Board of Supervisors — 2023-04-21

Good morning. I will call the April 21st, 2023 meeting of the Board of Supervisors and Budget Workshops for Fiscal 2023-24 to order. Madam Clerk, please call the roll.

Chair Williams and members of the board I do have a couple quick announcements this morning. I would like to note for those that intend to address the board, there will be an opportunity for public comment at the conclusion of each functional group in special issue presentation if you are registering to provide verbal public comment through zoom please note which functional group you would like to speak on in your online registration General public comment for items not on today's agenda will be at the conclusion of today's budget workshop schedule. Lastly, for the Board of Supervisors methods of public participation and to provide public comment on general public comment or an item on the board's agenda please see page two of the agenda. Individuals that would like to provide verbal public comment may do so via Zoom by registering in advance via the link available on page 2.

If you have any questions, please contact the clerk of the board's office at area code 805-568-2240. Again that's 805-568-2240. That concludes my announcements this morning.

That brings us to the third day of budget workshops. I will now turn it over to CEO Mona Miyasato.

Thank you, Chair Williams. And we're going to start this next section on policy and executive with the overview. And these are the last functional group of departments with Steve and you.

Good morning, Chair Williams and members of the board. As noted in the intro slide, the Policy and Executive Functional Group consists of County Council, County Executive Office, a Board of Supervisors, and general county programs. This functional group receives 30% of the county's general fund contribution at 108 million, in large part due to the General County Programs Department which receives GFC for a wide variety of programs and policies including cannabis revenues, 18% maintenance funding and Northern Branch Jail Operations Funding before these are transferred out to departments.

The functional group also makes up 6% of county-wide operating expenditures and just 2% of the county's FTEs at 108. In this diagram, we illustrate the flow of operating revenue and GFC to the functional group departments. In total, the functional group receives 200 million in funding, 108 million of which comes from GFC and 92 million is operating revenue.

Of the 200 million general county programs comprises the largest share at 47% or almost 94 million, 86 million of which is GFC, which again is transferred out to departments to fund board approved policies and programs. The County Executive Office receives about 46% of the functional group total, or $92 million. About $84 million of which is risk fund revenue that gets collected from all departments for insurance payments and ARPA funds that are received in CEO but get passed through as transfers out to departments.

In Operating Revenue and GFC Trends, you'll notice that CEO Risk Fund and ARPA are driving revenue. General County Programs' GFC allocation is driven by the programs and policies mentioned previously. Expenditures in Board of Supervisors and Council mostly mirror revenues. CEO expenditures show lower than the sources on the previous slide largely due to ARPA-related transfers made to departments that are not considered an operating expenditure.

Similarly, General County Programs also shows lower than the sources on the previous slide as they transfer fund balances to other departments. Again these transfers are not considered operating expenditures. And finally, the FTE trend shows relatively flat in Board of Supervisors and Council. While the CEO's office has had increases over the five-year period that includes positions to staff the Cannabis Program, a Compliance and Accountability Officer, an Emergency Preparedness Outreach Coordinator, and positions to support the CEO Department REORG, to name a few.

In addition to the reduction of some positions such as six Office of Emergency Management positions being transferred to fire in fiscal year 23-24. CEO Mia Sato will be discussing FTE further as part of the CEO department presentation. And that concludes the overview for the policy and executive functional group.

Any questions from board? Then we will go on to county council.

Mister chair members of the board. Good morning, I'm Rachel Van Molen County Council last year. I talked about how no one's really ever heard of county council and they don't know what we do not much has changed on that front so for the benefit of the public today. I'm going to talk a little bit about what our office does We are the county's in-house counsel. We're an internal law firm, and our clients are your board, the CEO, all of the county officers and departments you've heard from this week, and special districts.

We divide our work into two categories. We support county departments by advising on legal requirements so that they can provide programs and services to the community, and we protect the county treasury by litigating Your county council teams had a great year, juggling a lot of competing priorities. That included continuing to litigate our large time-intensive cases, our COVID backlog of cases and preparing for 11 upcoming civil jury trials.

