Orange County looking at $1.2B hike in annual budget

Orange County officials are proposing a $10.8 billion budget for the 2025-26 fiscal year, an increase of about $1.2 billion over the current year's spending plan.

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The general fund budget, which offers the most flexibility, is projected at $5.4 billion, up from the current fiscal year's $4.8 billion. The remainder of the budget is generally restricted by law, limiting the county's ability to adjust how those funds are used.

"It is higher than last year," Orange County Supervisor Don Wagner told City News Service. "We have enormous new mandates from (the state) legislature to deal with, issues from the court, so it's a frustration. Yes, it's bigger than last year. I won't defend that. But that is in the inevitable way of government budgets everywhere, and I wish we could get a handle on it. Everything is more expensive."

Orange County Board Vice Chairwoman Katrina Foley said the funding for state projects hasn't kept up with the costs.

"Our revenues are up but expenses related to unfunded mandates are not matching the increase in the revenue," Foley said.

The new mandates include programs for social services, security in courtrooms, healthcare, and ongoing reviews of old murder convictions that might qualify to be overturned due to new state laws, Foley said.

The county expects $1.2 billion in general purpose funds, an increase of $78.5 million, largely due to a $72.1 million rise in property tax revenue.

Revenue from the half-cent tax to fund law enforcement from Prop. 172 is down 2.5% this year compared to last fiscal year, officials said. The estimated revenue is $427.6 million, with $342.1 million allocated to the Orange County Sheriff's Department and $85.5 million to the District Attorney's Office.

That decrease isn't as bad as was expected, Foley said.

"We were at 5% (decrease) so that means we improved in our sales tax," Foley said. "When we shop local, when we buy from our local stores, retailers and not online those dollars stay in our local market and that helps us fund public protection."

The Prop. 172 revenue decrease is bad timing, Wagner noted.

"The 172 revenue is down but the demands on law enforcement, the public defender and D.A. are increasing, so it is a challenge to continue to provide the level of support ... without making cuts in other places," Wagner said. "So we've been very clear with department heads that belt tightening has to happen, which has been happening."

County officials are also keeping an eye on the federal government and the impacts a new tax-cut bill and tariffs will have on the economy. Foley said there are reports that car sales, for instance, have slowed down due to tariffs.

The county is expected to receive $27.5 million from "realignment revenues" over last year for a total of $945 million. Of that, $266.4 million is budgeted for health, mental health and social services, $666.7 million for public safety and social services and $11.4 million for juvenile criminal justice.

The county is planning to eliminate 163 jobs by not filling vacant positions, although department heads may attempt to restore some of those cuts. For instance, officials from the District Attorney's Office recently met with county leaders about the upcoming budget, Wagner said.

"They were asking we take a hard look at the positions that were frozen and see if there's relief there," Wagner said.

The county can hire back some retired employees on a part-time basis but only for about six months or so, Wagner said.

"If the legislature wants to give us relief from that then that would help," Wagner said of the pension restrictions that prohibit longer tenures for returning employees.

One looming financial concern is the Airport Fire and the series of legal claims that blame the county's Public Works Department for its ignition.

"We are reserving some money" to prepare, Wagner said. "We are perhaps being a bit more frugal with restoring augmentations than we'd like to because that money we're going to need to make (legal claim) payments. It's not a great big bill due immediately, but over several years now, and we are planning accordingly. This budget and next will be tight. We've made no secret about that."

Orange County CEO Michelle Aguirre said officials have transferred funds from other county departments to pay for legal claims.

"The intent of that is to provide us with flexibility ... as we continue to mediate with claimants," Aguirre told reporters on a conference call Wednesday. "We want to make settlements in good faith. If we have a need to make internal borrowings that's what it's there for."

It's unclear how much the county will need for the claims, she said.

"The claimants have not provided us with all of the details related to their claims," she said. "We don't have a specific idea on how much that will cost us."

Aguirre also noted that the state continues to return the least amount of money in taxes back to Orange County.

San Diego County, for instance, receives "more than double what Orange County receives, so we have to be very strategic and plan well ahead to manage the budget."

Orange County Chief Financial Officer Kim Engleby said this year's spending plan was "one of the most difficult and problematic in many years."

But, she added, "We've been through other challenging times since the Great Recession and COVID-19... We know what to do."

Some projects included in this year's budget are a revamping of the Juvenile Hall campus and efforts to create services to help those released from jail or aging out of foster care have shelter and training to re-enter the workforce, Engleby said. A workforce entry center will be developed at the former animal care site, she said.

The workforce re-entry site will have a retail and dining businesses to help participants get on-the-job training, she said.

"And it will have housing for about 50 people who participate in the program," she said.

Aguirre added, "The goal is to also address our homeless population," because many of the people exiting jail have trouble finding shelter.

The re-entry centers can also serve as shelter for longterm transients who finally want to get off the streets, she said.

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