CAO Doesn’t See Tobacco Funds as an Easy ‘Bailout’

Although county government is set to receive $8 million in unrestricted tobacco settlement funds by April, the county’s new chief administrator said Thursday he likely will not rely on the windfall to erase a projected $5-million deficit.

Harry Hufford, who took over as the county’s top executive Monday, did not rule out using the money, generated by a states’ lawsuit against major tobacco companies to recover the costs of treating smoking-related illnesses.

But he said he must first fully analyze the county’s financial position before making a recommendation to the Board of Supervisors. His initial leaning, Hufford said, is that the funds would not be tapped to make up the shortfall that will appear by June 30 if other adjustments to the budget are not made.

“The tobacco settlement is obviously very useful to the county. . . . But I’m certainly not looking to that as the bailout,” Hufford said.

Intense competition for the tobacco dollars among county departments means that it may be politically difficult to target them to pay off millions of dollars in unanticipated expenses brought on by last year’s mental health care merger and a federal Medicare lawsuit--the primary causes of the county’s anticipated shortfall.

Still, the settlement money--expected to average $9 million annually for the next 25 years--will be one of many options county officials consider as they seek ways to eliminate the deficit, Hufford said. The final decision rests with the supervisors, a majority of whom have indicated they would be willing to use at least a portion of the lawsuit proceeds to get the budget back on track.

Jockeying for the money has been intense in recent months. Health Care Agency chief Pierre Durand has made clear that he believes the settlement was intended to beef up funding for public health programs.

He has a powerful ally in Supervisor Frank Schillo, who on Thursday proposed that the board adopt an ordinance that would designate a portion, estimated at less than 50%, of the settlement funds for a variety of programs serving the mentally ill. A secure source of revenue is needed to build more housing and a locked nursing facility for mentally ill patients leaving the hospital, Schillo said.

Both problems have been identified as gaps in the county’s mental health system and can be paid for with the tobacco dollars, the Thousand Oaks supervisor said.

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The county should also use the money to start a psychiatric residency program tied to the Ventura County Medical Center, Schillo stated in a proposal prepared with Behavioral Health Director David Gudeman.

Schillo has asked his board colleagues to discuss the proposal at Tuesday’s board meeting and then refer it to a subcommittee, headed by Schillo and Supervisor Judy Mikels, that will develop recommendations on how the tobacco settlement should be spent.

“If you don’t take action, then we will never do a damn thing with that money,” Schillo said. “I want to be a county that does something positive with this money, who can say after 20 years, ‘Look what we built here.’ ”

Other supervisors say they, too, want to build more housing for the mentally ill. But committing the money in an ordinance would mean the board has less flexibility to decide how those dollars should be designated each year, Mikels said.

“I don’t mind an ordinance stating that we will follow a certain plan for beefing up our mental health services,” Mikels said. “But we don’t know what changes might happen in the law over the next 20 years. To say, by ordinance, that this is how we will spend this money is just too inflexible.”

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Supervisor Kathy Long said she also has reservations about a local law restricting how the dollars are spent. Supervisors six years ago adopted an ordinance that specifies that all funding generated by a special half-cent sales tax be funneled to four county law enforcement agencies--an action that has generated controversy because the money is unavailable for other county programs in need.

“If we are going to start to segment our budget by passing ordinances, it gets to be very convoluted and unnecessary,” Long said.

Schillo said he is not “wedded” to the ordinance proposal. But he hopes the board can reach consensus soon on how the tobacco settlement dollars will be used.

“I’m just trying to get conceptual agreement through the board before we get any further down the line on how to use this money,” Schillo said.

Earlier Thursday, Hufford and County Auditor Tom Mahon held conference calls with credit-rating agencies to assure them that the county was meeting its financial obligations. They also told the rating firms and investors that the tobacco settlement money would be available and ensure that the government’s bills would be paid on time.

Hufford said the financial officials seemed pleased with the update, but said they would continue to monitor the county’s finances.