San Diego County officials forecast probable recession and budget shortfall

Financial officials offered grim projections for San Diego County in the coming years, warning the Board of Supervisors that a recession is likely by the end of the year and the county is expected to face a $267 million budget gap. in the next five years.

Inflation in San Diego County is around 6.5 percent, said Ray Major, head of data and analysis for the San Diego Association of Governments. That’s slightly above the national average, and well above the 2 percent target rate set by the Federal Reserve.

Rent and food prices have gone up a lot in the last three years, and while unemployment has been low, that could change, Major said.

“Job security is starting to be an issue here in San Diego as well, as we see the national economy start to slow down,” he said.

San Diego has a diversified economy, fueled by the military, technological innovation and tourism, which offers some protection against a deep recession. But tourism and retail are struggling as people cut extra spending amid rising spending on food, fuel and housing.

“Tourism is down 10 percent,” Major said. “A lot of that has to do with business tourism, which hasn’t fully recovered, and international tourism, which has also been relatively weak.”

Chief Financial Officer Ebony Shelton said the county anticipates a balanced budget this year and next fiscal year “that not only maintains existing services but also provides growth, albeit limited.”

Property tax revenue is rising at a steady pace, he said, but the loss of some one-time healthcare funding will leave gaps for years to come, he said.

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Starting in 2024-25, county officials expect to see “a widening gap between department spending requests and general fund revenues, adding to a cumulative shortfall of $267 million in 2027-28,” Shelton said. .

Shelton said administrators will try to maintain funding for essential services as they work to close the gaps and look to outside sources of revenue and use the layoff to cut spending.

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