Local Entities Play State Budget Shuffle

Tulare County - Local governments and state-supported entities dealing with a delayed state budget has almost became as much of a sign of the season as the start of school and the football season.

As Sacramento sleeps – no action on a state budget that was due July 1 – local governments or entities that rely on the state for funds are scrambling to come up with money to pay their bills.

Hardest hit is Family Health Care Network which CEO Harry Foster says is going this week without its first Medical payment from the state. That payment is roughly $600,000 a week.

Foster has been through this before. As have Eric Frost, city of Visalia Administrative Services director, Rita Woddard, the county's tax collectors and treasurer, Tulare County, Christine Statton, Visalia Unified chief financial officer, and Dr. Bill Scroggins, president of College of the Sequoias.

“It is unforgiveable that they do this every year and all they do is hurt people,” said Foster. He said FHCN will have to borrow money to cover its bills until the state finally passes a budget which some speculate will not be until after the November state election. On that ballot is a measure that would allow the state Legislature to need only 50 percent plus one vote to pass a state budget. The law now requires two-thirds approval and in this day of partisan gridlock, that is nearly impossible.

While clinics like FHCN will eventually get paid – once a budget is passed – Foster pointed out it will not be repaid the interest it must pay. He said last year that interest was about $30,000. “That's $30,000 that could have gone to patient care because of their monkey business, and it is monkey business.”

At COS, Scroggins said community colleges are also operating on a line of credit as state payments are missed. The July payment – COS is paid quarterly – was missed and it is likely the October payment will be missed as well. Also being hurt are students who get financial aid, such as Cal grants and Pell grants.

“We've been advancing money to students,” said Scroggins, who added the college paid out $17 million in financial aid last year and it looks like more will be paid out this year.

“The lines for financial aid have been out the door,” he said, saying there appears to be more need by students for financial aid this year than last year.

Like Foster, Scroggins said the budget crunch it is becoming the norm. “It's anticipated. It's sad,” he said.

The situation is a little less dire at Visalia Unified School District and the city of Visalia.

“We're probably OK because we will be using cash balances for a few months, then at that point it might affect us,” said Christine Statton, VUSD chief financial officer.

Even then, Statton said they plan on borrowing from other resources.

The state's payment of gas tax revenues to the city have been delayed, said Frost. That occurred last year as well.

However, this year the state has said it will not be paying the gas tax until April.

Frost said that is about $200,000 a month in revenue for the city – about $2 million between now and April.

Luckily, he pointed out, the state does not have much left to take away from cities, but not having a budget and the uncertainty that brings is not good for anyone.

“It's just bad, and what do you gain from this,” he said of the budget stalemate.

As they have n recent years, Tulare County officials are borrowing money to pay bills, especially welfare payments.

With California's budget mess still unresolved, the county is in the process of borrowing up to $55 million from Union Bank via a line of credit.

Woodard said, “We have borrowed money each year to cover the payments to recipients and to fund the mandated programs when the state does not send us the monies. Our plan is once again to borrow any monies needed to cover the approximate $10 million per month cost for funding the mandated welfare program. We have heard that the state budget may not be passed for several months - no budget, no monies forwarded for the state share.”

She said part of the welfare payments to the county are made by the federal government and monies are funneled to the county through the state. The state is supposed to timely forward the federal share to the counties. The shares are inconsistent from month to month, she added.

“Under the law, we must make the welfare payments to recipients whether the state pays us or not. We will have administrative costs to make these payments whether the state pays for those costs or not.”

The inconsistency in the payments received by the county is a continuous problem, Woodard said.

“For instance, in July 2010, approximately 43 percent of the CalWORKS program monies were from the federal government and 57percent from the state. In August, the state paid 99.3 percent of the CalWORKS program.”

Although amounts vary, Woodward says the county pays about $30,000 per month in interest on the money it borrows over usually three to four months a year. The county does not recoup those costs, she said.

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