Apr. 30—The Sutter County Board of Supervisors held a study session for the county's 2024/25 budget on April 25, but with its unavailing attempts to generate revenue in recent years, county officials believe a reduction in certain public services could be imminent as Sutter County faces a compounding deficit.

According to Sutter County Administrator Steve Smith, California will be working under a $37 billion deficit in the current fiscal year. Because of this, more responsibilities are imposed on counties and local jurisdictions to operate public services and fill government positions without sufficient funding.

"The state continually places programs with counties ... but also, at times, takes a portion — say 50% — of the funding that it took them to complete a task at the state level. They shift it to counties and keep the additional 50% savings for themselves, so it makes it very difficult for local regional jurisdictions to complete the tasks that the state has mandated," Smith said.

In Sutter County's case, there is little ability to raise local revenue, and recent efforts to do so have been unsuccessful. Nearly 70% of the county is located in a FEMA floodplain and another substantial portion of its land is part of the Sutter Buttes, making development opportunities and subsequent tax bases scarce.

Measure A, a 1% sales tax measure, failed to pass in 2022 and would have generated $19 million annually over the course of nine years to fund vital public safety services and government positions. Since then, Sutter County has had to navigate through budgeting issues within its sheriff's department and other county services. County officials previously estimated that Sutter County will have a projected ongoing operating deficit of approximately $12 million a year by fiscal year 2027/28.

In hopes of generating necessary revenue, Sutter County is currently working on getting a percentage of a general sales tax measure led by Yuba City, which will most likely appear on the November ballot. Should the 1% tax measure pass, it is expected to generate $15 million annually. Revenue could be split on a 67% to 33% basis, with Yuba City receiving the majority of funds. Using a potential first year revenue base of $15 million, Yuba City would receive $10 million, while Sutter County would receive $5 million.

Deputy County Administrator Laura Grenados said that Sutter County's general reserve sits at $3.9 million, but the county's goal is approximately $4.4 million. Property tax revenue is low due to the county's limited development options, she said.

Sutter County sees an average revenue growth of approximately 3.7% each year, with approximately $35.6 million in anticipated property tax revenue for the 2024/25 fiscal year.

"Our tax base is just stagnant. We don't have a whole lot of development in the unincorporated areas, so this is a big revenue source for the county. To have it being so stable and flat does make things difficult because our expenditures rise more than our revenue," Granados said.

For sales tax revenue, Sutter County sees an average annual growth of 5.54% and anticipates over $5.8 million in the current fiscal year. These areas contribute to the county's deficit and ultimately impact Sutters County's ability to offer competitive wages for county employees on top of providing necessary services, Deputy County Administrator Taylor Kayatta said.

"We do have a budget gap that we are trying to address here. These concerns make our lives more difficult with respect to addressing that budget gap. The big categories here are that we are deficit spending. Our salaries and benefits are becoming less valuable in the market as we compete for employees. We have spending in (County Service Area F). We have increased public safety costs. homelessness costs, behavioral health, and then ... we have state encasement local funding," Kayatta said.

The cost of public safety has skyrocketed in recent years, with net county costs sitting at $25.8 million in the 2023/24 fiscal year. In comparison, net public safety costs in 2017/18 were just under $15 million. On top of this, Sutter County is receiving under half of the necessary costs through Proposition 172 revenue, a permanent statewide sales tax passed in 1993 that allocates funding for public safety. This year, Sutter County will receive $11.5 million in Prop. 172 funds.

Kayatta said that Sutter County has had difficulties filling vacant positions, with multiple failed recruitments and many applicants being significantly underqualified. The county is not in a position to offer competitive salaries to its current employees, leading to a loss of institutional knowledge and money due to extended vacancies, Kayatta said.

"We've been managing this situation through slow and no growth in non-safety departments for the past decade, and we've been holding general fund positions vacant longer this year to try and preserve our resources. We run a lean local government. Sutter County has fewer employees per capita than all but one county with a population of 200,000 or less. Sutter County's wages for almost every position are lower than surrounding jurisdictions. Still, expenses are growing faster than revenues, especially for public safety," Smith said in an email.

During the April meeting, Smith presented possible solutions to bridging the gap in Sutter County's budget, but stated that cuts in public services may be necessary.

"Since 2022, we have been telling the public consistently that there is a revenue issue in the county, we're pretty frugal with expenses and we have a low number of staff compared to other counties. Some unique things about Sutter County ... we have an issue developing businesses in high flood zone areas to bring in additional revenue. Long story short, public safety is getting more and more expensive — and that's not a criticism of those folks or departments. It's like this across the state and the nation. ... I think we're not going to be able to close the budget gap without some cuts in services," Smith told the Appeal.

As for which services, Smith was unsure, but believes any department operating through the county's general fund could be impacted.

"I'm hoping we can close the gap so that we don't have much in the way of cuts in services. But regardless, I think we're going to have to be open and look at pretty much any service or department that has a general fund impact, which is most departments other than child support services or behavioral health or welfare. There's a few that don't have a general fund impact, but other than those, most other departments whether it's administrative like mine or public safety, trial courts (could be impacted)," Smith said. "When we do these, we hope to do them through attrition where you have vacant positions and hold open, but at some point we'll have to see where we are numbers wise and move forward from there."

Proposed solutions to the budget gap include selling the former Kmart property on Gray Avenue in Yuba City. Smith said during the budget meeting that the building is currently being marketed for sale, but dollars generated from that sale will be one-time funds. County officials previously recommended a listing price of $12-$13 million.

Revenue from this sale would contribute to additional facility needs throughout the county, Smith said.

Other solutions include reducing sheriff patrol services in the Walton annexation area of Yuba City. Despite being within Yuba City's sphere of influence, Walton Avenue is under the jurisdiction of the Sutter County Sheriff's Office due to a long-standing tax agreement between Yuba City and Sutter County. Should Yuba City's potential tax measure be approved by voters and include a share for the county, service coverage for this area will eventually be placed in the city's hands. Smith said that this would save Sutter County approximately $1 million.

County officials have also looked at the possibility of a hard hiring freeze on nearly all vacant county positions supported by the general fund. Smith said that this would cause service reductions across multiple departments, and could generate overtime costs among current employees.

Sutter County could also defer vehicle replacements more than it currently does, eliminate most capital improvement projects supported by the general fund and reduce services in departments receiving general funds.

"There isn't a best or worst case scenario; there is only one scenario. Sutter County is facing a significant gap between available revenues and the cost to continue current service levels. This is not new information, and, in fact, it's exactly the situation that we predicted," Smith said. "As is normal this time of year, we continue to look at costs and revenues to get to a balanced budget. We don't stop when we identify the gap. We have to close it, and we strive to address deficits through attrition of staff, holding positions vacant and finding savings in various other ways. We have to consider the impact of every potential cut that we make, which takes time. The impacts are what affect services. We will soon know the extent of cuts necessary to balance and will develop recommendations for consideration by the Board of Supervisors."

Sutter County will have its 2024/25 budget book published and released to the public by June 7. The Sutter County Board of Supervisors will hear several budget presentations over the summer until its move for approval in September.