Outlook: County Anticipates $12-22 Million Budget Gap Next Year

Author: Administrative Office
Date: 11/10/2020 11:02 AM

While expenses are growing at expected rates, revenue growth is expected to shrink.

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To kick off the next budget cycle for the County of San Luis Obispo, today the County Board of Supervisors reviewed a financial forecast estimating a multimillion budget gap next year.

County staff presented the County’s FY 2021-22 Financial Forecast, including details of how staff came to their estimate of a $12 million to $22 million budget gap in the next budget cycle.

“While we don’t have a crystal ball to predict the future, we have the ability to estimate where we will be next year. This helps us prepare for the next budget cycle,” said CAO Wade Horton. “The fiscal year 2021-22 forecast reflects how COVID-19 continues to impact our economy.”

The County’s overall budget outlook for FY 2021-22 varies from prior years, in that revenues and expenditures are not growing in line with one another as they typically do. The budget growth rate has been slowing in past years, but the COVID-19 pandemic presents a whole new set of issues. While expenses are growing at expected rates, revenue growth is expected to shrink. The County started addressing pandemic-related budget impacts in June 2020 when the Board of Supervisors had to close a projected $19.3 million gap in the current year.

The financial forecast is one of the first steps in developing the budget for the coming year, which begins on July 1, 2021. It helps identify the future fiscal capacity of the General Fund and helps the Board establish its priorities, budget goals and policies, and strategies for balancing the budget. However, the forecast is made on many assumptions and just a 1% change in the variables at play can have a significant impact on the gap or surplus in any year.

“Forecasting is challenging in any year, but this year presents an added complexity,” said County Budget Director Emily Jackson. “So much of our budget is affected by consumer spending, which right now is impacted by the pandemic. Unfortunately, it’s not clear how the pandemic will shake out in the coming months. Fortunately, our long history of disciplined budgeting prepares us for unprecedented times like these.”

Review the FY 2021-22 Financial Forecast agenda item packet online for the full details.

View the presentation slides below.