“The county financial picture is stable, and discretionary revenue is slightly better than expected,” county Chief Executive Officer Jeff Van Wagenen said during the board meeting Tuesday. “But the cost of county services is growing faster than revenue sources.”

The $38 million shortfall highlighted in the midyear budget report’ stemmed from mounting cost obligations that the following county agencies were unable to meet from the Department of Public Social Services, District Attorney’s Office, Office of the Registrar of Voters, Riverside University Health System and Sheriff’s Department.

In a 5-0 vote, the board rectified the composite imbalance. About two- thirds of the deficit will be reduced by drawing down General Fund reserves. The remainder of the hole will be plugged with the agencies’ reserve accounts, according to documents posted to the board’s agenda.

“We’ll need to approach the upcoming budget cycle with discipline,” Van Wagenen said, pointing to decreases in federal funding for some programs, like Medi-Cal, and the anticipated decline in interest earnings on bonds while financial pressures persist. “Our general fund budget is still not structurally balanced. The reality is, things cost more, and there’s less money to pay for those things.”

On Monday, all county agencies submitted their budget requests for the 2026-27 fiscal year, and the CEO acknowledged higher outlays will be sought.

The midyear report indicated revenue streams had grown in a few places, principally property taxes, which increased nearly $19 million above the amount first projected at the outset of the fiscal year. That will translate to a 3% rise in discretionary income — $1.35 billion instead of $1.31 billion — by the end of 2025-26 on June 30, officials said.

The county’s composite reserves should reach just shy of $700 million at the end of 2025-26, compared to $655 million at the beginning. Van Wagenen attributed the positive shift to the fact that agencies returned a little more money to General Fund coffers than had been predicted at the end of the previous fiscal year.

The board had formally approved the 2025-26 budget, totaling $9.98 billion, on June 24. The supervisors further approved a tentative hiring freeze for most agencies to put the brakes on deficit spending.

Payrolls continue to consume half of outlays. The county employs nearly 26,000 people on a regular or rotating temporary basis

More than two-thirds of the county budget is composed of programmed spending, including federal and state earmarks for specific uses, along with grants and related external source revenue. The board has little control over those dollars.

Hearings on the 2026-27 fiscal year recommendations for all county agencies are scheduled for the second week of June, followed by tentative adoption of the new budget on June 23.

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“We’re recommending a hiring freeze for all departments that receive discretionary fund revenue,” CEO Jeff Van Wagenen said Monday at the outset of hearings on the proposed 2025-26 fiscal year budget.

He then qualified the statement by noting a few agencies, most notably the Department of Public Social Services and Department of Animal Services, should be exempt from the freeze due to pressing needs.

“The freeze on the other departments … will require them to shrink by attrition,” he said. “Revenue is not decreasing across the system, but we are seeing it flatten and go down in certain areas.”

The last hiring freeze to rein in spending occurred in 2016-17, and Van Wagenen said that action succeeded in saving the equivalent of $40 million to $50 million in Monday’s dollars.

Unavoidable excess costs will necessitate the use of $73 million in reserves during 2025-26. The imbalance, or budget deficit, stems from “inflationary pressures, growing labor costs, unpredictable state and federal funding and necessary investments in aging infrastructure (that) strain our financial capacity,” the CEO said in the 500-plus-page budget proposal submitted to the board.

By law, a tentative spending blueprint must be in place by the start of the new fiscal year, July 1, though formal approval of appropriations can be deferred until September.

The proposed aggregate budget for 2025-26 is $9.98 billion, compared to $9.58 billion in 2024-25.

The Executive Office is forecasting a reserve pool of $655 million for 2025-26. It had been projected at $728 million, but the total will have to be trimmed due to the estimated budget gap.

Payrolls continue to consume almost half of outlays under the budget plan. The county employs 25,632 people on a regular or rotating temporary basis, figures showed.

Public safety agencies started off Monday’s budget hearing, though the county’s top law enforcement officer, Sheriff Chad Bianco, did not appear in person, offering a videotaped statement with the explanation that he was attending a ceremony in Sacramento.

Bianco said the Executive Office’s proposed appropriation for sheriff’s operations “falls woefully short” of what’s needed. The sheriff’s department will end the current fiscal year $10 million in the red, and the proposed “flatline” spending plan for 2025-26 would put the agency $76 million in the hole, according to Bianco.

Unlike in previous budget hearings, the sheriff on Monday pointedly emphasized the need to make the Benoit Detention Center in Indio fully operational. Only one-third of the facility, which was completed in the previous decade, is functional. Undersheriff Don Sharp said about $32 million would be required to complete a two-phase activation of the jail in the coming fiscal year, though the dollar amounts may vary.

Other costs weighing on the department include ballooning labor and pension expenses stemming from the county’s agreement with the Riverside Sheriffs’ Association, the collective bargaining unit representing deputies, as well as court security expenses, the anticipated agreement with the Law Enforcement Management Unit, and internal service obligations, such as for maintenance of facilities.

District Attorney Mike Hestrin acknowledged that his office continues to contend with heavy caseloads, but the agency has remained within spending limits, and he expected to end the current fiscal year in the black, possibly even returning a little money to the county General Fund.

“Everything is more expensive, and that hits us as well,” Hestrin told the board.

He asked for an additional $1.4 million over what the Executive Office recommended in the office’s 2025-26 spending plan, mainly to pay for additional victims’ services specialists and “senior” paralegals to handle more administrative work that might otherwise require the attention of higher- cost attorneys.

Fire Department Chief Bill Weiser gave the briefest presentation, requesting an “augmentation” of $6 million in the agency’s 2025-26 appropriations plan outlined by the Executive Office. The funding would be roughly split between equipment outlays and new staffing expenses.

The EO is recommending an aggregate budget of $219.2 million for the D.A.’s office, $1.17 billion for the sheriff’s department and $577 million for the fire department.

More than two-thirds of the county budget is composed of programmed spending, including federal and state earmarks for specific uses, along with grants and related external source revenue. The board has little control over those dollars.

Direct property taxes remains the county’s largest source of discretionary income. It rose to $574 million in 2024-25, compared to $542.6 million in 2023-24, according to figures. The projection is for a $54 million, or 10%, jump in the next fiscal year.

The Department of Public Social Services consistently requires the highest level of appropriations of any one agency. For 2025-26, DPSS, which is an umbrella for a range of programs, including dependent children, foster care, adult protection and welfare benefits, is seeking $1.63 billion, while the EO has said the ceiling should be $1.59 billion.

Following the next public budget hearing on Tuesday, the board is slated to hold a final one to consider last-minute requests and adjustments at the end of the month.

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