Merced County adopts historic $1 billion-plus budget. What’s new in the spending plan?

The Merced County Board of Supervisors unanimously approved the largest budget in county history Tuesday, heralding in a financial plan in excess of $1 billion for the 2022-23 fiscal year.

That’s a notable leap from the budget of $844.8 million approved for the 2021-22 fiscal year. It also represents a boost up from the interim operating plan the board approved in June, which topped out at just over $983.4 million.

“This is significant on so many levels,” Merced County CEO Raul Mendez said of the $1 billion-plus budget during Tuesday’s Board of Supervisors meeting.

“As a public agency, perhaps the most important responsibility we have is being a good steward of the public dollar,” Mendez went on to say, adding that he hopes the county can maintain the public’s trust by managing the historically large financial plan.

The Merced County budget serves as a fiscal, operational and staffing plan that is intended to reflect the goals and priorities set forth by the Board of Supervisors.

Mendez said the 2021-22 budget year finished strong, allowing the county during this new fiscal year to direct additional resources to strengthen reserves, prioritize key projects and allocate necessary staffing resources.

This year’s record-breaking budget is balanced and fiscally sustainable, county staff reported.

The unprecedented influx of state and federal COVID-19 relief dollars, the ongoing John Latorraca Correctional Center project and expansions within the county Health and Human Services Department were each cited as major factors enlarging the budget.

“The proposed budget was based on a conservative spending plan,” Mendez said. “It is cautiously constructed with consideration to the anticipation of phasing out federal and state revenue sources that are unprecedented.”

Staff’s focus was setting up the county for long-term stability by taking economic and environmental uncertainty into account, Mendez said. The financial plan approved Tuesday was crafted with an emphasis upon leveraging one-time state and local funding awards for one-time projects that won’t need ongoing, consistent financing.

County supervisors speculated during the meeting that a budget exceeding $1 billion could be an anomaly in Merced County, at least in the next few years to come, as the temporary influx of state and federal COVID-19 funds stall.

“Don’t fall in love with that number,” Supervisor Scott Silveira said, stating his prediction that the county budget is likely to decrease next fiscal year.

More on the 2022-23 budget

Of the $1 billion-plus budget, general fund dollars represent $737 million. That’s up from $634.7 million during the 2021-22 fiscal year.

General fund dollars pay for basic county services like public safety or health and human services. The general fund is the portion of the budget that elected county officials have the most control over.

Of the county’s 2022-23 general fund, the Health and Human Services Department accounts for $430 million. Public safety and the justice system represent $155 million, support services take up $85 million and municipal services account for nearly $66 million.

Merced County’s general fund revenues exceeded expenditures for the third year in a row. Referencing economic uncertainty and nationwide concerns over a potential economic downturn, however, the Board of Supervisors unanimously voted to modify the county’s general fund reserve policy.

“We need to save for a rainy day,” Silveira said. “I think it’s a prudent move.”

The general fund reserves are meant to help ensure the county is able to respond to unanticipated costs and mitigate operational impacts during difficult economic times.

Under the old policy, the reserve could be set at 7-9% of the average general fund revenue of the preceding three fiscal years. The updated policy boosted that range to to 7-12%.

In an effort to minimize financial risk due to unpredictable funding sources, the board raised the 2022-23 general fund reserve balance by $3 million to $42.1 million, representing nearly 9% of the three-year average of general fund revenue.

“This is a cautious approach, and I appreciate the cautiousness because I think it reflects a lot of our input,” Supervisor Daron McDaniel said of the 2022-23 financial plan. “We don’t know what’s before us.”

The operating plan approved by the Board of Supervisors is also slated to add 23 county positions, representing an added cost of $2.3 million. County positions for this fiscal year total 2,375 with the increase.

Positions have continued to rise since the 2020-21 fiscal year, when county jobs took a hit largely due to the impact of the COVID-19 pandemic.

The board further approved an allocation of more than $64 million for countywide road projects. Over $40 million of that has already been committed to specific projects, leaving about $23 million available to construct and maintain county roads.

Merced County parks also received attention from this year’s financial plan, with the board voting to include an annual allocation of at least $500,000 for park projects in each final budget going forward.

The complete Merced County 2022-23 budget will be posted on the county’s website. Additional information about the financial plan approved Tuesday can be found within the Board of Supervisors’ agenda.