MEETING DATE
10/23/2013 |
BUREAU SUBMITTING THIS REPORT
Executive Office |
RESEARCHED BY (PRINT NAME)
Dick Reed |
REVIEWED BY (PRINT NAME)
Alan B. Deal |
REPORT DATE
09/17/2013 |
APPROVED BY
Robert A. Stresak |
DATE APPROVED
10/07/13 |
PURPOSE
Information Only |
FINANCIAL IMPACT
No
|
| ISSUE, BACKGROUND, ANALYSIS, & RECOMMENDATION |
| ISSUE: |
| This is an informational report to the Commission on a projected shortfall in funds and measures POST will implement to attempt to offset this possibility. |
| BACKGROUND: |
In February 2013, Department of Finance (DOF) informed POST that a 5-year decline in revenues to the Peace Officer Training Fund (POTF) were exhausting POST’s reserve account to the point that, if left unchecked, there will be a $5 million deficit by the end of FY 2014-15.
POST staff reported this at the June 26, 2013 Finance Committee meeting, and the July 16, 2013 (teleconference) Commission meeting. Due to continuing low revenues and a greater-than-expected number of reimbursable trainees in FY 2012-13, the deficit is now projected to be $7.8 million.
The unanticipated shortfall is based on a DOF projection that reflects steadily declining revenues to the Peace Officers’ Training Fund and a less-than-robust economic recovery in California. DOF anticipates that POST revenues from the State Penalty Assessment Fund to the Peace Officers’ Training Fund (POTF) will remain relatively flat from FY 2011-12 through FY 2016-17. Attachment A reflects historic and projection data contained in this report.
POST’s year end balances could not be calculated prior to the July Commission meeting because there was insufficient data on which to verify the likelihood and size of the shortfall or to quantify a workable strategy to prevent a deficit from occurring. Since that time, staff has worked collaboratively with DOF to confirm the size of the deficit and develop a strategy to mitigate the shortfall, thereby ending FY 2014-15 with a modest reserve. |
| ANALYSIS: |
Attachment A shows that between FY 2006-07 and FY 2012-13, POST’s annual revenue from the POTF has fallen from $40.183 million to $30.860 million. DOF projects that POTF revenues will slip to $29.908 million in FYs 2013-14 through 2016-17. If this occurs, POST’s reserve fund will shrink to $5.997 million by the end of FY 2013-14 and to a deficit of -$7.824 million in FY 2014-15. Left unaddressed and in the absence of an increase in revenues to the POTF, the deficit would swell to -$22.645 million by the end of FY 2015-16, and -$37.466 million at the end of 2016-17.
These developments presented two separate issues requiring staff to implement a timely resolution:
- POST and DOF concur that spending must be reduce to eliminate a deficit and end FY 2014-15 with a modest reserve. Presently, that would entail a reduction from the previously projected expenditure amount of $59.447 million to approximately $51.623 million. A greater reduction would be needed to ensure a modest reserve at the end of FY 2014-15. Therefore, staff was required to identify at least $7.824 million in reduced spending in FY 2013-14 and/or FY 2014-15. Reductions must come from the Local Assistance account, the State Operations account, or a combination of the two. While the deficit will not appear until the end of FY 2014-15, impact to the field will be lessened if reductions are commenced in the second half of the FY 2013-14.
- Staff must identify which programs will be reduced or eliminated to ensure the targeted reduction in spending occurs, thereby ensuring no deficit at the end of FY 2014-15.
In response to issue 1 - staff reviewed expenditures within the Local Assistance account and the State Operations account. The Local Assistance account is that from which all training reimbursement is paid. The State Operations account includes all staff salaries, facility rent, administrative overhead, letters of agreement, and contracts (training and administrative). Traditionally, the Local Assistance account has received approximately one-third of all POST revenues and the State Operations account has received two-thirds.
In response to issue 2 - staff considered many alternatives to deal with the looming deficit. The focus was on achieving reduction in expenditure levels while continuing to support critical training needs and programs that law enforcement relies on to enhance the competencies of peace officers and public safety dispatchers.
The following options were identified as being the least injurious to the field and the most viable for staff to administer:
1.
|
Beginning January 1, 2014 through June 30, 2014
Backfill Reimbursment will be suspended. (1.5 FY's)
|
Savings: $3 million
|
2.
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Beginning January 1, 2014, through June 30, 2015, all
contract courses that are not mandated or that do not
directly support Basic Courses will be reduced to
their FY 2012-13 actual expenditure. (1.5 FY's)
|
Savings: $6 million
|
3.
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Beginning January 1, 2014 through June 30, 2015, all
Plan IV reimbursement (travel, lodging, commuter
lunch and perdiem) will be suspended. (1.5 FY's)
Contract and mandated training courses are exempt from this reduction. |
Savings: $4 million
|
4.
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Beginning July 1, 2014 through June 30, 2015, all
symposia, workshops and seminars will be suspended.
Team Building Workshops will be exempt from this
suspension but the number of presentations will be
reduced. Other exemptions may be granted at the
discretion of the Executive Director. (1 FY) Symposia,
workshops and seminars previously scheduled through
June 30, 2014 may proceed as scheduled but must
conclude prior to June 30, 2014.
|
Savings: $500K
|
| |
Total Expenditure Reduction:
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$13.5 million
|
| |
Projected Deficit:
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$7.824 million
|
|
FY 2014-15 Fund Balance (Reserve):
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$5.676 million
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To allow sufficient time for the field to adjust to these forthcoming reductions, Bulletin 2013-14, Attachment B was distributed on October 8, 2013. |
| RECOMMENDATION: |
| This report is for information only and requires no Commission action. |
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