Show me the money: Supervisors have ‘balanced’ county budget with more than $100 million in federal IOUs – that is bad business

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Now that I’m no longer trying to win friends and influence people in order to get votes, I’m free to speak the truth when I see it. To that end, I’ve been watching with interest as our Santa Cruz County Board of Supervisors puts together our county’s 2024-25 budget. 

At this point, four out of our five county supervisors have agreed upon a proposed $1.2 billion budget. Some time in September, this proposed budget will be voted on by our supervisors.

Already, our supervisors tell us it’s going to be a “bare bones” budget. The pensions of the retired county employees will be paid first. After that, all of the other expenses, costs and overhead of running our county will get paid.   

Because the proposed budget is so lean, there will be almost no money allocated for “new projects.” A “new project” might be something like maintaining and improving our county roads. (A recent grand jury report on roads tells us what we already know: Our roads are in deplorable shape, with an astonishing 63% in poor to failing condition. The lone supervisor who did not approve the budget, Manu Koenig, says he wants more money for roads. 

In order to balance the budget in these times of rising inflation and decreasing tax revenues, our county needs to live within its means. That is good advice for an individual, a family and for a county government. 

The goal of our county supervisors, each of whom are paid over $141,000  a year for their work, is to present taxpayers with a balanced 2024-25 county budget. 

I’ve always understood that a “balanced budget” meant that expenses are balanced against tax revenues and reserves. After reading over the 2024-25 county proposed budget, it appears that this might not be the case.  

As I read it, our supervisors are attempting to balance our county’s budget by including what might be called a number of IOUs from the federal government.

This is money that Santa Cruz County spent during COVID-19 business shutdowns, the CZU fire expenses and many other areas. The feds encouraged our county supervisors to spend the money. They told our supervisors that they, the feds, would reimburse our county.

Our supervisors needed little encouragement to spend the money. And why not? Uncle Sam, with his endless deep pockets, promised to pay the county’s bills. That’s what rich uncles do.

I asked my good friend David Schwartz, who ran for Santa Cruz County Supervisor in District 2, to give me his thoughts on the proposed 2024-25 county budget. David is a numbers and financial guy. His idea of a good time is to dig into financial statements, government budgets and public balance sheets.

After studying the county’s 700-plus-page proposed 2024-25 budget, he was impressed that in the entire proposed budget he didn’t find a single signed statement by anyone in authority to verify or certify any of the numbers.

David found that the federal government still owes Santa Cruz County more than $68 million. There is also an additional $37 million that the feds might also owe our county.

That’s over $100 million, at least. The number is likely closer to $120 million, as Lookout has reported. 

David and I both agree that a roomful of accountants would be greatly challenged to make sense of the 2024-25 proposed county budget. 

September 2024 will mark four years since the CZU fire destroyed 911 homes in Santa Cruz County. As of today, the federal government hasn’t reimbursed the county the money that it promised.

No worries. Our county has been holding an IOU from the feds as an asset on its books for years. We all know (hope) the feds are good for it. So does everyone else who is still waiting for reimbursement from the Federal Emergency Management Agency (FEMA) or their Small Business Administration loan for their CZU fire losses.

After waiting almost four years, many of these people are beginning to despair of ever seeing their money.

If the feds can’t (or won’t) reimburse our friends, our neighbors and our community members, should we perhaps wonder when they might pay up on their $100 million IOU to our county?

If we can’t depend upon when the feds will pay their $100 million IOU to our county, is our 2024-25 county budget really balanced?

For that matter, if our county’s budget can be balanced as easily as slipping a $100 million IOU into the county’s asset column, why stop there?

What if the county could get a $300 million IOU from the feds?

Then the county would have a budget surplus. With a budget surplus as large as that, the county would have lots of money to spend on all kinds of new programs.

If an IOU from the feds is good enough to balance our county budget, then perhaps the county doesn’t really need to be that concerned about having money enough. They just need an IOU big enough.

I’m sure our county supervisors are working diligently to figure out how to balance our county’s budget. I’m sure they are frustrated at the feds. But quiet seething is not action. It’s not going to help us get out of this mess.

I’m told the county’s accounting and asset management group is debating ideas such as stretching out the payment of county invoices from 30 days to 60 days or 90 days before payment. There’s also talk of raising money by borrowing against county property.

Using number magic like this, our county supervisors will be able to pull a financial rabbit out of their hat in order to balance our 2024-25 county budget.

Still, I wonder what might happen when an angry creditor demands our county supervisors “show me the money.”

Tom Decker builds affordable homes, with a focus on homes for victims of the CZU fire. In 2024, he ran for county supervisor for District 5. He has lived in Ben Lomond for almost 20 years. His business, BAM Homes, is located in downtown Boulder Creek.