads may want to invest in that we're just not able to if we want to balance the budget without major cuts and services but I will let them speak for themselves if they have other thoughts.

Well um is that an invitation for the department heads you put them on the spot if there are further comments and they indicate now or they can speak later because we're going to be scrubbing the um spectrum of efficiencies I think we talked about recently um I think we the biggest thing for me is to be very clear and transparent about priorities if something needs to be cut what goes first before other things that don't are important and I'll say that the least among us the um severely challenged mentally and physically the most vulnerable seniors foster youth and the like in my opinion need to be protected if there are things that we can gain efficiencies in I guess that's a better word than cut we have to find those uh efficiencies are different than cuts right it's not um cutting something it's finding a new way of doing it and getting the same result more efficiently so um that's what we have to do I look forward to you'll get it done by June 30th we always do closing the gap I guess I'm interested in the 40 million dollars in extra revenue you know I guess we'll see what that number is come June 30th.

Is the 40 million the progress we've made to date on revenues is that what you're doing yeah yeah yeah I mean that's just that's some of that is frankly just because when we did our initial estimates we were looking at six months of actual and now we have nine months.

You know, so in some cases things have improved.

I think there's areas where we were probably more conservative than we needed to be, or in some cases we're gonna be a little bit more, you know, aggressive.

I think certainly being you know prudent looking um longer term.

The other thing, you know, I'll just mention is that you know I think the county is very fortunate in that we have measure W.

That's not reflected in here, that's in a separate fund, you know, the discussions that are occurring around that, but that is actually supplemental general purpose funding that the county you know has access to, um, whether you want to use it to invest in new or expanded programs or to you know offset some of the budget challenges.

I think I heard that our estimates of measure W are even um further enhanced by an increase versus what we budgeted.

Is that right?

Correct.

Based on our receipts to date, yeah.

It's coming in um slightly higher than we had budgeted.

Yeah, okay.

I guess it's better to be conservative on your revenues because if they come in higher, that's a good thing.

Yeah, thank you.

Any other questions or comments?

Yes.

Thank you.

Um first I want to say that the roadshows have been amazing.

So that's a great addition to the community.

I think they've been really well received and people have appreciated the extra transparency.

So really excited to see how that develops.

Um sad to see the main revisions as well.

That's unfortunate.

I do have some follow-up questions.

So, first, seven positions is what I saw as a head count, which is pretty impressive.

I was curious with the proposed reductions, does that reduce those positions?

Maybe I'm seven or nine positions for head count.

I think you have listed, but then I noticed something like seven million for overtime.

And so I was just curious, in those overtime figures, sometimes that can be a head count.

Um, I assume that's been reviewed.

So I'd just be curious to know a little bit more about the overtime costs relative to the head count and if some, you know, massaging of that can be had for benefit.

Yeah, I think the uh thank you for the question.

I think the FTE increase you might be referring to is the increase between fiscal 24-25 and the current year approved budget.

Um so there's really no relationship between the proposed increases uh between last fiscal year and the current fiscal year to the positions that we're looking at that the county administrator referred to, really long-term vacancies that you know we're looking to either eliminate or apply some sort of salary savings factor to capture that savings.

Um, on the overtime question, really what we were trying to do in the uh maintenance of effort budget is really right size based on the history um and actual experience of um where we see the most significant overtime costs are tied to our 24-hour facilities.

So um Santa Rita jail as well as that the juvenile hall and um both the sheriff and probation have historically been under budgeted for overtime.

Overtime is actually uh just cheaper, frankly.

Um the cost of overtime staffing with overtime is cheaper than adding positions.

Um it's not something that you know we would ideally rely on, but from a financial standpoint, it is more cost effective on a per head count basis you're saying on individual.

Okay, thank you.

Again, thank you for the presentation.

More questions or comments.

Supervisor, I just wanted to Anika Choudray, uh, director for Alameda County Health.

Um, just kind of back to the the conversation about filling the the gap and and how we address that.

Um I just also want to acknowledge some of the challenge is that um so much of the funding that we uh administer at the county is um then put out through CBOs, right?

And so I think that's where there are some difficult conversations to be had um and some community wide priorities to to be set in terms of um you know just being realistic and and setting realistic expectations um because our as you're seeing in the measure w conversations, our CBOs are hurting.

Um there's that uh wonderful slide was up that sort of shows all of the different um pressures that are on the counties.

So at a time of increased demand for safety net services, that's also when our safety net providers need more support.

Um and at the same time, county revenues are going down, right?

And so just kind of trying to balance all of those things.

And um, you know, at health, we've been trying to be um honest with all of our partners that even in spaces where there's like bridge funding because the the board is interested in providing that.

Um we just really want to be cognizant of not setting up expectations that that funding is then going to continue, right?

So it's kind of thinking through some of the the timing.

And as you heard Amy Costa mention, you know, this particular year 2627 is going to be terrible, like not great, and 2728 is actually going to be worse.

Um, so to the extent that we can think about how we're sequencing support um would be really helpful.

So good point.

Thank you.

Does that complete the economic and state budget outlook?

It does it concludes our presentation.

Is there public comment either in the room or online for item number two?

Thank you, Chair.

We do have one speaker with their hand raised in Zoom.

If you wish to speak on this item, please raise your hand in the Zoom app.

Calling on one moment.

John Lindsay Poland.

Good afternoon.

Um thank you so much for the presentation.

Um, you discussed the structural deficit, and I think one of the things that I hear is that there are unfilled uh positions from year to year that most departments have, and that is often then comes out as a one-time savings because the department has not filled all those positions, has money left over.

