As President Donald Trump talked about the availability of ventilators and state-mandated contact tracing, local governances — counties and their public health departments — were charged with providing information, equipment and resources to county hospitals, businesses and individuals.

“When Covid started to take off, the local response became very important,” said National Association of Counties’ Chief Economist Teryn Zmuda. “Counties were called to do things like address shortages of PPE, provide stand-up additional medical facilities, purchase hotels and motels to house the unsheltered population.”

As the Employment Development Department reports a rising number of unemployment applicants, the need for county services will also rise — particularly those meant to interrupt the cyclic effects of poverty, Zmuda said. The Sierra Community House, just one of the nutrition-related programs that Placer County supports, reported its pool of recipients in need doubled in size since the onslaught of coronavirus-related layoffs began in the North Lake Tahoe region.

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The demand for public services is high. Whether or not the government — on a federal, state or local level — will be able to meet that demand has yet to be determined.

“The county’s financial position and reserves are healthy, which affords us the time to make appropriate decisions regarding short-term and long-term impacts …”— Daniel ChatignyPlacer County finance and budget operations

Placer County is one of seven counties in the region that has entered phase two of reopening after the Covid-19 shelter-in-place order was first ordered, and the tentative budget for fiscal year 2020-21 is due in less than a month.

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Finance and Budget Operations Manager Daniel Chatigny said despite the unknowns, his team is working on a tentative county budget to present to the public and the Placer County Supervisors on June 9. Chatigny said the final budget will be available on June 23 in time to start the new fiscal year July 1.

Covid-related expenditures

Placer County operates one of 1,900 county health departments across the country that employ critical public workers like first responders, health care workers, mental health professionals and other social service providers, Zmuda said.

To date, Placer County has not yet received CARES Act assistance, however the county has received $736,987 in state assistance to support COVID-19 efforts.

According Chatigny, Placer County’s pandemic-related expenses amount to $4,934,346 as of May 13. Chatigny said the county is tracking its operational costs, including staff salaries and benefits, materials and equipment, in case FEMA will reimburse expenditures incurred during the national emergency.

Chatigny clarified that some of the funding is related to routine department activities and that the county is not operating in a deficit to support the County’s COVID-19 response.

Uncertain Public Revenue Streams

Emergency aside, Placer County’s annual budget was estimated at $1.03 billion for the 2019-2020 fiscal year. The various revenue streams help protect from economic fallouts like the Great Recession of 2008-09 but make it challenging to predict COVID-19’s economic fallout.

The 2018-19 budget report indicates the county’s non-discretionary revenue comes from three primary sources: 28% property tax, 4% sales tax and just over 1% Transient Occupancy Tax. This money, which goes into the General Fund for county supervisors to distribute as they see fit, makes up one third of Placer County’s overall revenue.

Zmuda said the first public revenue source to be affected will be sales tax. Effects on property tax, if there are any, will not be observable for at least a few years out, Chatigny said.

Chatigny said the county cannot measure COVID-19’s true impact on sales tax revenue because the numbers are not yet in.

“We expect all funding streams to be impacted in some way,” Zmuda said. “Impact in sales tax, reduction in local fees — building permit fees, real estate transactions fees — those will be cut along with taxes collected. What’s yet to be determined is how federal and state funds will be affected.”

Those intergovernmental funds are a consolidation of even more revenue streams on a state level generally for discretionary use. Combined with service fees and charges, this revenue accounts for the remaining two-thirds of county revenue.

Although the percentage is relatively small, Placer County collected $30.5 million in sales tax last year. In an April presentation on changing sales tax projections, county experts estimated 22.6% of the tax went to the public safety fund, 22% went to Health and Human Services and 9.6% went to the Fire Fund.

Similarly, the TOT data available does not provide a complete picture of COVID-19’s economic impact in the public sector because the first 75 days of the third quarter were unaffected by the statewide shelter-in-place order.

“Spending from Transient Occupancy Taxes is more project-based and the county has flexibility to adjust the project schedules depending on actual revenue,” Chatigny said.

In the meantime, Zmuda said constituents should expect cuts of “less essential” county programs.

“In order to maintain critical public safety and health services, counties are cutting capital investment projects, economic development projects and putting infrastructure on hold,” Zmuda said.

Auditor-Controller Andy Sisk corroborated Zmuda’s prediction of county priorities by recalling the dozen or so development-related layoffs that Placer County endured during the Great Recession.

“All those layoffs dealt with two departments in particular, the building (and) planning departments that issued building permits, because obviously the housing market experienced a dramatic slow down. I’m not sure what’s looming in the future, but that’s what happened back in 2010,” Sisk said.

Sisk said some of those employees in those departments were transferred to other roles within the county instead of being let go.

Zmuda said county employees may face furloughs and layoffs and cited the U.S. Bureau Labor of Statistics report that employment in local government is down by 800,000 jobs.

RECESSION & CONTINGENCY PLAN

Sisk is not sure what the future holds for Placer County operations, but suspects that the county may utilize a safety net it’s been weaving since the Great Recession.

“The county has built up $27 million in reserves so that’s one source that would help bridge any budgetary deficit that they have going into the 2020-2021 fiscal year.”

Chatigny said the 5% reserve is a county financial policy to set aside funds for Economic Uncertainties and General Reserves.

“This pandemic is going to cause revenue losses in some operating areas,” Chatigny said.

Chatigny said the reserve’s longevity is dependent on several factors including the severity and duration of unfavorable economic conditions, expenditure reductions and new offsetting revenue sources.

“At this early juncture it wouldn’t be prudent to speculate how long those reserves would last,” Chatigny said.

Chatigny said prudent saving translates to prudent spending.

“The county’s financial position and reserves are healthy, which affords us the time to make appropriate decisions regarding short-term and long-term impacts including future property tax revenue and pension obligations,” Chatigny said.

The 2018-2019 Budget Report indicates the county has remained in strong standing with pension payments before, after and during the Great Recession.

Sisk said the same financial prudence that allowed Placer County to pay its retirees during an economic downturn, also helped the county maintain most of its staff during the economic crisis of 2008-09.

“The county did pretty well through the recession but it wasn’t easy,” Sisk recalled. “We had the hiring freeze, they were very conservative and they did use some of the reserve that they built up.”

Chatigny said the county has not officially implemented a hiring freeze.

“County employees that are not able to perform their normal job duties remotely have been re-deployed to help in other county operations areas,” Chatigny said.

This includes librarians, and libraries’ custodians, Chatigny said.

Chatigny said Placer County will closely monitor the impact COVID-19 has on PERS and other post-employment benefits.

Further, his team is not discussing layoffs, staffing reductions or wholesale cuts to expenditures as it prepares the budget for the next fiscal year.

“We’ll make recommendations to the board at the right time,” Chatigny said.

Rebecca O’Neil is a reporter for the Sierra Sun. Contact her at roneil@sierrasun.com.