Spending Habits Have to Change, Analysts Warn

Budget gamesmanship that has contributed to the county’s financial troubles is so entrenched that change will require unaccustomed firmness from elected officials and a strong manager to carry out their will, supervisors and analysts say.

For years, Supervisors Frank Schillo and Judy Mikels say, county department heads have requested jobs they never intend to fill so they can use the cash for other purposes. And if the managers had a few extra bucks at the end of the year, they just rolled it into the next year’s budget.

On the other hand, these phantom jobs were needed because the Board of Supervisors had an informal policy of allowing department heads to grant employee pay raises without budgeting for them.

These practices were among the reasons former Chief Administrative Officer David L. Baker gave for resigning after only four days on the job. The tactics are “unrealistic and encourage dysfunctional budget game playing,” said Baker, who detailed “overwhelming” financial and organizational problems in county government.

While the county’s top leaders split on whether Baker exaggerated the financial problems, many agree he correctly identified flaws in the budget-making process that have quietly simmered for years.

Schillo and Mikels--the board’s fiscal conservatives--say they have repeatedly asked for procedures that would bring the budget more in line with accepted standards. But their words were largely ignored, they say. Now, Baker’s departure provides an opportunity to bring about changes that will result in a budget representing the county’s true financial health, Mikels said.

“There’s no magic to budgeting,” she said. “It’s money in, money out and it should match. And the only way we can tell if that’s happening is to stop these games.”

Ventura County’s nearly $1-billion budget is parceled out to 29 departments and agencies whose employees provide public services such as law enforcement, health care, welfare-to-work assistance and road improvements.

Like other California counties, Ventura has struggled to recover from the state’s decision to shift millions of property tax dollars away from counties to its own treasury.

Over the past six years, roughly $230 million has been shifted from Ventura County’s budget, Schillo said. “That’s a big hit,” he said.

Added to that is the fact that Ventura is the only one of 58 counties that narrowly limits how it will spend $40 million in annual sales taxes generated by Proposition 172’s half-cent tax for public safety. By board action, that money can only be distributed to the sheriff, district attorney, public defender and probation departments. Also, audits and a federal lawsuit triggered after an ill-fated decision to merge the county’s mental health and social service departments cost the county at least $11 million in unexpected payouts this year.

So while other counties have seen their treasuries begin to fatten during the current economic boom, Ventura finds itself scraping to meet payroll for its 7,500 employees. The budget shell games have only hidden problems, Schillo said.

“When I came on board, we were using reserves to pay for operating expenses,” he said. “That’s like using your savings account to buy groceries.”

At Tuesday’s supervisors meeting, board members agreed to immediately cut the budget to erase a $5-million deficit. But the board finally appears determined to go beyond a routine budget adjustment and to make deep structural changes in the way the budget is prepared.

Schillo, for instance, requested that Bert Bigler, interim chief administrative officer, prepare two-year budgets to better reflect spending needs. And board members agreed that department managers would no longer be able to transfer unspent money in their budgets without first getting approval from the top administrator.

One way to begin reining in hidden costs, supervisors agreed, is to eliminate some of the 860 positions that department heads have overbudgeted but left vacant. In the past, they’ve used this money to buy new computers and other equipment, Supervisor John Flynn said. This has been routine since the late ‘80s, when home prices--and property taxes--began tumbling. Department managers tried to squirrel a little extra away in case their revenues also dropped, Flynn said. “County government financing was so uncertain that if [a department manager] ended up with a surplus, they could soften the blow that may or may not come,” he said.

It’s time for all these unsound practices to end, Flynn said.

“That is not good budget planning because it is not centralized planning,” he said.

The board must also consider its informal policy of approving pay raises that are not planned at the beginning of the year, Mikels said. Over the years, the board has allowed department heads to “absorb” pay raises within their budgets.

Often, however, those same department heads come back to the board seeking more money because they have exceeded their budgets, she said. It is better to have a reserve set aside for such things, Mikels said.

If not spent during that year, the money should be rolled back into the budget to be used in subsequent years, she said.

“We know when labor contracts are coming up,” she said. “We ought to be able to say, ‘This year we will take X amount of money out of the cash flow and put it in a contingency fund for that use.’ ”

Bigler will meet with each department head in coming weeks to determine a plan to cut spending. Reducing vacant positions will be one area discussed, Bigler said, including how to decide what positions will be chopped.

Once the deficit is eliminated, he will begin drawing up a two-year budget, Bigler said. “It’s just good information to consider when allocating limited money,” he said.

Barbara Fitzgerald, director of the Human Services Agency, said she is willing to do her part to erase the deficit. But her department is not padded with vacant positions, Fitzgerald said.

Many have remained open only because she has been unable to fill them in a strong, labor-short economy. It has been tough to find social workers and welfare clerks because the wages offered by the county are not competitive, Fitzgerald said.

“That’s not gamesmanship, it’s reality,” she said.

Others doubt that the system can be so easily changed.

It may be particularly difficult to find a county executive willing to rein in the spending habits of powerful elected department managers such as Sheriff Bob Brooks and Dist. Atty. Michael D. Bradbury, said Steve Maulhardt, a Camarillo accountant who mounted an unsuccessful challenge to Auditor Tom Mahon in 1997.

“They really need to have some strong leadership at the CAO level,” Maulhardt said. “And that executive will have to work with elected department heads who believe they are answerable only to the voters and not the Board of Supervisors.”