RIVERSIDE, Calif. -

Riverside County government will end the 2013-14 fiscal year with a balanced budget, but fiscal challenges lay ahead for several agencies -- with the county hospital ranking highest on the list, officials said today.

"They're looking at a deficit of $50 to $80 million next year," county Chief Financial Officer Ed Corser told the Board of Supervisors during a report on county third-quarter finances. "We can use general fund money to make the hospital whole, if that's the desire of the board."

More than 90 percent of the Riverside County Regional Medical Center's income originates from state and federal sources. County general fund appropriations amount to about 5 percent of the Moreno Valley facility's budget.

RCRMC Director Doug Bagley told the board last month that low Medi-Cal reimbursements and rising costs in other programs were impacting the hospital's ledger.

Supervisor John Tavaglione pointed out today that county agencies, specifically the Departments of Mental Health and Detention Health, had been paying reduced rates or next to nothing for hospital services, leaving the medical center to effectively subsidize those agencies while losing money.

"They're not paying their fair share," Tavaglione said. "Issues like this need to be addressed."

Corser said many of the hospital's patients are indigent and slow to pay their bills, making revenue collection a long-term and uncertain process.

The board did not signal interest in covering the hospital's shortfall with general fund appropriations. However, the Executive Office vowed to continue looking at ways to rein in its costs.

Tavaglione worried about the facility's ability to compete for federal funds with the full implementation next year of the Patient Protection and Affordable Care Act, better known as "Obamacare."

The fire department was also contending with persistent red ink. According to the budget report, county fire Chief John Hawkins had made progress containing costs but would not be able to close a $4.9 million gap in the agency's budget before July 1, the start of the next fiscal year.

At the the Executive Office's recommendation, the board approved a $3.9 million appropriation to offset the department's expenses, some of which stem from the agency's conversion to an all-digital public safety communication system that the county has been working to bring into operation over the past five years.

Corser told the board Sheriff Stan Sniff was expected to close the fiscal year with a balanced budget for his department, after starting off nearly $10 million in the hole.

Several years ago, the board enacted a policy to bulk up a fund strictly set aside for public safety reserves. Supervisor Marion Ashley told Corser and county CEO Jay Orr today that more work should be put into expanding the county's economic uncertainty reserves, which have remained below $150 million after peaking at $500 million in 2007.

Other board members agreed that gradually boosting reserves to $250 million would be a wise decision.

"All we need is a little blip, and we're in trouble again," Supervisor Jeff Stone noted.

Orr said charting a course based on "conservative fiscal principles" would be in the county's best interest going forward.

"Even with the revenue increases forecast, balancing the budget will continue to require taking the long view with prudence and restraint," he said. "We must remain grounded and pragmatic."

The CEO noted that cuts in services and layoffs are possible to keep the county budget structurally balanced.

"It will be difficult, but necessary," he said, without citing specific figures of potential layoffs.

According to the budget report, the regional economy is showing signs of a gradual recovery, dovetailing with improving economic conditions throughout the state.

Positives include a lower unemployment rate, thanks largely to hiring in the leisure and hospitality sector, as well as increases in sales taxes and increases in the number of building permit applications.

According to the report, sales taxes in unincorporated communities are up 9 percent compared to a year ago. County officials attributed most of the jump to activity tied to construction of the 250-megawatt Desert Sunlight and Genesis solar power plant near Blythe.

Building permit applications surged 26 percent in the most recent quarter compared to a year ago, bringing in $3.4 million in permit fees, the report said.

County officials expected a .15 percent drop in the county property tax assessment roll, reducing discretionary revenue by roughly $3 million in the current fiscal year. Despite the decrease, discretionary revenue was likely to top out at $587 million by July 1 -- around $17 million more than predicted when the budget was approved last July.

This story was written by Paul Young, City News Service