We also continued to litigate our ongoing portfolios such as child welfare, probate, conservatorships and assessment appeals. We did all of this while also advising your board, the CEO, all the county departments and special districts on major programs and projects. And working on process improvements within our office. Our operating budget is $12,404,200 which is approximately 10.6 million of that as general fund. And you're gonna see this information displayed in a few different ways over the next few slides.

All of our funds are used for legal services. And our staffing is 45 employees, which includes 32 attorneys and our legal office professionals and our business manager. I'm going to break that staffing down a bit further. So we support the county departments, and this includes through reviewing and advising on hundreds of contracts and grants, resolutions and ordinances, assisting on real property transactions, land use permitting and enforcement and capital projects. The majority of items that come to your board on a weekly basis go through our office for review.

Many of our attorneys litigate full-time, and this litigation protects the county treasury. Sometimes we bring in revenue such as our three attorneys and legal office professionals that litigate assessment appeals and bringing property tax dollars And sometimes we protect the county from having to pay out funds that it's not warranted, such as our office prevailing in a federal jury trial this year where the plaintiff sought millions of dollars in damages.

Instead of having to pay millions of dollars in damages they had to pay some of our litigation costs. We have approximately five attorneys and three legal office professionals that litigate about 45 cases ongoing. We resolve cases, and then new cases come in. These are personal injury, civil rights, employment litigation, and property rights. These cases are time intensive, involve a lot of discovery, and tend to last for years.

Last year our office resolved 27 of these types of cases with 56% with no county payout. We also have four attorneys and two legal office professionals that support social services. They litigate an average of 600 dependency cases annually, and each of those cases represents a child that Social Services is helping. While many of our attorneys litigate full-time, some of our attorneys litigated and also advise departments.

For instance, we have an attorney that advises the Public Guardian and the Agricultural Commissioner. And also litigates gun violence restraining orders and restraint motions for the Sheriff's Department. We have an attorney that advises on financial items. Advises Community Services Department on Libraries and Arts Commission. And advises Laguna Sanitation.

And also litigates assessment appeals. And we have an attorney that litigates water law and federal land use cases, advises planning and development in the Planning Commission and the Agricultural Preserve Advisory Committee. And is also part of our Emergency Operations Center team during emergencies. All of our attorneys and legal office professionals need to be an expert at more than one area of law and have to be flexible as our county priorities change.

Over the next few slides, you're going to see our goals and some of how we met all of our renew goals and performance measures. And there's a lot of overlap in material there. We've had more than 30% of our staff attend InnovateSPC. We retained 98% of our staff over the last three years. We've completed stay interviews with all of our staff and continue to do that annually, and we met with the CEO and department heads to get feedback and begin implementing that feedback which you're going to see in a minute with our expansion request.

We've increased our training of county departments so that we can be even more proactive. We're implementing our case management system and we've been working with KPMG as they finalize their report, and we have completed or in progress of implementing their recommendations. We have no service level reductions and we have one expansion request. Our expansion request is for one Deputy County Counsel for $210,000.

This is for advisory legal support for all the county departments and two special districts on labor relations, employee relations, benefits, disability, leaves of absence and civil service. When I've been meeting with department heads, the repeated request is for more support on personnel related issues. So this expansion would be responsive to those requests and also would help us implement our KPMG recommendation of more external trainings.

You've heard a lot of expansion requests this week, a lot of good ones. And I completely understand that funding is limited and that this may not be the most satisfying way to spend those funds but outside council costs have gone up substantially. The low end is now five to seven hundred dollars an hour So keeping this in-house would be a substantial savings for the county.

It's really about problem prevention and avoiding future liability, which overall saves the county money in the long run. Before I conclude, I just want to thank the whole County Council team and my management team who's here with me as well as CEO Miyasato, Assistant CEO Nancy Anderson, Budget Director Paul Clementi and our analyst Wesley Welch for all their help throughout the year and through this budget process.

