Mid‑year budget: CAO reports improved 2024‑25 position but 2025‑26 structural deficit remains; Board approves CAO plan

Humboldt County officials on Feb. 4 reviewed mid‑year fiscal results for 2024‑25 and an outlook for 2025‑26. Deputy CAO Jessica Maciel told the Board the county’s mid‑year view showed an improved 2024‑25 position compared with the adopted budget, but staff project a structural shortfall in 2025‑26 that requires constrained spending.

Why it matters: the mid‑year review sets assumptions for next year’s budget and identifies near‑term actions the county should take to avoid running out of general fund balance. The CAO recommended parameters that the board adopted in order to preserve fund balance for the 2025‑26 budget year.

Highlights from the CAO presentation and recommended package: • Mid‑year improvement for 2024‑25. Staff reported that estimated net general fund expenditures exceed revenues by about $20.3 million through June 30, 2025, an improvement from earlier projections. The change reflected stronger-than-expected discretionary revenues (property tax and interest earnings), Measure Z receipts, and some departmental expenditure savings. After accounting for available fund balance, the estimated structural deficit for 2024‑25 was reduced to roughly $9.9 million. • Outlook for 2025‑26. Under current assumptions and using available fund balance, the county faces an estimated structural shortfall of about $12.4 million for fiscal year 2025‑26. Staff stressed that ongoing cost pressures include salary and benefits (health insurance was highlighted, with a projected county increase of around 15.4%), and more modest increases in base salaries driven by tenure and step movements. • Proposed balancing actions and contingencies. The CAO proposed status‑quo general fund allocations (i.e., setting department general fund allocations at current levels, including previously approved adjustments), restricting new requests for general‑fund allocations in the upcoming budget cycle, and using a portion of a retirement contribution fund (Fund 3250) to smooth pension payment increases. Staff recommended a $5 million contingency for ongoing labor negotiations and a modest $3 million contribution to the county’s general reserve to improve fiscal resiliency. Staff also recommended continuing a 2% Pars contribution and re‑establishing a deferred maintenance annual contribution (estimated roughly $700,000). A $2 million transfer from the tax loss reserve was recommended for one‑time use. • Other fund conditions. Several internal and program funds remain negative or at risk — behavioral health, roads, economic development, and aviation enterprise funds were flagged. Staff said some negative balances reflect ongoing receivables (state or federal reimbursement) but noted persistent risk in several enterprise and program funds.

The board debated the package and the CAO’s recommendation not to accept additional general‑fund supplemental requests during the next budget cycle, which they said was intended to preserve limited fund balance. Supervisors recognized the pressure on departments and said they expect staff to return with proposals where outside funding is available or when urgent issues arise. After discussion the board approved the CAO recommendations (vote recorded 4–1). The CAO said staff will return with implementing ordinance items and supplemental budgets where required and will continue to track negative fund balances and grant receivables.