Los Angeles County Supervisors Don Knabe and Zev Yaroslavsky began the process of creating a permanent Rainy Day Fund today to combat potential financial shortfalls the County may face in the future.
Today’s motion directs the County’s Chief Executive Officer to examine how a Rainy Day Fund would be structured, including transferring three-percent of the County’s annual fund balance into the Rainy Day Fund, how these new reserve funds would be spent, and the maximum size the fund would have to reach before any excesses could be spent for one-time purposes. In the past, the County has created temporary rainy day funds on as-needed basis and as surpluses have been available.
At today’s meeting of the Board of Supervisors, staff members updated the Board on the County’s current budget health and the potential impacts the national economic slowdown could have on County coffers in the next several years. Today, the financial health of Los Angeles County is very strong.
Despite the current financial strength, the County is facing looming financial challenges which add to the need and relevance of an on-going Rainy Day Fund. These challenges include the State budget causing $129 million in funding reductions to the County, the Department of Health Services facing an increasing budget deficit over the next several years, and an estimated structural deficit of $181 million in the County’s operating budget by next year.
Our County is in solid financial shape today, but we are facing a number of budget uncertainties in the next few years, said Supervisor Knabe. The best time to prepare for future budget shortfalls is when times are still good. That is exactly what we are doing today by calling for the creation of a permanent Rainy Day Fund.