For my quote, I picked a song And this song reflects how I feel and how we feel about our client departments, and officers in our special districts as well as our staff. If you got a problem, I got a problem too. It's a song by Joy Oladokun and I'm going to paraphrase the chorus. If you've got a problem, I got a problem too. If your standing at the bottom, I'll reach out for you.

If you need someone to lean on I can be strong. I will carry you through because if you got a problem, I got a problem too. And with that, I'm happy to answer any questions.

I can't think of a better quote for a team of attorneys. Oh my God! I feel so validated in my life. Questions from the board?

How do you not grant, if you got a problem we got a problem too. That's the way we look

at

it. Supervisor Capps?

Yeah I just wanted to thank County Council and the entire team. You really helped me get up to speed on so many different policies and just I've been pretty much overwhelmed by the breadth of the work that you do here. I've been in other organizations where Council sort of called in when there's just litigation, but it's so much farther than that. And I'm just very impressed with your 98% retention rate. That's incredible these days especially and it's a testament to the leadership. So thank you.

Thank you.

We'll go on to Nancy Anderson.

So board members this morning, Chief Assistant Nancy Anderson will be presenting the Board of Supervisors budget and as well as the CEO's budget. And you know, this is the last budget workshop for Wesley Welch. I keep saying that to maybe hope that that will go away but unfortunately it's the case.

Good morning, Chair Williams and members of the board. I am pleased to provide a budget overview for the budget units related to the Board of Supervisors and as CEO Miyasato indicated, I'm happy to also acknowledge Business Manager Wes Welch for his work on this and he is available to answer any questions as well. So some of the key challenges and emerging issues the board offices are addressing include long-term financial stability of the county by balancing priorities and mandated requirements, support and work towards a more inclusive and equitable future for the county, support and work towards resiliency in the county's water supply, drought conditions and changing climate impacts, and the severe lack of affordable and workforce housing in the county.

The total operating budget for these offices is $4.1 million, and that is fully funded through the general fund contribution. There are 18.875 FTE positions authorized for these budget units. As indicated, the BORA offices are funded entirely by general fund contribution. This slide shows the funding distribution between district offices that has remained relatively flat.

This slide shows the staffing level for the past five years. The staffing for next fiscal year is declining 0.75 FTE to 18.9 FTE, this is a result of a net of a deletion of one position after retirement and an increase in existing position converting from part-time to full time. This slide shows the board office budgets have remained relatively flat over the past five years with slight increases primarily for negotiated labor increases and insurance premium costs.

Some of the anticipated accomplishments noted by board offices include continued work on long-term budgetary issues to promote fiscally sound and sustainable county, support in significant investment in homeless facilities and services and encampment cleanup. Actively partnering with regional leaders to advance broadband capabilities and the development of a Santa Barbara Broadband Strategic Plan and supportive increased investment to improve critical infrastructure including streets sidewalks and lighting Here are a few of the goals and objectives noted by board offices for next fiscal year, including the efficient and effective use of public resources and focus to maintain the long-term fiscal sustainability of the county. Support and enhancement of economic vitality efforts in the county, including the continued participation in Vandenberg Space Force Base Master Plan MOU, and the completion of regional comprehensive economic development strategy for access to EDA grant funding.

development of proactive solutions with other partners to address homeless right and homeless crisis and the prioritization of infrastructure Needs including roads drainage and water storage to address growth and future storm events There are no service level reductions within these budget units And in summary, the board offices will continue to support and provide the quality public services to the people this count in Santa Barbara County That concludes a presentation happy to answer any questions you may have

Questions from the board? Let's move on to the CEO's office.

Before Ms. Anderson begins the CEO's report, I just want to first of all take a moment and thank all our department directors. So this is my ninth budget with the county. It seems hard to believe right when I knew Supervisor Nelson was just the Chief of Staff. I'm saying this really to just remind everyone where we were and we'll be talking about that in a little bit, but to thank your board.

