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1 COUNTY OF ALPINE Department of Finance Carol McElroy- CAO/DOF Janet Dutcher- Asst CAO to Budget and Finance To: Department Heads and Fiscal Staff From: Janet Dutcher, Assistant CAO to Budget and Finance Date: March 9, 2016 Re: FY 2016/2017 Budget Guidelines and Instructions That time has arrived to begin work on next year’s budget (FY 2016/2017). Finance staff will work with departments in developing their individual budget packages. At the January 19 meeting, the Board of Supervisors adopted the budget calendar described in further detail in this memo. Note this year’s budget instructions do not refer to a preliminary or final budget. This year we intend to adopt one budget before the start of the next fiscal year. This resulted in advancing last year’s budget process by one month. One benefit of this is that Departments will not need to wait until September when a final budget would normally have been adopted to make budgetary changes that do not require Board of Supervisor approval. The purpose of this memo is to transmit to you the guidelines and instructions for formulating your Department’s budget requests. The instructions below provide guidance for completing your department’s submission. BUDGET TIMELINE January 19 FY 16/17 budget calendar approved by BOS. Set dates to hold budget meetings with Board. March 21 Budget instructions transmitted to department heads and fiscal staff. Budget system online goes live for budget entry. Departments enter their individual budgets using the site-based budgeting module. For those departments without access, paper copies of the budget reports are distributed via department mailboxes. ---PAGE BREAK--- 2 BUDGET TIMELINE March Finance prepares the following: - Schedule of assumptions and economic factors expected to impact the budget. - GF revenue projections. Departments are responsible for projecting Non-GF revenues. - Schedule of salary and benefit accounts. Finance will input all salary and benefit accounts into the site-based budget system. The same percentage allocation used last year for salaries will be used again this year unless departments advise otherwise. If you anticipate using a different allocation percentage, please advise Finance as soon as possible. - Finance determines each GF Department’s share of GF discretionary revenues after adjusting for department source revenues and share of salaries, benefits and certain other items. - Finance determines the amount to set aside as GF Contingency Appropriation. May 1 Departments submit budget forms back to Finance and departmental budgets are completed by the close of business. May 1 - 6 Finance balances projected revenues with proposed appropriations. Finance compiles budget reports and forms. May 9, 10 & 11 CAO, Finance and Departments conduct one-on-one meetings. May 20 This will be a budget workshop with the Board, Departments, CAO and Finance staff. It will be held at TRP and is intended to be an informal sit- down meeting where each department has an opportunity to communicate with the Board and the Board has an opportunity to ask questions. The budget will not be adopted at this meeting. An overview of FY 16/17 budget with comparison to past results and trends will start the meeting followed by one-on-one meetings between Board members and each Department. This is an opportunity for department heads to address the Board concerning budgetary matters. Department heads should be available to answer questions. May 20 – 26 Budgets are finalized. Finance compiles the budget for publishing. May 27 Publish notice that the budget is available and to notice public hearing. Distribute published budget to known participants (10 day notice). June 7 Open public hearing at regularly scheduled Board meeting. Opportunity for public comments concerning the budget. June 21 Board of Supervisors considers adoption of the recommended budget. ---PAGE BREAK--- 3 BUDGET DEVELOPMENT GUIDELINES The budget is a tool specifically meant to measure and control financial accountability. It communicates information about the anticipated allocation of resources and expenditures. A balanced budget ensures the County does not spend beyond its means. A balanced budget is also required by California State law. A structurally balance budget further ensures the County’s use of resources for operating purposes does not exceed operating revenues. This is our ultimate goal with the budget process as it strengthens the County’s fiscal sustainability. The goal of Finance is to achieve a structurally balanced budget for the County’s General Fund with this fiscal year budget. These guidelines are designed to help the County achieve this goal. A structurally balanced budget is defined as one that budgets recurring expenditures at no more than the amount of recurring revenues. Guidelines for estimating revenues Operating or recurring revenues are those reasonably expected to continue year to year with some degree of predictability. Some revenues have both non-recurring and recurring components and the exercise of judgment is required to determine how much is truly recurring. Generally, only the recurring portion is budgeted unless there are planned one-time appropriations to be funded from non-recurring revenues or carryover balance. Finance will conservatively estimate General Fund operating or recurring revenues and this is especially true for those revenues that are highly volatile and difficult to accurately predict. This is done to avoid overspending and to prevent mid-year appropriation cuts. Finance will not budget non-recurring or one-time revenue unless: o A specific appropriation or use of the revenue has been identified, o Receipt of the revenue is reasonably assured and o The amount can be estimated with a high degree of accuracy. o Departments responsible for budgeting revenue outside the General Fund will adhere to this guideline. Finance is responsible for estimating revenues for the General Fund. Departments are responsible for estimating revenues for those funds under their authority and outside the General Fund. Revenue projections should be based on grantor award letters, anticipated allocations, trend analysis, economic modeling or any other method that is appropriate that results in conservatively projecting the amount of revenues anticipated to be received. ---PAGE BREAK--- 4 Guidelines for estimating expenditures Operating or recurring expenditures appear in the budget each year and include salaries, benefits, materials, services, utilities, supplies and maintenance. Capital asset acquisitions are not considered recurring and although