Santa Clara County projects $285 million deficit in wake of coronavirus

Santa Clara County is bracing for a roughly $285 million budget shortfall precipitated by the coronavirus pandemic’s toll on its revenue sources, according to County Executive Jeff Smith.

The startling projection is the latest indication of the widespread economic fallout from the pandemic and comes days after Gov. Gavin Newsom announced a whopping $54.3 billion hit to the state budget.

“This year will be breathtaking, but the next two years after that will be even worse. We’re going into definitely uncharted territory,” Smith said.

Before the pandemic hit, Santa Clara County was already planning for a shortfall of about $180 million due to the anticipated economic recession. But now, a likely nosedive in local property taxes — as well as a decline in state funding from capital gains and income taxes — could set the county back much further.

The county’s current $8.1 billion budget, which technically ends June 30, included a slew of projects as well as the purchase of two hospitals. At the time, Smith warned it marked the “last year of expansion” for the county as a recession loomed.

Now officials expect an ongoing deficit of $285 million to $300 million. Already, the county has reached about $74 million in coronavirus-related expenditures, spread across public health care costs, the Emergency Operations Center and contracts. Those numbers are expected to at least double in the coming months.

“As COVID began to happen, we also saw not only costs related to COVID going up, but also obviously the recession going into a depression,” Smith said.

The deadline for launching the 2020-21 fiscal year budget has been pushed back from July 1 to August to determine what funds could roll in from the state and federal governments and sort through what Smith described as “so-called easy cuts.”

That would first mean slashing vacant jobs, followed by contracts that haven’t reached their maximum financial obligations, and then capital or IT projects that could be delayed, Smith said.

Over the next few years, the county will plan to use one-time state and federal funds to cover ongoing expenses. Some money from various reserves could also be transferred into the general fund; the county’s “contingency” fund, which is required to contain at least 5% of general fund revenues, clocks in at about $140 million.

The county also expects to receive a $175 million infusion stemming largely from the CARES Act Coronavirus Relief Fund and Federal Emergency Management Agency. It’s not yet clear how that money could be allocated between past and future expenses.

Even in the early stages of matching the money to costs, however, it’s clear that the county is “certainly on pace to use these funds,” County Budget Director Greg Iturria told the Board of Supervisors Tuesday afternoon.

“We’ll need to continue to keep up legislative advocacy to get additional funding and additional flexibility,” Iturria said.

The county has also sent home about 1,000 staffers deemed “nonessential” on administrative leave.

“If you’re going to do a cut to the bone, you’re going to destroy county services and eliminate a whole bunch of jobs — which is not necessary right now,” Smith said.

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Author: Fiona Kelliher

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