And when I greet new employees and I said what's the county's administrator or county executive office's job? And I said my job is to make sure the Board of Supervisors in the county is successful And that means a lot of different things. Ensuring mandates are enforced, making sure financially stable, making sure budget balance is all of that but it's really because I really believe and I say this that our job in my office is to ensure representative democracy works as expressed through your board and your policy decisions But it doesn't work by us alone. It works with us working with all our departments, county council, your board offices elected and appointed department directors.

So I just want to thank your board and all our departments because When I look back over the last nine years, I think we've come a long way. And one of the things that I've tried to do with all the departments is build a culture that will continue that ethos because the work that we do here today in this workshops it's important. It's the balancing. We talk about numbers and sense and different funds Thank you very much. Thank you.

My own staff and the public. This is sort of the sausage making but we never forget that the real impact and the real reason why here it's a set of policy document of funding because the real work happens outside of here And with that I'm going to hand it over to Nancy Anderson

Chair Williams and members of the board, this is a preliminary budget presentation for the county executive office. Our office is comprised of two budgetary programs. The first is County Management which includes Executive Management, Clerk of the Board, Cannabis Administration, Legislative Affairs and Economic Vitality, Communications Data Governance and Analytics, and the newly established Compliance and Accountability Division.

The second budget program is risk management. That includes the insurance programs for medical malpractice, workers' compensation, general liability in addition to employee insurance programs such as unemployment and dental. Our office, similar to many of the others that you have heard from this week are affected by some emerging issues and general key challenges that face county.

As noted here we are currently working to develop long-term strategies and policies to maintain service levels and fiscal stability. We're thoughtfully looking at changing organizational structures and processes to proactively adapt to new circumstances. We are assessing the budgetary and operational impacts of several legislative and state changes We are supporting the successful implementation of the county's new Workday Enterprise Resource Planning System or ERP and we are heavily focused on recruiting, retaining and developing qualified staff and proactively advancing effective succession planning.

This slide shows our budget summary with a total operating budget for both budget units of $65.8 million and the general fund contribution is $7.3 million. We have 44 authorized positions in our department. This slide shows the resources that support our functions. You will note that a significant amount, or 99% of these funds are related to risk management insurance programs at $53.8 million in addition to ARPA funds of $30 million that transfer through our budget.

The other sources are general fund contribution is 7.3 million and minor. Other funding from other transfers and some use of department fund balance. Here is a picture of our operating budget by the two programs, Risk Management at $53.2 million and County Management at $9.9 million. Here's a staffing summary. This year incorporates several changes within our office, netting to a reduction of four positions from last year. We added four positions related to a reorg approved and initiated mid-year.

It adds one position in risk management to assist with claims and redundancy. It includes the transfer of the IT director to the new IT department. It converts one equity outreach position funded through ARPA to contract for services It deletes one data analyst position and transfers the corresponding ARPA funding to the DA for a data consultant, and it reflects the transition of the Office of Emergency Management to the Fire Department.

Here's another view of our resources budgeted in our budget programs as indicated previously. Most of this relates to risk management insurance programs and ARPA passing through two other county departments. Our office has been very busy this year facilitating board priorities and carrying out the operational duties of multiple divisions within our office. I will just note a few of these on the next two slides that acknowledge our division's teams and for all of their great work.

This year we have coordinated efforts for further homeless support to the North County through the Dignity Moves Hope Village Project in Santa Maria, We worked with numerous partners to complete the first ever Santa Barbara Broadband Strategic Plan and started an internal working group with several departments to move that forward. With the help of our new PIO, Kelsey Batita, we launched expanded communication efforts to share county information and spotlight our parks and open spaces.

We successfully clerked the Board of Supervisors meetings with new talent and profound teamwork by the Clerk of the Board staff. We improved accountability of department risk management, loss and prevention efforts by creating scorecards and tracking related to policies and procedures to ensure they are in place. We have engaged a diversity equity and inclusion consultant with ARPA funding to begin an assessment to develop recommendations for comprehensive county DEI plan addressing department service and program gaps And we established the Compliance and Accountability Division, and have implemented the board's new policy for monitoring reporting on audit findings and recommendations.