some capital assets are acquired every year they are not the same assets year after year. Recurring expenditures are those necessary to continue providing the same level of service provided in the prior year. The finance department will estimate and enter salaries and benefits for all funds using the following guidelines: o Salaries are based on current pay rates, anticipated step increases and approved COLAs. o Budgeted salaries are limited to those positions approved and currently filled or, if vacant, an active recruitment is currently taking place. o PERS contributions are generally based on 53.74% of salary for safety personnel identified as CLASSIC and 26.387% of salary for non-safety personnel identified as CLASSIC. Rates are lower if PEPRA applies, which is 12.82% for safety personnel and 6.9% for non-safety personnel. o Health insurance premiums are estimated with a 10% increase beginning January 1, 2017. o Workers compensation amounts are based on a separate allocation using information provided by Trindel. This allocation takes into consideration historical trends resulting from paid claims. Insurance amounts are based on a separate allocation prepared by Finance using information provided by Trindel. This allocation takes into consideration asset ownership and historical trends resulting from paid claims. A schedule of amounts by fund and department will be distributed once complete. Indirect cost allocations are based on the County’s cost plan filed with the State. A schedule of amounts by fund is attached. All departments are responsible for budgeting services and supplies using the following guidelines: o Estimate expenditures using historical actual results from prior years (including FY 2016 projected actuals) and not carryover budgets unless circumstances have changed and a different budget amount is warranted (but see below for GF Departments only). ---PAGE BREAK--- 5 o FOR GENERAL FUND DEPARTMENTS ONLY: If the department’s proposed budget for any account exceeds the projected FY 2016 actual results by more than the department MUST lower the budget to within a 5% margin or explain why. Justification is to be documented using the Budget Justification form. FY 2017 services and supplies budgets cannot be more than 105% of last year’s projected actual results without providing justification. o Do not budget one-time expenditures unless one-time revenues (or carryover balance) is available and obligated in some manner. If one- time revenues or carryover balance is not available or obligated, these items should be listed on the Unfunded Request form. Do not include unfunded requests in the department’s budget. GENERAL FUND DEPARTMENTS – HELPING SOLVE THE STRUCTURAL DEFICIT The General Fund has a structural deficit that exceeded $380,000 in FY 2016. This is lower than the prior year so it is going in the right direction. As previously stated, the goal of Finance is to achieve a structurally balanced budget. Balancing ongoing expenditures with ongoing revenues will move the County towards fiscal sustainability and when actual revenues exceed actual expenditures the County can become fiscally resilient allowing the build-up of reserves to fund one-time expenditures and capital improvement projects, instead of having to use this surplus to balance next year’s budget deficit, as we do right now. This year, Finance will determine each General Fund Department’s allocation of discretionary revenues. This amount will be based on projected property taxes, sales taxes and TOT. This amount will be allocated to departments; and after subtracting each department’s own source revenues, salaries, benefits and certain other items, will be the amount designed to minimize or eliminate the GF structural deficit and the amount GF Departments should generally budget for their on-going services and supplies. GF Departments should make every effort to budget within this amount. Also this year, Finance will explore utilizing a GF Contingency Appropriation account. The purpose of this account is to provide GF departments with a framework to tighten budgetary cost controls at the account level for the purpose of achieving a structurally balanced budget. Finance will determine the amount available as GF Contingency Appropriation and include it in the budget. The contingency appropriation is available to GF Departments to use during the fiscal year (with Board approval) when unexpected increases in expenditures occur that could Example For office supplies, a department proposes spending $13,000 for FY 2017. FY 2016 budget was $12,000 and FY 2016 projected actual results were $10,000. Unless there is justification, the department is required to decrease the budget for office supplies to no more than $10,500 because the proposed budget of $13,000 is greater than 105% of FY 2016 projected results of $10,000. The FY 2016 budget of $12,000 has no impact. This does not mean the department cannot budget $13,000 for office supplies. It means the department must provide justification to propose spending $3,000 more than it did in the prior year. ---PAGE BREAK--- 6 not have been anticipated during the budget process. It provides a margin of safety and a source of temporary funding for GF Departments. As a result, it is expected that GF Departments will lower their services and supply budgets to within 5% of last year’s actual spending. DEPARTMENTAL INSTRUCTIONS – THOSE WITH ACCESS TO SITE-BASED BUDGETING MODEL Departments will again prepare this year’s budget request using the site-based budgeting model which is accessible from the site-based voucher system menu. Using the Site Based Budget – Department Menu, each general fund department will enter their projected amounts for services and supplies using the guidelines described above. Non-general fund departments will enter their projected revenues, services and supplies. Salaries and benefits will be entered by Finance. Budget amounts for each budget unit are entered separately based on the department’s site code and fund/department combination. The budget system will display the 2016 YTD and 2016 Budget amounts and a place to enter the Department’s 2017 Request. Budget input to the system must be completed by the close of business on Monday, May 1. DEPARTMENT INSTRUCTIONS – THOSE WITHOUT ACCESS TO THE SITE-BASED BUDGETING MODULE For those departments without access to the site-based budgeting module, Finance will distribute reports to department mailboxes. These departments should review their budgets and make corrections directly on the report. Corrected reports should be returned to Finance no later than the close of business on Monday, May 1.