LOS ANGELES —Kern County, Calif. has declared a fiscal emergency, anticipating a shortfall because one-third of the county's property tax revenues come from oil companies.
The county is anticipating a $60 million reduction in property tax revenue for fiscal 2015-16 as a result of the steep drop in oil prices, said Nancy Lawson, the county's budget director.
If the board did not take action, it would be facing a $27 million deficit in its $781 million general fund budget, she said.
The county is in no danger of insolvency and the action taken by the county's board Tuesday was a proactive measure, Lawson said.
"The county doesn't expect any fiscal strategies will impact the ability of the county to pay all of its obligations," Lawson said. "It really, truly is a proactive budget measure to allow for flexibility as we go into the next budget cycle to help deal with this."
In addition to the dip anticipated from slumping oil prices, the county is facing an escalation of Kern County Employees Retirement Association pension plan contributions as a result of changes in actuarial assumptions, plus payments on its pension obligation bonds are escalating over the next six years by $16 million annually. Plus, the county has a new jail opening in fiscal 2017-18 that it needs to staff.
The resolution allows the county to dip into a reserve fund and also to reduce the number of firefighters.
While projections put the general fund down $44 million, a 5.6% reduction, the fire fund is facing a $17 million, or 11.5% reduction of its $147 million budget.
The union agreement with the fire department outlines constant staffing, "so there is no flexibility unless we declare a fiscal emergency," she said.
The county assessor looks at oil barrel prices as one component when evaluating assessed values.
"Based on current market, they have projected a $55 price per barrel of oil to determine the assessed value," she said. "The current fiscal year, it was $99 per barrel, so that is a significant reduction.'
The county benefited when oil prices were high; in 2010, for example, its property tax roll increased 4.6% during a year in which the majority of California's 58 counties saw tax rolls shrink.
That gain was attributed largely to the oil and gas industry, which comprises about one-third of the county's roll.
Kern County has just started the process of creating its fiscal year 2015-16 budget. The finance team will go back to the board with recommendations on how potential cutbacks will effect each department in two weeks.
Lawson doesn't know at this point if layoffs will be necessary as the departments will not submit their budgets until April.
"I am not anticipating service level cuts," she said.