However, our work is never done. These next few slides touch on some of the work we have planned for next year. We will continue to work on several critical initiatives and projects already in progress including criminal justice initiatives and implementation of the Digital Evidence Management System or DEMS with our justice partners. Implementation of the recommendations for the Broadband Strategic Plan. Implementation of the Workday ERP system and development of the County DEI plan. We also will be working on new projects such as assisting the review and implementation of new ambulance services models, development of one-stop shop risk management hub, implementation of a full cost recovery fee structure for cannabis administration and an innovate SBC Black Belt facilitators program.

Issuance of a first compliance and accountability report, coordination of the development of new countywide goals and objectives. And finally we intend to pursue the issuance of debt financing for critical capital project needs Here are a few of our performance measures. The first is related to estimating general fund discretionary revenues, which includes cannabis with the reduction of the estimate for 23-24 cannabis revenue and more typical growth on property taxes we anticipate this to be within range next fiscal year.

The second is a bilingual public communications and outreach issue. Our target is to increase this outreach in bilingual form by at least 10% and we're making progress towards that. One of our goals is to enhance county efforts towards economic vitality by expanding the number of active, collaborative regional economic initiatives or partnerships that the county is engaging in. We started that a few years ago initially with REACH and a few others that has expanded to include broadband, the SEDS, micro-business grants through the Santa Barbara Foundation and others. So we're making progress there as well.

The fourth performance measure is related to our new compliance and accountability function, Eventually over time eliminate repeat findings and post audit reviews. Currently from what we are seeing in our initial reviews of audits, we're running about 10%. That's rather high so our goal over time is to get that to zero. We have been successfully able to retain 100% of the six positions that we've added over the past five years These are three of several recommendations made by KPMG for our office. The first two related to a structured countywide strategic management process and measurement approach, and the Santa Barbara County Strategic Communication Plans are two things we plan to work on in the next fiscal year.

And the third has been completed. This one is in part due to the CEO organization initiated earlier this year, in addition to reevaluating how we establish responsibilities under the CEOs and the rest of our structure. We have no service level reductions. And in summary, we look forward to continue to make progress on several multi-year projects and bring some to fruition.

And we are ready to focus on new efforts as we adapt to our ever changing environment and to support your board the county departments in our community. Our quote is by the late Maddie Stepanek, a renowned author and poet. And we believe it reflects well upon our office. Unity is strength when there is teamwork and collaboration wonderful things can happen.

With that I'm happy to answer any questions you may have.

Questions for the board? Supervisor Labadino

Not a question but observation just I can't believe it's been nine years, Mona. But yeah, it's a long time but just kind of looking back on how far we've come and how nimble the CEO's office has been too with when you talk about what your job is, it would be a difficult job if all five of us had the same priorities and were moving in the same direction all the time which obviously It's hard to do for five different people, so it's almost an impossible task to try to navigate and get to an area that we can all agree on. And so just the amazing job you and your team do. It kind of brings us back all back into focusing on what really matters, and that is the public, so in getting to a place. But I started thinking about what the significant shifts that we've made as a board And how you've been able to navigate that with just the entire shift, our thought process on homelessness and how we deal with that.

And mental health and the commitment to sustainability all the time while you guys are juggling disaster recovery and all these other terrible things. So I know we tell you all the time but one more time, we really appreciate you and we think you're doing an amazing job in your whole team. Really, really appreciate it.

I think it's obvious that he speaks for all of us in that one. Okay, let's go on to Paul for general county programs and fund balances.

Chair Williams and members of the board, this presentation is for the General County Programs Department which includes support to other governments and organizations, general fund reserved and committed fund balances, and ancillary services. The purpose of general county programs is to account for county-wide types of activities that are not typically associated with a specific department's function.

