(This story has been updated because an earlier version included an inaccuracy.)
Monterey County is facing a projected $39.7 million deficit in the coming fiscal year, according to county officials.
The shortfall is due to a combination of factors, county officials say, including rising labor and operational costs, ongoing impacts from multiple natural disasters, and the loss of one-time and federal funding.
On March 25, Monterey County Board of Supervisors held a budget workshop to delve into its current $2.25 billion fiscal plan and consider options to manage the anticipated shortfall.
A county presentation showed that the current deficit is projected to grow to $67.4 million and $93.6 million in the coming two fiscal years.
Biggest revenue sources, property tax and TOT
Property tax revenue, transient occupancy tax (TOT) are the top sources of discretionary revenue for the county, bringing in an estimated $246.5 million and $38.8 million, respectively for the current fiscal year.
Further growth in property tax revenue is expected to grow, as is the transient occupancy tax, assuming there is not an economic downturn, according to county officials.
Cannabis tax revenue is down significantly from pandemic highs when the state industry experienced some of its biggest earnings.
Latest county estimates $3.6 million in cannabis revenue for the current fiscal year, down from prior estimates of over $5 million. In 2021, the county brought in $20.1 in cannabis revenue.
General fund expenditures expected to grow at faster rate than revenue
General fund expenditures are projected to grow at a faster rate than revenue, according to the budget presentation.
Expenses will continue to grow in forecast years due to cost drivers including, wage increases, health insurance, general liability and workers compensation and pension costs.
To address the anticipated shortfall, the county stated it has implemented cost-saving strategies, including a hiring freeze, not filling vacant positions, eliminating long-term unfunded positions and exploring opportunities to implement technology into county processes where appropriate.
General fund contributions increased by $3.5 million this fiscal year due in part to the supervisors directing 25% of the transient occupancy tax to the county’s road fund.
Budget hearings are scheduled for May 28.
This article originally appeared on Salinas Californian: Rising labor costs, loss of federal funding lead to Monterey County budget woes
Reporting by Roseann Cattani, Salinas Californian / Salinas Californian
USA TODAY Network via Reuters Connect
