RIVERSIDE (CNS) -

Riverside County started the 2013-14 fiscal year in better shape than originally expected, with a few million more dollars in the bank, but there's a string of challenges ahead, including red ink on the hospital's and sheriff's ledgers, a county official told the Board of Supervisors today.

``The budget is balanced and the economy is improving, albeit slowly,'' county Chief Financial Officer Ed Corser told the board before it formally adopted a $4.69 billion budget for the current fiscal year. ``We have a few unresolved issues.''

The board waited until today to fully implement the 2013-14 appropriations plan that the supervisors OK'd on June 17 because of concerns about how the state budget process might impact Riverside County.

Corser said nothing at the state level posed an imminent threat to the county's finances, but the same could not be said of local agencies, especially the Riverside County Regional Medical Center.

For the first time in RCRMC's 15-year history, it is staring down multimillion-dollar deficits. By the end of the current fiscal year, the hospital is expected to be $50 million in the red, according to Corser.

RCRMC Director Doug Bagley explained that the shortfall stemmed from county and state actions. The hospital began hemorrhaging funds when the board imposed across-the-board cuts as part of a 2009 deficit control plan, Bagley said. No agency was spared.

Bagley noted that a $21 million annual surplus quickly vanished, and the hospital has been operating in negative territory for the last two years.

Further exacerbating the situation is the rising cost of operating an infirmary for a growing number of jail inmates -- an expense for which the hospital has not been adequately compensated, Bagley said.

He said treating patients under the care of the county Department of Mental Health is another largely unreimbursed expense, and it has only gotten worse since realignment legislation was enacted by the Legislature and governor in 2011, making what used to be a state function a county responsibility -- without commensurate funding.

Treating uninsured patients has eaten into the hospital's budget, as well, with few indigent patients paying their bills, Bagley added. He hoped that Medicaid reimbursements would be increasing after a new federal formula is negotiated in 2015.

Supervisor Jeff Stone, a pharmacist, said that as a ``healthcare professional'' he was dismayed by the hospital's financial straits, which he called ``unacceptable.''

An outside auditor is reviewing RCRMC's operations and will be issuing recommendations on what the facility can do to lower its debt and be more efficient. Bagley acknowledged the hospital was ``caught between a rock and a hard place'' but felt that initiatives arising from the audit would raise productivity and help conserve revenue.

According to Corser, the Sheriff's Department is the other budgetary concern going forward. The CFO anticipated a $39 million deficit on the sheriff's books by the end of the fiscal year. But most of that overspill is tied to board-authorized increases in sheriff's staffing, so the county would be responsible for closing the funding gap by drawing down contingency funds, Corser said.

Sheriff Stan Sniff is engaged in a recruitment drive to fill 500 positions to have sufficient personnel to expand the number of deputies on patrol in unincorporated communities and to adequately staff the jails.

The county has embarked on a jail expansion project. The foremost priority is completion of the East County Detention Center in Indio, which will result in a net increase of 1,200 inmate beds. Plans are also afoot to further enlarge the Smith Correctional Facility in Banning.

The county's correctional system -- with just under 4,000 beds -- has been deemed woefully inadequate to handle increasing space demands. In 2012, around 7,000 inmates were released early to comply with a federal court mandate that every detainee have a bed.

Supervisor Kevin Jeffries despaired that the county seemed to be anchored in policies rooted in ``building jails and building warehouses.'' He complained that the budget blueprint lacked a ``philosophy'' that might better define the county's future.

"We have to keep the bad guys locked up. But what else can we do? We need to be more business-friendly,'' Jeffries said. ``We need to be more job-friendly. Small business owners out there are saying `You're bleeding me to death with fees and delays.'

``Let's help folks survive,'' he said. ``We need a change in our culture. We need to turn this around. I don't want people coming to me and saying that they're going to get a business permit in L.A. County rather than here because of the obstacles.''

Fellow board members generally agreed with the view. County CEO Jay Orr said he understood the message and would carry it to department heads.

According to Corser, the county began 2013-14 with $3 million more in cash than anticipated. He said discretionary income will round out to $592 million in the current fiscal year, rather than $588 million -- the figure assumed before the county's property tax assessment roll was confirmed. The 2013 roll showed 4 percent growth compared to the previous year.

Corser said the county's reserve pool is around $160 million.