County May Face $26-Million Deficit by 1996 : Budget: A five-year financial report predicts an $11-million loss next year. Study says higher personnel costs have outpaced revenue.

Ventura County will face an $11-million deficit next year that will grow to $26 million by 1996 unless the county cuts down on increasing personnel costs, according to a five-year financial forecast.

In the forecast, Auditor-Controller Norman R. Hawkes attributes the budget problems primarily to increasing personnel costs that have outpaced incoming county revenue.

If past spending trends continue, the cost of salaries and benefits is expected to increase 9.2% over the next five years, while county revenues will increase 7.7%, according to the report released late Thursday.

To reduce the projected deficit, Hawkes recommends tying salary and benefit increases to the rate that county revenues increase.

“If the increase in the total of salaries and benefits is limited to the increase in total revenues, the projected deficit in fiscal year 1996 would be reduced from $26 million to less than $3 million,” he said in the report.

Although the report does not recommend any program cuts, it suggests that the county establish a priority list for programs so that future cuts can be made to the least important programs instead of on an across-the-board basis.

The projected deficit for next year would represent almost 3% of the county’s $415-million general fund budget. The deficit for 1996 would increase to almost 5% of the $559-million budget for that year.

The county has about 6,000 full-time employees.

Chief Administrator Richard Wittenberg said he agrees in concept with Hawkes’ recommendations.

However, he said Hawkes’ conclusions may be overly optimistic because they do not take into consideration cuts in county funds that state legislators will probably make to reduce a $12.6-billion state deficit.

“The environment we work in is always changing,” he said. “We don’t know what the state will do to cut its budget.”

While the report does not recommend a hiring freeze or layoffs, a Board of Supervisors budget subcommittee has already begun to discuss those options as well as eliminating specific programs.

Supervisor Vicky Howard, a member of the subcommittee, said the board is going to have to consider every option conceivable to reduce the deficit. She did not elaborate on any reduction option.

“I think everything is on the table as far as I’m concerned,” she said.

Howard, who returned this week from talks with legislators in Sacramento, said the state budget crisis is going to spell gloom for Ventura County.

“We’ve got the most serious budget deficit situation we’ve ever faced,” she said.

Howard anticipates the financial crisis will lead to tough contract negotiations with county employees. “Any time you are in tough economic times you can expect difficult contract talks,” she said.

Barry L. Hammitt, executive director of the county’s public employees union, said he believes the “county’s economy is in serious jeopardy.”

But he said Hawkes’ recommendations for reducing the deficit do not surprise him. He said the county has always tried to balance the budget on the shoulders of its employees.

“It’s really nothing new,” he said. “The auditor has been talking about this kind of thing for five years.”

Instead of cutting salaries or staff, he suggested that the county find new revenue sources, such as increased taxes. “The citizens have to be willing to pay for those services,” he said.

Hammitt said county services will suffer if the Board of Supervisors cuts salaries. “Government is a service-oriented business and it must compete with private organizations for qualified employees,” he said.

In a report submitted to the Board of Supervisors, Wittenberg has recommended that each county department prepare to cut its budget next year by as much as 10% to help offset anticipated state funding cuts.

Wittenberg said state legislators could cut as much as $2.3 billion in funding for county programs statewide. For Ventura County, that could mean a $20-million cut in funding, he said.

To offset the cuts, Wittenberg suggests that each department head submit two budget alternatives for next year: one that anticipates a 5% budget cut and one that anticipates a 10% cut.

The cuts would “provide the flexibility to deal with the uncertainty of actual state reductions,” Wittenberg said in his report.

The Board of Supervisors will consider his proposal on Tuesday.

Hawkes’ forecast was based on economic indicators such as projections in unemployment rates, interest rates and inflation.

Among other recommendations, Hawkes suggested that the county establish a “Little Hoover” commission to study ways to reduce costs and improve efficiency.

He also recommended that the county establish a reserve fund equal to at least 3% of the county budget. The fund would be used for various emergency needs, such as operating costs after a natural disaster.