Hard times ahead as Sutter County and Yuba City reckon with budget woes
Yuba City and Sutter County officials have finished the bulk of their budget planning for the next year, but they expect more financial maneuvering ahead as local ramifications from murky state and federal budgets become more clear.
The latest county budget continues years of cost cutting and hiring freezes in which it has bolstered its reserve savings while limiting its services and staffing. The city, after failing to pass a penny sales-tax measure in the last election, finds itself facing another deficit eating into its reserves.
Yuba City council members on Tuesday approved a $62.7 million budget with a $6.2 million shortfall, caused in part by declining sales and lodging tax revenues, as well as the continued rise of expenses.
The city entered the past budget cycle with a $5.4 million budget gap, which officials took action to address earlier this year. Now covering the larger deficit may depend on a $5 million chunk from reserves, based on current estimates.
“For the most part, it seems like an ominous hole, but if you look all throughout California right now, you’re going to find that cities and counties, special districts, are all experiencing some difficult times,” said Robert Bendorf, interim city manager.
Sutter County supervisors received their budget last week and will consider its tentative approval Tuesday. Its $518 million total includes about $310 million in spending, up almost $10 million from the previous fiscal year.
Although county reserves — sitting at about $12.5 million — have stabilized, officials face the question of how to support a foundering fire district that covers the small cities of Sutter, Live Oak and large swaths of the unincorporated county.
“The county simply cannot sustain the level of services that the community demands within the resources we have available,” County Administrator Steve Smith wrote in his budget message.
Yuba City: Doing less with less
The failed tax measure that city officials intended to support public safety costs, pay for road repairs and stabilize their budget loomed over the latest budget planning.
That tax, divided with the county in an unorthodox fashion, would have brought the city almost $12 million a year and the county almost $6 million. The county ran a similar tax measure on its own in 2022, which failed by a narrower margin than the city’s most recent attempt.
City expenses have risen about $900,000 in the latest budget, set to start July 1, despite hiring freezes and other cost-cutting measures taken over the past year.
Declining sales tax revenue by $1 million and hotel tax revenue by $500,000 offset a $1.1 million increase in property tax revenue and other gains, resulting in a net revenue increase of about $150,000.
The budget calls for moving more than $5 million from rainy day and discretionary funds to cover the projected deficit.
“You heard me say it before, I’m just gonna say it again ... you didn’t get here overnight,” Bendorf said. “The deficit all of a sudden didn’t magically appear, and it’s not going to magically disappear with one budget year. It just doesn’t work that way.”
In addition to the lost opportunity of the failed tax measure, the sales tax revenue the city already receives has trended lower over the past year. The city made cuts and hiring freezes earlier this year that will mostly continue, with a hard hiring freeze coming in September.
“Unfortunately, we’re in those times where sometimes you have to do less with less,” Bendorf said.
Other local governments in California have faced similar challenges, Bendorf said, causing the need for new, and even creative, ways to bring money into the city, rather than solely focusing on cutting expenses.
“Not (that) because it’s happening everywhere else makes it OK, but we’re all dealing with that,” said Councilmember Marc Boomgaarden. “Even those that have passed revenue measures, because the pace of inflation and the cost of doing business just continues to escalate.”
Sutter County: Nothing left to squeeze
The new county budget is about $37 million higher than last year’s, largely due to changes in state behavioral health funding. Under the new system, the county must first send funds to the state, which then routes them to the federal government. The money is bundled with a federal match and returned to the county.
That added bureaucracy, as county officials labeled it, increased the behavioral health budget by about 60% and adds clerical legwork.
It also speaks to broader concerns county and city officials have about uncertainty from state and federal partners.
State funding for local governments doesn’t become clear until, at times, months after the initial budget passes. Meanwhile, county officials have seen or expect cuts to federal funding through Medicaid, food assistance, rent subsidies and a variety of public health services.
County officials expect to return to supervisors later, once state and federal funding specifics become clear, and adjust the budget, with the county unable to afford taking on a funding shortfall created by state or federal cuts.
Lately, county costs have grown faster than their revenues. Given the county leaders’ philosophy of not spending money it doesn’t have, what it provides for residents is relatively gridlocked and unsustainable.
“The physical constraints of the county hinder its ability to attract and develop new commercial industry and housing and the ability to increase revenues,” Smith wrote in his budget message.
To make up the difference, county officials have deferred maintenance and capital expenditures, limited expenses and held vacant jobs unfilled. That approach over the past two budget cycles has firmed up the county’s financial footing but leaves the future less certain.
“I remain confident that the county team can continue to analyze all aspects of county operations and make sound recommendations to maintain financial stability, but this endeavor will be increasingly difficult, if not downright painful,” Smith wrote.
Funding for fire
For more than a decade, a fire district serving about 20,000 people living in unincorporated areas of the northern, western and southern Sutter County, as well as incorporated Live Oak, has cost more than its property and special taxes yield.
After relying on the county to balance its budget, the fire district’s remaining funds are nearly gone.
“Its remaining fund balance is expected to nearly be depleted by the end of next fiscal year,” said Jamme Yang, deputy county administrator.
Federal dollars from the COVID-19 pandemic bolstered the struggling district in recent years, but now the county has to sacrifice other parts of its budget to accommodate the financially strained fire services.
The district would only have about $349,000 left at the end of this new budget cycle.
“I’ve spoken to regional county administrators who have mentioned they’re seeing the same things in their counties where rural fire stations are running out of money because of rising costs, primarily,” Smith, the county administrator, said.
The county, along with the COVID-19 relief dollars, has put about $4.5 million into the district in recent years.
“These contributions were intended as one-time support, not ongoing funding,” Yang said.
County officials have stressed the importance of solving the fire-funding dilemma with a sustainable solution.
The county’s failed tax initiative, Measure A, had planned to shore up funding for the district. Now city and county officials have begun talking in general about proposing another tax measure to patch the holes growing in their ledgers.