Um that used to be, you know, the department could roll it back, and now the county is able to use those funds to you know um try to balance the budget.

But one area where that is consistent year after year after year, I'm glad the CAO is trying to go after those.

But the Babu settlement has created um a fixed number of positions in the jail under the settlement that are required that the sheriff's office has never been able to fill.

There are over a hundred, and by some counts, maybe two hundred um unfilled positions that are budgeted, and so this is actually a call for the supervisors to think about revisiting the babu settlement.

This is not going to be done by June 30th, but um it is uh beginning to address that structural issue because the sheriff has never been able to fill those positions and the jail population is one half of what it was when the settlement was made, and when the settlement was made, um the staffing recommendation was based on more people in the jail than there were at that time.

So it could even affect the overtime if the Babu settlement is controlling how much time existing staff are in the jail.

The one final thing I wanted to ask is it on May 28th when the budget is presented, that the CIO could could present it in the manner in which it did two years ago, which included prior year actuals for all uh program areas.

It included a breakdown of salaries and services and supplies for each of those areas that is really important for the board, but also for the public to really understand what is the movement of these budgets uh from year to year.

Thanks so much.

Thank you for your comments.

Moving to our next speaker, Carrie or Kari Malkiki from Restore Oakland.

You may unmute yourself and begin your two-minute comments.

Hi there, thank you.

Can you hear me?

Yes, we can.

Great, thank you.

Um, yes, this is Kari.

Um, I'm from our Oakland, um, based in district three.

I really appreciate the presentations and the clarity.

Um I also really appreciate Supervisor Tam and Supervisor Howard's comments.

Um, and just want to emphasize how I remember last year as well, how Supervisor Halbert um emphasize the the need to within this dire landscape, always think about how to prioritize the least among us um the most vulnerable residents.

And I do want to just um echo everything that John Lindsay Poland shared.

Um, this is a similar analysis that I have, and I think the advisory board would be uh place and body to um because the babu settlement is a very it's an important um idea policy, but the the budget needs to be revisited.

Um the positions need to be revisited with the current data, which I know that the CAO is naming as uh recognizing current data um as an important place to be thinking through ways that we can save our county money.

Um and I do just want to think through um to Supervisor Halbert's point, uh the least among us uh can be served with the most cost-effective ways by ensuring that they are not in our jail.

Um, every time that we have high need populations in our jail, um, as well as on our streets, that is creating incredible costs for our county that are in the long term always going to be lowered by having folks housed and cared for in supportive housing and with county services that exist outside of the jail.

So I just think like if we are thinking about a long-term strategy for making this budget sustainable, we need to recognize that the jail population does not need to include people with serious needs and behavioral health and physical needs.

So thank you.

Please just recognizing care first, jails last is still a budget demand.

Thank you, Chair.

That was our last speaker.

Thank you.

With that, we'll move on to item three, Alameda County budget update.

Oh, then did we go to public comment for both?

We just for both, okay, so um, let me react to public comment, which is we see funded but vacant positions as um a way to close our gap.

We've seen that year over year, and I think reflecting back on prior year comments, there's lack of clarity where people just wonder, you know, is this just an endless bucket of unfilled fund positions that we can keep going to year after year?

And I also note that in our budget presentations, each department will list their positions and change in head count, if any, and then that would often elicit a question from Supervisor Tim.

How many uh positions do we have vacant?

What if we just added or had clarity for each department or agency, how many unfunded positions there are from year to year?

But in that in that year, and how many were planning to eliminate to close the gap would just help provide that transparency.

So there is quite a bit of detail around the positions in the budget documents.

I don't have it in front of me, but I know we show full-time equivalent positions as well as authorized positions, and the difference between those would give you a good sense of what's um unfunded that's in each of the departments, and I believe there's also you know a listing.

Well, there's certainly our listings by classification in the county salary ordinance.

So, you know, we'll continue to um refine the detail, but I believe there's quite a bit of detail, and we will identify the positions that are that we're recommending be reduced as part of the balancing strategies.

Okay.

Um then because we have our lobbyists here, do we provide or is there a way for us to provide at a county level our feedback to our legislature?

And through through PAL is a good way.

I mean, you know, I guess I get one more opportunity to say, there's a whole lot bigger fish to go after than a little tiny discretionary budgets that seem to be met with more scrutiny than millions and billions of dollars that are being cut.

While other millions and billions of dollars are being put into reserve.

I mean, who at the end of the day, the budget's a governor's budget, but the legislator has a legislature has a lot they can do in the way of um legislating.

Maybe we can ask them to pay more attention to bigger things.

I love the budget as many folks know.

So I'm always advocating.

This year we've worked uh especially closely with some of the agency and department heads given kind of the profound impact of HR one, and we will continue to do so.

Um in January, we submitted a letter signed by Supervisor TAM about our priorities.

Um, and I continue to think, as we've said, not just this year, but for the foreseeable future, it will be mostly about HR1 and whether or not the state is going to help offset those costs for counties.

Um, I think specifically in the healthcare area, we're experiencing a very profound change in how people are covered and who is not, and what um uh we as the county um responsible for indigent care are going to bear the burden of.

Um, and I think obviously we also have an election this year, and we're gonna have a new administration next year when some of the more um impactful um implications hit.

So it'll be I think very telling to see with the new administration how they view um counties' role in these changes at the federal level.

Very profound and impactful.

I agree.

Okay.

Any other closing remarks?

Supervisor Tam, you sure?

Going once, going twice, we're adjourned.

Thank you all.