The County of San Mateo’s financial footing remains strong but County Manager John Maltbie urged the Board of Supervisors to use fiscal restraint as it prepares to adopt a Fiscal Year 2016-17 Recommend Budget that is approximately 9.2 percent greater than anticipated last September.

In September 2015, as part of the two-year budget process, the Board of Supervisors approved the FY 2015-16 Adopted Budget and received the FY 2016-18 Preliminary Recommended Budget. The Board at is Tuesday, Jan. 21 meeting will consider the updated budget which has been adjusted by $219 million due largely to increases for capital and infrastructure projects, rollovers and Measure A initiatives.

The FY 2016-17 Recommended Budget for all funds totals $2.6 billion with 5,438 positions and $322.3 million in reserves. The General Fund totals $1.67 billion with 4, 274 positions and $154 million in reserves, which represents 10.1 percent of the County’s General Fund operating budget.

Significant changes to the budget include:

•   $94.3 million for capital projects, including trail improvements and Mirada Road erosion protection

•   $162 million in Measure A initiatives, including $11.9 million for the Big Lift and $2.8 million for parks improvements

•   $14.1 million in pension prepayment contributions

•   $4.6 million in retiree health contributions

•   $7.7 million in loans for the Half Moon Bay and Brisbane libraries

•   $7.5 million loan for start-up costs for Peninsula Clean Energy Authority

•   $2. 8 million loan to replace two hangars at San Carlos Airport

•   $2 million in administrative costs for the flood control zone

•   $2 million for a one-year employee commuter bus pilot program

•   $1.7 million for mental health pods in county jails

•   $580,000 to complete a countywide seal level rise vulnerability assessment

•   $500,000 for the Affordable Housing Task Force

•   $3.5 million for the “Sunny Day” criminal trial costs

To meet these requirements, general fund reserves will be drawn down to $154 million which is the lowest level in 10 years.

“This significant reduction in our reserves is worrisome because we should be replenishing our revenues, not depleting them. Economists predict a mild recession in the next 18 to 24 months which is why it is critically important we take the steps now to maintain our future fiscal strength and allow us the means to focus on our milestone goals of ending homelessness, improving educational outcomes for foster youth and strengthening childhood literacy by 2020,” Maltbie said.

Due to declining gas tax revenues and an increase in discretionary road projects the Road Fund — the County’s funding source for maintaining and managing the County’s road infrastructure — is also seeing declining reserves. Based on current spending, Road Fund reserves will be depleted in four to five years. The lack of funds means the conditions of roads in the unincorporated areas will quickly deteriorate because the gas tax revenue will not adequately cover the cost of ongoing maintenance, emergency repairs and discretionary projects while also addressing 40 miles of failed roads.

Next year, Maltbie will submit to the Board with its FY 2017-2019 budget a new five-year Capital Improvement and Infrastructure Program. Once adopted, Maltbie said it will be prudent for the Board not to make significant changes without identify new sources of funding, eliminating projects or both.

While Maltbie said the budget shows the need for discipline by the County’s leadership, it also indicates the County is making progress in accelerating the pay-down of unfunded pension and retiree health liabilities. Despite volatile market conditions over the past year, the remains on pace to pay off its unfunded pension obligations by 2023 after which the continuing obligations should be reduced by $106 million.

The complete Fiscal Year 2016-2017 Recommended Budget is available at http://cmo.smcgov.org/budget-and-performance

The Board of Supervisors will adopt a resolution approving the recommended budget at 9 a.m. Tuesday, June 21 in Board Chambers, 400 County Center, Redwood City. The Board will consider the adopted budget, including September revisions and final adjustments, at its Sept. 20 meeting.