Title
Human Resources Department recommending the Board approve and authorize the Chair to sign a Fiscal Year 2025-26 budget transfer increasing the use of fund balance and appropriations by $235,000 in the Retiree Health Fund and the use of General Fund Contingency in the amount of $175,000 for the Human Resources Program, as well as other minor budget adjustments.
FUNDING: General Fund Contingency and Retiree Health Fund.
Body
DISCUSSION / BACKGROUND
After completing a year-end projection for the Human Resources and Risk Management programs, it was determined that a budget transfer is needed to ensure adequate appropriations are in place for projected FY 2025-26 expenditures.
A budget transfer to increase both the use of fund balance and appropriations by $235,000 in the Retiree Health Fund is needed. Under the County’s labor MOUs, the County provides Retiree Health Defined Contribution (RHDC) payments toward health premiums for eligible retired employees. To support this obligation, County departments contribute to the Retiree Health Fund, and funds are then transferred out as RHDC payments are made.
The RHDC budget is set using an actuarial report completed every two years by an outside vendor. The FY 2025-26 budget, developed in Fall 2024, relied on the actuarial report based on June 30, 2022, data, which was finalized in the Spring of 2023 and was the most current report available at that time. However, the report did not reflect subsequent increases in health premiums, salaries, and inflation. These cost increases have resulted in higher contributions than initially budgeted. The recommended budget transfer will fully reimburse the Retiree Health Fund for FY 2025-26 RHDC costs.
The Human Resources Department (HR) has also completed its final FY 2025-26 projection, which shows an estimated increase in Net County Cost of $160,000. At Midyear, HR anticipated a $70,000 increase in Net County Cost, driven by:
• $60,000 in higher health benefit costs (rate increases and new benefit elections made after budget development), and
• $10,000 in services and supplies related to anticipated PERB (Public Employment Relations Board) hearings.
The current year-end review now reflects a total Net County Cost increase of $160,000-an additional $90,000 above the Midyear estimate. This increase is attributable to an unbudgeted separation payout for an employee ($50,000) and costs associated with an HR investigation for another General Fund department ($40,000). The Department is requesting $175,000 in contingency funds to cover these increased expenses. An additional $15,000 is being requested for unanticipated costs as of the time of the budget analysis.
In addition to the RHDC and Human Resources adjustments described above, the recommended budget transfer includes several revisions within the Risk Special Revenue Funds, with no impact to Net County Cost or the General Fund. These revisions primarily relate to how County Counsel charges are allocated across Risk programs. Previously, these costs were recorded in the Risk Operations Program (0900000) and distributed to other Risk programs through the overhead allocation journal based on labor. Beginning with this fiscal year, actual County Counsel costs will be charged directly to each Risk program. Due to this change, budget adjustments are required within the Health Program (0930000) and the Workers’ Compensation Program (0920000).
ALTERNATIVES
Should the Board opt not to approve the budget transfer, it would result in inadequate appropriations for various year-end entries.
PRIOR BOARD ACTION
N/A
OTHER DEPARTMENT / AGENCY INVOLVEMENT
Chief Administrative Office
CAO RECOMMENDATION / COMMENTS
Approve as recommended.
FINANCIAL IMPACT
The Retiree Health Fund has sufficient fund balance for the retiree health contributions. The Human Resources Department is requesting $175,000 in General Fund contingency funds.
CLERK OF THE BOARD FOLLOW UP ACTIONS
Upon Board approval, obtain Board Chair signature on the attached Budget Transfer and forward to the Auditor’s Office for final processing.
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Joseph Carruesco, Director of Human Resources