These are primarily support to other agencies such as LAFCO, debt service payments and other board commitments or general administration and contracts including the conflict defense contract and KPMG reviews. General county programs also contain the key discretionary fund balance components for the general fund. Operating expenditures and debt service for this program in fiscal year 23-24 are 5.6 million dollars This includes 1.4 million in debt service payments and funding for the conflict defense KPMG reviews innovate SBC LAFCO and other operating program costs These costs are offset by approximately 4.9 million dollars in general fund contribution as well as minor operating revenues and release of some committed fund balance This chart shows the department is funded primarily by general fund contribution and a minor operating source of federal subsidy.

The large jump we see in GFC going towards operating expenditures is the conflict defense contract that was previously held in court special services and funded with general fund dollars there, that came over mid-year this current year and is now reflected in the recommended budget next year. The funding to general county programs accomplished several key objectives in the current fiscal year, including northern branch jail operations funded in accordance with the plan. 18% maintenance funding being allocated KPMG reviews for four departments completed Several trainings held to promote innovate SBC and funding related to keyboard priorities that was identified and managed through prudent policies Next fiscal year, the objectives remain very similar including northern branch jail funding, 18% maintenance funding which is increasing to $15 million.

The conflict defense contract which I mentioned has been moved back to the county from the courts. KPMG reviews for four departments which are in process or being planned. Innovate SBC training which continues with a goal of 30 employees going through the black belt training and a total of 150 going through the green belt training next year. And we will continue to manage funding board priorities, including critical capital and technology projects. No service level reductions in this department.

In summary, we'll continue to manage these countywide programs that provide assistance to all departments and ensure that the county's ongoing renew efforts and updated big picture goals are being supported and funding will be managed consistent with board initiatives and county policy. And finally, this last slide shows the general fund key discretionary fund balance accounts that are held in general county programs.

This does not encompass fund balances that are maintained within department budgets as all departments also have their own balances for specific purposes. Most of these accounts are associated with a board approved policy and are committed for specific purposes. Some of the accounts are used to receive general fund contribution and pass it through to other departments such as the 18% maintenance, the roads baseline funding, facilities maintenance baseline, hazardous tree mitigation and the jail operations account.

For the cannabis funds specifically all of the actual tax collections and allocations are accounted for through this fund. As indicated in Tuesday's overview, the estimated unadjusted balance at June 30 of this year 2023 for these key general fund balances is anticipated to be about $130 million. Adjusted balances after allocations and earmarks in the upcoming fiscal year is about 72 million, of which 44 million is related to the strategic reserve and equates to 8% of general fund operating revenue.

Some notable changes related to policy or fiscal planning as part of the preliminary budget are 3.3 million being added to the 18% maintenance plan, which increases that total to $15 million. Seven million being earmarked in advance construction reserve to provide cash flow for high cost bridge projects and other capital projects before reimbursements come back.

Three and a half million added to the strategic reserve in accordance with policy to keep that at 8% of general fund operating revenues $14 million shifted from other balances to the disaster recovery account and earmarked to assist with the 2023 storm recovery as we discussed earlier this week. $7.5 million was added to the labor cost set-asides and program stabilization to be released with future cost increases in our five year forecast, and $2.6 million added to the Northern Branch Jail operating plan with half of this coming from GFC and half of that coming from Prop 172.

That concludes my walkthrough of this department.

Chair Williams, I have a question. Can I? Good. Mr. Clemente, speaking about disaster recovery, I know one of the huge priorities for this entire board but definitely for Supervisor Lavinino is getting the access to Guadalupe Beach restored. Is that covered there or are we going to need some additional allocations to make that happen?

Supervisor Nelson through the Chair, that would be the appropriate account to look for that funding first. The earmarks we have there are the $14 million discussed and then there are other earmarks as well for prior disasters that haven't closed out yet that we're looking for FEMA reimbursements to finish out and then we do have a policy to hold three million in their I'm going to go ahead and open it up for questions.

We're not going to have any money in that account, because we already have earmarked needs in 23-24 and past year mark needs there. So I'm just does that your marking include that need in Guadalupe? Or do we need to further enhance that fund to make sure that's taken care of is the question that I have.

