BAKERSFIELD, CA -- The Kern County Board of Supervisors learned Monday KMC has a $64 million budget shortfall that's getting bigger each month. Although Supervisors did not directly blame KMC CEO Paul Hensler for the budget blunder, after their financial meeting, supervisors terminated Hensler.
Supervisors say these financial revelations could cause cuts to every department in the county.
"It isn't just a mistake," said Mike Maggard, chairman for the Kern County Board of Supervisors. "It is a profound mistake."
The mistake was revealed to the board by KMC's new Chief Financial Officer, Sandra Martin at the Board of Supervisors monthly meeting at KMC. Martin told supervisors she's only been on the job for 45 days.
The CFO said a audit conducted by Martin and a third party company, Toyan and Associates, revealed that since 2006 KMC has over-reported revenues, meaning it collected more money from the state than it's owed.
Paying that money will create a massive budget shortfall for the county-run hospital. The CFO said KMC owes the state about $28 million.
To make matters worse, Sandra Martin said the county won't receive $35 million dollars in state funding it was expecting. However County Administrative Officer John Nilon said during budget discussions the board of supervisors allocated about $30 million dollars to KMC to offset that revenue loss.
All together the county estimates a $64 million shortfall that county officials say is growing each month.
"It is very disappointing that we receive this news today and we will determine who is responsible for that and take steps to make sure that doesn't happen again," said Supervisor Maggard.
Immediately after the financial report was given to the board, supervisors went into closed session to discuss CEO Paul Hensler future employment with KMC. After private discussion the board revealed that it terminated Hensler's contract immediately saying they no longer had "confidence" in the CEO.
Hensler has been the CEO at KMC since 2007. During the board of supervisors meeting Monday afternoon Hensler accepted responsibility for KMC's financial hardship.
However KMC's Chief Financial Officer said the mistake was likely made by "ill-informed and lazy financial staff."
Supervisors said they can wait to pay back the $28 million because those bills will not come immediately, but monthly shortfalls are an immediate issue because the county is losing $1.6 million per month to operate the hospital.
County officials say supervisors need to find an extra $20 million to balance the budget this year. Their immediate plan is to cut KMC services that won't affect current revenues. Nilon said the county must be careful because if supervisors cut services that bring in revenue to the hospital, it will compound the problem.
"What we need to do is be strategic and look at the things that are not required by law and are not making the county money and attack those first," said Nilon.
Nilon said the county has two options besides adjusting KMC's budget: dip into the county's $96 million in reserves or cut department budgets. Nilon said the board could look at cuts to all departments, possibly 4 percent to 6 percent, to make up for KMC's shortfalls.
Nilon said the board of supervisors could also consider repealing new expenditures like the addition of hours at Kern County's libraries, the addition of rural crimes officers to the Kern County Sheriff's Department among other things.
KMC said these budget shortfalls are only preliminary. There could be more or less. CFO Martin said she and Toyon and Associates need at least 90 days to lay out the extent of KMC's financial situation.
However Nilon hopes supervisors devise a plan by early October.
