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San Diego Union-Tribune

With tourism down and inflation up, San Diego County braces for a likely recession, and a yawning budget gap

By Deborah Sullivan Brennan,

2023-03-15

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

Inflation in San Diego County is at about 6.5 percent, said Ray Major, chief data and analytics officer for the San Diego Association of Governments. That's slightly higher than the national average, and well above the target rate of 2 percent set by the Federal Reserve.

Housing and food costs are up sharply from three years ago, and although unemployment has been low , that could change, Major said.

"Job security is also starting to become an issue here in San Diego as we see the economy starting to slow nationally," he said.

San Diego has a diverse economy driven by military, technological innovation and tourism, which provides some protection from deep recession, he said. But tourism and retail businesses are struggling as people cut out extras amid rising costs of food, fuel and housing.

"Tourism is down by 10 percent," Major said. "A lot of that has to do with business tourism , which hasn’t come back completely, 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 stable rate, she said, but the loss of some one-time healthcare funding will leave gaps in future years, she said.

Starting in 2024-25, county officials expect to see "an increasing gap between department spending requests and general fund revenues, adding to a cumulative deficit 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 will both look for outside revenue sources and use attrition to cut spending.

This story originally appeared in San Diego Union-Tribune .

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