‘Stable’ financial picture likely to end

Booming airport traffic, fewer office vacancies and low unemployment rates helped boost a strong county economy in 2006-07, but leaders said Thursday that a new report from the San Mateo County Controller’s Office points to the end of what has been a stable period for the Peninsula.

According to Controller Tom Huening’s report, the county faces a $25 million structural deficit, caused in large part by skyrocketing personnel costs. One-time revenues boosts, county management analyst Colleen Leong said, offset the costs, but lawmakers do not expect those revenues to return. Many are bracing for the possibility of cutbacks when Gov. Arnold Schwarzenegger’s budget updates are released in January.

“I think this is the end of a stable period,” Supervisor Rich Gordon said. “We’ve weathered through the ups and downs going back to the year 2000, and we’ve been able to build up reserves, but the effects of housing prices, foreclosures … on the economy are having an impact.”

Even through Huening’s budget paints the picture of a balanced county budget, it also points to future problems — including the fact that expenses are outstripping guaranteed sources of revenue.

It also highlights big-ticket projects such as county subsidies to the San Mateo County Medical Center, which were $59 million in 2005-06 and could rise to $115 million in 2012; and studies to determine whether the county needs a new jail.

The biggest boost in expenses continues to come from employee salary and benefits. Salaries have climbed 6 percent per year since 2002, while benefits have jumped 16 percent each year, said budget director Jim Saco.

County leaders have said recently that there will be hiring freezes —despite as many as 50 vacancies in government departments — and have now said raises will cease for the next five years, Saco said.

They’re also studying a variety of cash-boosting options, from increasing local hotel taxes to asking voters to approve a parcel tax or sales-tax increase to fund government services, according to Saco.

But potential state shortfalls loom. California sends roughly $300 million each year to support county programs, Saco said. That money helps pay for county programs including child welfare, adult welfare-to-work and adult protective services.

“It could very well be that the state cutbacks could be effective immediately,” said Gordon, adding that supervisors might opt to dip into the county’s $229.5 million reserve to cover short-term losses. “There are some programs you just can’t turn from ‘on’ to ‘off.’”

bwinegarner@examiner.com

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