The Morning Report
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There’s a widespread assumption that San Diego County’s got vast reserves that could be deployed to address a long list of community needs. It’s true.
It’s got about $2 billion in the bank – a total that’s grown by nearly two-thirds since 2010. That’s more than nearly all major counties in the nation.
Yet it’s also true that most of the nearly $2 billion in the county’s savings account is spoken for in some way. Deploying any significant share of the money under the Board of Supervisors’ control would require votes and policy changes.
But those are decisions the county could make, if it wanted to. It comes down to priorities.
The county has already set aside hundreds of millions of dollars of its savings for new buildings, pension bills and other needs, and imposed strings to ensure their nest egg isn’t quickly wiped out. The county is now facing increased calls to cut those strings and redirect some of the money.
County supervisors and staffers credit the disciplined approach to shielding the county from risk and allowing it to pay cash for construction projects. But progressive advocates and political candidates believe the county should spend more of its ample cash on workers and programs. The disagreement will play out publicly this week as the county kicks off hearings about its proposed budget for next year.
This debate over what the county should do – and how much should remain in savings – is likely to intensify as candidates vie to replace four long-sitting county supervisors who will term out by 2020. It’s already been ratcheted up this year by a coalition that includes the county’s largest labor union.
County supervisors and staff, on the other hand, have doubled down on a message of their own: They can’t just start writing checks.
“We are believed by some to have a pot of money sitting and available to be spent on new programs,” Chief Operating Officer Don Steuer said as he helped unveil a new proposed budget last month. “That is simply not the case.”
Steuer detailed why that is: It’s because of self-imposed rules and commitments that restrict county spending, not a lack of cash.
That distinction is crucial. The county’s got lots of money. For now, there are just rules and pledges restricting how and how much can be spent. Those rules could be nixed if supervisors wanted.
Most notable among them: County policy bars using onetime influxes of cash to expand services or increase pay for workers, the very investments unions and progressives have long wanted.
The Government Finance Officers Association, an industry group, recommends governments hold at least two months of operating cash in reserves to safeguard them from major budget hits. San Diego County’s amassed far more than the $601 million it’d need to meet that standard.
So how much of that could be invested in causes like homelessness or bolstered county services? That’s up for debate.
Here’s a breakdown of the county’s savings account through last June, the period covered by the county’s latest detailed financial report.
A portion of the county’s $2 billion bank account is entirely off limits in most annual budgeting. Both the county’s annual budget and savings account are subject to a laundry list of federal and state restrictions that give it less discretion over how it spends its money.
But that’s not the case for more than three-quarters of the county’s $2 billion reserve. This is the money the supervisors hold sway over.
Current supervisors, though, are proud of their frugality, and what the county’s accomplished with their strategy. They often speak glowingly about the fruits of this fiscal discipline, including the county’s high credit ratings.
Supervisors and county staff say they’re taking the long-term view with their reserve account. They’ve made policy choices to earmark dollars to address massive pension and infrastructure bills they’ll face over the long haul, and to ensure reserve money goes to onetime causes rather than ongoing ones they say could drain their savings.
As of last June, the county had $337 million in savings for new buildings and upgrades. Over the past decade, this fluctuating savings account has helped the county pay cash for new facilities, including an upgraded county operations center and two new sheriff substations.
More recently, the county’s diverted $136 million to pay down pension bond debt. Budget officials have proposed investing another $63 million for the same purpose this year, which they say is helping the county proactively address one of its biggest budget threats.
Tens of millions more have been stashed away for a major catastrophe.
The past couple years, the county’s also penciled in and spent about $200 million annually for onetime county needs such as technology upgrades, a solar financing program and Alzheimer’s disease projects.
The county does have more flexibility with about a third of its bank account. Its $747 million unassigned pot is just that, unassigned.
County Supervisor Ron Roberts said that is the account he floated raiding last year to offer a $150 million bridge loan to help pay for a new Chargers stadium. Roberts said he thought fellow supervisors might consider that loan since he was counting on getting much of it paid back in a short clip.
Yet current supervisors are reluctant to spend much of this cash.
Though the county’s built up other funds to address infrastructure needs, pension obligations and onetime costs, the $747 million account is the one county officials consider their safety net account.
It’s the account where the county keeps two months of operating cash and is also one budget staffers say they might lean into if the Affordable Care Act or state reforms hammer the county’s budget.
Supervisor Dianne Jacob, who chairs the board, has brought up a potential $100 million budget hit thanks to pension bills and possible changes to the state’s health care marketplace. She argues the county must hold onto its substantial savings to shield it from worst-case scenarios. So far, her worst fears have not been realized.
“We don’t spend money just because we have it,” Jacob told VOSD. “We spend at a prudent level so that we have the reserves so we can take care of these long-term liabilities and risks that we’re gonna be facing. Some we know about, some we don’t.”