Three days of hearings on Santa Barbara County's proposed $800-million budget for 2007-08 begin Monday, with the financial picture strong for the coming year but shakier in the future, as a slumping housing market and construction slowdown affect property-tax revenues.

The spending plan that will be presented to the Board of Supervisors in Santa Barbara beginning at 9 a.m. Monday is about 3.5 percent bigger than the $772-million budget adopted by the board a year ago.

That's due to more employees being hired and new expenditures approved by the board during the past 12 months, as well as salary increases and higher costs for employee pensions and medical insurance anticipated during the coming year.

The proposed budget contains about $82 million for capital projects, including $36 million for road maintenance and transportation projects. Also on that list is $3.6 million to build a new Isla Vista Foot Patrol headquarters; $1.9 million to construct a community pool and complete a master plan for a recreation center for remote Cuyama and its 800 residents; and about $3.5 million for new voting machines in the county Elections Division, of a type that can be used by disabled persons without assistance.

In addition, about $5.6 million would be spent on installing impervious liners under the Tajiguas landfill near Gaviota, and about $1 million to add a technical services building at the Sheriff's Department headquarters near Goleta.

As the county budget continues climbing toward the billion-dollar level, its total numbers can be misleading: Most revenues and expenditures are tied to programs and services mandated by federal and state governments.

So, the amount over which county supervisors have any real say - referred to as “discretionary revenues” - totaled only about $182 million this fiscal year and is estimated at $189 million for 2007-08. Of that amount, about $120 million, or 63 percent, will come from local property-tax revenues, which aren't growing as fast as they did in recent years.

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“With recently robust property-tax revenues, the county is in good fiscal health for the coming year,” County Administrative Officer Michael Brown states in his written introduction to the budget. “However, the current economic climate indicates that tightening credit and a soft real estate market could further negatively impact the growth of property tax revenue and real estate transfer tax” collections in future years, he warns.

The actual budget for this fiscal year, which ends June 30, was about $12 million higher than originally projected, and is estimated to finish at $784 million, including nearly $7 million in discretionary monies not yet spent or earmarked for any specific uses.

County administrators are recommending those surplus funds be held in reserve until at least September, even though various county departments and community groups are collectively requesting about $9.5 million in expenditures not included in the proposed budget.

The Sheriff's Department, for example, wants to add 10 extra positions, costing about $800,000, in anticipation of a slew of retirements next spring when higher pension formulas for public safety personnel take effect. The Probation Department is also requesting almost 20 additional positions, at a cost of $2 million, to provide increased supervision of convicted criminals placed on probation.

By waiting until September before allocating the surplus funds, the county will know better how it will be affected by the state budget that is yet to be passed, and will have more exact figures for its year-end balance, explained Assistant County Executive Officer Ken Masuda.

In any case, it appears the county will avoid any major cuts this year while boosting a few departmental programs, mostly with additional state and federal monies.

The total number of “full-time equivalent” employees for the county was 4,306 a year ago, increased to 4,357 this fiscal year and is expected to remain at close to that figure - 4,351 employees - for 2007-08, according to the proposed budget.

The two-inch thick, 413-page document has a wealth of financial and demographic information, about not only county government but the entire Santa Barbara County region. It is available for viewing or copying online at www.countyofsb.org/cao/budgetresearch/budget0708.asp.

Budget hearings are also scheduled Wednesday and Friday, beginning at 9 a.m. both days. The hearings will be at the County Administration Building, 105 E. Anapamu St., in downtown Santa Barbara, but can also be viewed live on public access television Channel 20, or remotely by closed-circuit television at the Betteravia Government Center, 511 E. Lakeside Parkway in Santa Maria.

Some of the budget statistics are sobering. Combined salary and benefit costs, when averaged over all 4,300-plus employees, have climbed from $79,400 per full-time position four years ago to $97,400 for the coming fiscal year.

Retirement costs that totaled about $31 million in 2002-03 are projected at $66 million for 2007-08, up about 10 percent from the $60 million spent for pension contributions this fiscal year.

About 56 percent of the entire budget goes to salaries and benefits.

The county's ability to be competitive with other areas and agencies on “salary and benefit increases in future years' budgets would be significantly impacted if revenue growth declines as forecasted,” Brown noted in his opening message.

The real estate market and new construction affect property tax revenues in two ways. First, properties are reassessed, typically to a greater value, whenever they change ownership. Property taxes are then based on the new, usually higher assessment. New construction also increases the assessed value.

Secondly, the new owners pay a “property transfer tax” each time real estate is sold or changes ownership. The total amount of money collected from the transfer tax peaked at $5 million in 2004-05, and has steadily declined since. It's estimated at $3.1 million for the coming fiscal year.

Over the past three years, the number of property sales or transfers resulting in reassessments also has dropped sharply, from 7,832 in 2004 to an estimated 4,100 this year. Annual totals for “supplemental property tax revenues” - the additional amounts levied due to reassessments - have followed a similar pattern, peaking at $9.7 million in 2005-06 but dipping to a projected $5.0 million in 2007-08.

So-called “secured property taxes,” by far the biggest pot of property tax revenue, steadily increased for 10 years - in amounts ranging from 3 to 11 percent annually - before leveling off in 2006 and this year. Instead of the approximately $10-million annual jump seen each of the past two years, an increase of $5.7 million is projected for 2007-08.

The board will probably adopt a budget Friday, but may wait until the following week to do so.

Among the plethora of issues the supervisors will have to decide before then is whether to spend about $132,000 to boost staffing at the Santa Maria sheriff's substation jail, so prisoners can be incarcerated longer than four days at that 39-bed facility. Sheriff Bill Brown is proposing that as one of several small steps to help relieve chronic overcrowding at the main County Jail near Goleta.

During discussions Wednesday on the Public Health Department's budget, the board is also likely to approve spending $1 million in 2007-08 on health insurance premiums for hundreds of children living in the county who are currently uninsured. Last week, three of the five supervisors clearly indicated their desire to fund such an insurance program, at a cost of $1,346 per child.

As in past years, the proposed budget includes no funding for a long-awaited and much-needed North County jail. Negotiations are underway with the state to possibly build a joint facility near Santa Maria that would house both state prisoners nearing release to Santa Barbara County and local inmates serving jail sentences. Specifics of how that “jail/re-entry facility” would be funded, designed and operated are still being worked out, however. Total cost to build an 800-bed facility has been estimated at $153 million, plus about $19 million annually for operating costs.

“Full funding of the North County jail construction is yet to be identified,” the proposed budget states.

Chuck Schultz can be reached at 925-2691, Ext. 2241, or cschultz@santamariatimes.com.

June 10, 2007