Halfway through the fiscal year, Kern County budget officials report that the county's financial house is in order -- running at the level of revenue and spending outlined in the annual budget plan passed last summer.

But county officials predict next year will contain more challenges for the county.

Now the county is starting the process of building a new budget for the fiscal year that will start on July 1.

The 2012-2013 county budget, one of the best since the bottom fell out of the economy in 2008 and 2009, was bolstered by spending on wind-energy and road construction as well as hearty tax assessments on oil industry properties.

But County Administrative Officer John Nilon is recommending that departments plan on getting no more money or staff next year than they have now.

And -- as precaution -- department heads are being asked to draft a plan for how they would cut their budgets by 5 percent if things turned sour.

The exercise is not fun, county leaders said.

"It is very unpleasant. In years past it was even more unpleasant," said Kern County Library Director Sherry Gomez.

The Library Department was hit hard by budget cuts during the worst of the financial downturn. Staffing was slashed and supervisors cut the number of days many of the county's libraries were open all the way down to one or two a week.

Those cuts have not been reversed and Gomez has to hope that the 5 percent cutback plan she will draft isn't needed.

"We hope that they never come to pass. It's something we keep in our back pocket and we hope we don't need it. Fortunately we haven't needed it in the past few years," she said.

Unfortunately there are some dark clouds on the county's financial horizon.

The Kern County Board of Supervisors will discuss that future during its regular afternoon meeting on Tuesday.

The county, Nilon wrote in a letter to the supervisors, expects to see "reductions to property tax revenues for both general fund and fire fund due to an oil and gas assessment appeal and the progressive decline in one-time sales and use tax revenues from wind and roadway construction."

Nilon said an appeal of property taxes by Occidental Petroleum could reduce county government revenues by about $11 million. That's $8 million from the general fund and $3 million from the fire fund.

The current county budget totals $2.5 billion $2.5 billion .

In addition, county departments will need to absorb a 2 percent increase in staffing costs created by a contract deal signed with county unions in March 2012.

Those contracts will force long-term county employees to begin paying contributions to their retirement and increase contributions to health care premiums.

But, according to the packet of reports made to supervisors, the county's health care costs will remain flat in the coming fiscal year and -- due to the continuing impacts of the economic crash on the county's retirement fund and increases in payments on bonds approved years ago -- pensions will cost the county an additional $6.5 million in the 2013-2014 fiscal year.

Nilon said the budget was purposely conservative.

"If things change, we'll adapt to them," Nilon said.

But drafting a careful budget makes it easier to avoid drastic cuts if the financial winds blow harsher than expected, he said.


Supervisors, at their 9 a.m. session Tuesday, will discuss the status of employee retirement investments, which are administered by the Kern County Employees' Retirement Association.

The $2.96 billion fund's actuarial unfunded liability -- the difference between the expected cost of retirements and the money the system is expected to have to pay for those retirements -- increased by $100 million from $1.83 billion to $1.93 billion between 2011 and 2012.

That will translate to a $1.7 million increase in the investment Kern County will have to make in the coming fiscal year to try to whittle down that funding deficit.

In total the county will have to pay $241.4 million into KCERA accounts to fund county employee pensions in the coming year, a figure that also includes bond debts from previous years.

The KCERA funds' market performance was a flat-line .06 percent return.

Adjusted for the ups and downs of the previous few investment years, KCERA reports state, the fund saw a 4.5 percent return.

But that falls short of the 7.75 percent return the county's fund plans to see each year in order to keep its retirement system afloat.