California County Declares Fiscal Emergency Due To Oil Price Plunge
LOS ANGELES, Jan 28 (Reuters) - Plunging oil prices led California's Kern County to declare a fiscal emergency on Tuesday, a move that allows officials to tap into a reserve fund as tax revenue faces a big decline due to the lower oil prices.
A roughly 50 percent drop in crude prices since the summer is hitting budgets in U.S. oil regions. Kern County, in central California, is at the heart of the state's oil production.
Officials in Kern County, with a population of about 900,000, say the plunge in oil prices has cut projected property tax revenue for the 2015/16 fiscal year budget by $61 million.
Oil companies account for about 30 percent of the county's property tax revenues, said Lee Smith, an assistant county assessor. Roughly two-thirds of the county's revenue is gleaned from property tax.
Overall, the projected drop in property tax revenues, combined with rising pension costs, will cause a $44 million hit to the county's general fund in 2015/15, said Nancy Lawson, the county budget director.
The general fund is currently $781 million and in surplus. But by 2015/16, officials predict a $27 million general fund deficit, Lawson said.
By declaring a fiscal emergency, which the Kern County Board of Supervisors voted for on Tuesday, officials have the legal authority to tap into a $40 million reserve fund to shore up the budget. It also gives them greater power to cut staffing levels in the county fire department.
Lawson said if low oil prices persist, the price drop will have ripple effects in other parts of the economy. The area is braced for significant layoffs in the oil and gas sector, which will lead to diminished sales and use taxes, further denting the budget, Lawson said.
The county budget is also under increasing strain because of pension costs. Kern County does not pay into the California Public Employees' Retirement System, or Calpers, which administers most public pensions in California.
Most of Kern's pensions are administered under a separate system established in the late 1930s for a group of California counties.
Those pension costs are rising. Estimated pension costs for fiscal year 2015/16 are $231 million. The county also has $213 million in outstanding pension obligation bonds the county issued in 2003 to shore up its pension fund. They begin to mature in 2022.
(Reporting by Tim Reid)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.