Right supervisor Nelson there. There is no specific earmark in there for the Guadalupe specifically.

Supervisor for the chair I think the The bottom line is we don't know. We're holding aside $14 million, and when you see a zero it's because the line before that is at $21 million. That's $14 million earmarked for the storms. And so as Public Works continues to work with FEMA, we'll be tracking that. Like Paul said, if that's the highest priority, we could fund that first. We just don't know given all the other damage. What I would suggest is as we go between now and either budget hearings or even the recommended budget, we will keep tabs with them Public Works, what is it? What does it look like and if we feel there's needs to be more added to that We can certainly do that or we could also certainly bring it back in hearings But we understand we hear that's a high priority

Other questions Then we'll go to public comment. Is there any requests speak from public

chair Williams and members of the board We have no requests to speak on the policy and executive functional group

And mr. Clemente let's go into cannabis revenue update

I just want to say one thing before we leave this. Chair, if it's okay. Strategic reserve at $44 million. That's the full 8%. Just want folks to know in 2011 it was 1.1 percent. We had nine million dollars left in the strategic reserve of an eight hundred thirty five million dollar budget so things are good.

I love your historic perspective.

It's good to come from the bad times you know?

Chair Williams and members of the board. The purpose of this special issue today on cannabis revenue is, as we've noted to your board in quarterly updates and earlier in these workshops, cannabis tax revenues have been declining from peak receipts in fiscal year 2021 coming in significantly under budget in both fiscal year 21-22 and in our current projections for fiscal year 22-23.

Through this fiscal year, there have been enough cannabis fund balance and reserves in cannabis to cover the shortfalls. But with lower revenues estimated at $7.5 million in the upcoming fiscal year, there is not enough anticipated revenue and fund balance to cover all of the previously approved allocations from prior fiscal years. Anticipating a dip in revenue in preparation for last year's 22-23 budget development, your board adopted a policy in December of 21 directing that no new ongoing expenses outside of cannabis program costs should be funded from cannabis revenue.

Furthermore, staff began looking at swapping out funding for some allocations unrelated to the cannabis program that had been funded with cannabis revenue. In last year's 22-23 budget, we swapped $1.1 million of public safety expenses from cannabis tax revenue to Proposition 172 revenue. This coming year, we are recommending a swap of $1,200,000 in ongoing costs with remaining GFC and $5 million in one time allocations from cannabis revenue to other general fund sources.

If revenue estimates hold, this action will balance fiscal year 23-24 expenses but an ongoing issue will remain and further swaps will be necessary in following years if cannabis tax revenues do not recover. Today staff is requesting board approval to proceed with the recommended swaps for inclusion in the fiscal year 22-23 budget. Just a brief background, Chapter 50 regarding the licensing of cannabis operations was adopted by the board in May of 2018 and became operational in June after voters approved the general tax measure.

Payments from operators on a quarterly basis were required to begin with the first quarter of fiscal year 2018-19. We'll see actual revenues by year on the next slide but the cumulative total collected through our projected year end this year is $50.1 million Revenues have been declining since fiscal year 2021 due to oversupply in the market and the drop in wholesale prices.

This is a table that we showed you in March during our quarterly budget update with updated projections in the final 22-23 column. What we see is actual revenues escalating quickly up to $15.8 million in 2021 before dipping back down to a projected $6.7 million in current 2022 fiscal year while expenditures ramped up more slowly over the years. This led to the building of fund balance up to $15.7 million by the end of fiscal year 2021, which is now being depleted to cover the revenue shortfalls.

Current estimates are that we will end this fiscal year with about 5.1 million dollars in cannabis fund balance, which is up by about 500 thousand dollars from our quarter two estimates, which were about 4.6 million dollars at that time. On this slide, we see all ongoing expenses in fiscal year 23-24 currently funded out of cannabis revenue with $5.9 million in cannabis program costs and about $4.6 million in other costs not related to the cannabis program.

This totals to about $10.5 million in ongoing allocations funded with cannabis revenue. The non-cannabis program expenses include 18% maintenance funding that was carved out during the years of growth, library operations funding, the annual equity set aside, Mixteco translation services, three planner positions in long range planning, a capital projects manager and general services and an administrative professional in the elections division of clerk recorder assessor.

All of these items will be funded in the 23-24 budget. Nothing is being cut, but to achieve that we are recommending using the 1.2 million dollars of remaining GFC to move libraries funding and long range planning positions out of cannabis For the one-time costs funded out of cannabis revenue, we have a total of $7.9 million. Many of these are projects that have been funded but not completed yet or set asides for future uses that have yet to materialize. Either way once funding is allocated to a one time use, we earmark that funding year after year to ensure it is still available when the costs do materialize I won't walk through everything on this list But we'll point out the biggest ticket items are the parks trails and open space set-asides in North and South County And the city of Santa Maria recreational opportunity match which combined for five million dollars and are the items We are recommending swapping for other general fund reserves.

I'll get into the swaps more on the next slides but will note that all the one time and ongoing costs mentioned on both of these slides come to a total of 18.5 million dollars So this is our recommended approach to the ongoing expenses in fiscal year 23-24. We're projecting $7.5 million in ongoing tax revenue next fiscal year, and as I mentioned we have about $10.5 million in ongoing costs between both the cannabis program and other non-cannabis program costs. This is a shortfall between ongoing revenue and ongoing costs of about $3 million.

We only have about 1.2 million in available GFC left unallocated and are recommending that we use this to fund libraries and long-range planners to relieve some of the pressure on the ongoing tax revenue. This still leaves a difference of about $1.75 million, which would be balanced with some of the reserves that will carry over from the current fiscal year.

Heading into fiscal year 24-25 next year, however, we would need to do further swaps with GFC to get this $1.7 million out of cannabis as well if cannabis revenues do not recover to a sufficient level to cover all ongoing costs. And as mentioned at the start of this presentation, we did begin swapping revenue out in the 22-23 fiscal year with $1,100,000 of Prop 172.

This is our approach to the one-time expenses. As mentioned, prior year carryover is expected to be about $5.1 million, 1.7 of which will be needed to cover the remaining ongoing costs just discussed on the prior slide. This leaves about $3.4 million in fund balance to cover $7.9 million in one time allocations. That's a 4.6 million dollar shortfall. Our recommendation is to use $5 million in general fund one-time carryover to swap the parks, trails and open space set asides and the Santa Maria recreational set aside.

Moving these earmarks out of cannabis would leave a small cannabis reserve balance of about $400,000. This swap would not affect the available unallocated one time balance of 2.1 million dollars that we've been discussing with your board this week. These recommendations help balance the fiscal year 23-24 expenses and alleviate some but not all of the pressures on the ongoing tax revenue.

Importantly, it is a way to keep prior funding commitments with no cuts needed in 23-24. $1.75 million in ongoing costs will still need to be swapped in 24-25 if cannabis revenues do not recover And if revenues decline further or there's not enough GFC growth to cover ongoing allocations, cuts may be necessary in the future. The recommended $5 million swap of one-time expenses will help ensure previously funded one time programs and projects remain funded.

That concludes this presentation and we are looking for your board's direction today on our recommendations for the funding swaps laid out here.

Questions from the board? Supervisor

Nielsen. Thank you, Chair Williams. Just help me with the swap especially on that $5 million from the trails and the Santa Maria recreational opportunity so we're going to take is it just a transfer or is it really a swap because or do we have somewhere already in the do I already have programs that are scheduled against those expenditures?

Supervisor Nelson through the chair. We have prior year carryover of other general fund discretionary revenues This is in the emerging issues fund balance and we will earmark five million dollars there So it's not transferring cannabis revenue or moving anything out. It's just unear marking Those amounts in the cannabis reserve and earmarking it in the emerging issues where there is five million dollars

So it just a matter where the money's located Not necessarily that it's being programmed at this point