As Steve Szalay prepared to hand over the reins to the top spot in county government, he talked about his experiences as interim county executive and sent a message to his successor: “Don’t screw it up.”

Szalay came on board with the county in December of 2009 when County Executive Terry Schutten retired. It was a temporary assignment that would bring Szalay out of retirement just long enough to put the county back on track while the Board of Supervisors recruited a permanent county executive.

With more than 40 years’ experience in California government, including work in the administration of four counties and as executive director for the California State Association of Counties, Szalay was ready for new challenges.

“(Sacramento County) was in bad shape, and it needed to be ‘repositioned,’ ” Szalay said. “We’re not ‘recovering,’ we’re positioning in a different direction. This is what I enjoy most. I’m happiest when there are problems to solve.”

He wanted problems to solve, and he got them.

For starters, the county budget was in need of a serious overhaul.

Sacramento County has a budget of $3.5 billion, Szalay said, and the general fund makes up $2 billion of that amount.

When the county supervisors approved the 2009/2010 budget, it was balanced with $80.2 million of one-time resources and internal borrowing – which damaged the county’s credit rating.

“When I walked in the door, they’d had a budget in place for five months, and they already knew they were about $15 million out of balance,” Szalay said. “The consistent one-time fund use took (the county’s) credit rating from A-minus to triple B-plus.”

The previous year, the budget gap was smaller ($123.7 million), but the board used more one-time resources that year ($103 million) to plug the hole.

“They were in denial about the recession and getting further and further behind,” Szalay said.

In addition to a runaway budget problem, the county was working with labor contracts that created havoc with the balance sheet.

Szalay said Schutten and the board entered into five-year labor contracts in 2005/2006, when times were good – contracts that included cost-of-living increases and equity increases for every bargaining unit for every year.

“While revenues where going down, expenses were going up,” Szalay said. “What wizard decided that was a wonderful thing? I don’t know what they were smokin’ when they came up with the idea.”

Despite the continual downturn in the economy since 2006, the labor contracts stayed in place.

The first order of business as “ICE” (the acronym-turned-nickname was effective almost immediately, Szalay said) was to set up a plan focused on four key areas of improvement: budget/fiscal, labor, debt and efficiency.

“You want current revenue to pay for current services,” Szalay explained, “and then you want a small contingency to take care of unexpected things that happen in the year, and you want managers on top of things to make adjustments quickly when it’s needed.”

To solve fiscal challenges, Szalay said he worked with management and the board to make “reasonable and necessary” cuts and to reduce the amount of one-time funds used to fill budget shortfalls.

Through those efforts, county supervisors cut more than 1,000 positions, streamlined some services and reduced the budget gap by almost $130 million over two years.

“We’re now within $19 million of having current revenue pay for current services,” Szalay said. “That’s huge.”

Next, he worked to negotiate labor contracts that didn’t undermine the budget.

What the county ended up with were new labor contracts that had no increase the first year, no increase the second year, and the third year, “we’ll talk,” Szalay said.

The new contracts also included lower-tier retirement for new employees and stopping heath care stipends previously given to retirees.

“All 26 unions agreed to the terms,” Szalay said. “That was a real accomplishment.”

Of everything he has worked on as interim county executive, though, the work that really ignited a fire in Szalay was what he calls “new efficiencies.”

“This is the fun stuff,” Szalay said. “This is where you get things done.”

The “new efficiencies” are composed in a list of 56 projects that Szalay and county management worked on for the past 21 months to save money, increase revenue and enhance services throughout the county.

Some projects changed policy to direct new revenue into the general reserve fund every year and not pull from the fund to fill budget gaps.

Other projects created new contracts with private nonprofit and corporate entities to take over services previously operated by county staff.

“This county has one service delivery policy: Hire a bunch of civil service workers and put ’em to work,” Szalay said. “What we need is a mix. We should (also) have some contracts with the private sector, some contracts with (the) nonprofit sector, some joint services with the city.”

Reorganization projects were also part of Szalay’s plans.

Szalay took the “three-legged stool model” of county services that includes municipal services, countywide services, and internal support operations, and looked for ways to combine operations or reorganize to eliminate redundancy.

Szalay estimated that the changes will save the county between $10 million and $13 million each year in operating costs.

When asked if he feels he’s accomplished what he set out to do for the county, Szalay was emphatic.

“Yes. Definitely.” he said. “We’ve adopted two budgets, gone through negotiations of labor contracts, worked on 56 efficiency plans and started working on marijuana permitting,” Szalay said.

“The time is good for a hand-off,” he added.

As Szalay returns to retired life, he said he and his wife, Diane Cummins, a special advisor to Gov. Jerry Brown, will spend time relaxing with family in the days to come, and they are planning a month-long trip to Italy in September.

After that, Szalay said, he will probably do some independent consulting work or focus on projects for the county on a contract basis.

The new county executive, Brad Hudson, is expected to take over on Aug. 14, and Szalay said he has every confidence in Hudson’s abilities.

Hudson’s background is in economic development, Szalay pointed out, so when the county experiences new growth – “and it will,” Szalay assured – Hudson will have plenty of opportunity to “show his stuff.”

“I’ve had the pleasure of being able to make some changes at the top of this organization, and there’s an excellent management team that I’m turning over to the new guy,” Szalay said.

Does he think Hudson can keep things going in the right direction?

“He’d better,” Szalay said. “He knows that, for the next few years, fiscal stability has to be the No. 1 goal.”

Szalay said he’ll have two days to brief Hudson about the position before stepping down, and he’ll have one last comment before handing over the keys to the office:

“Now, don’t screw it up! I’ll be watching you!”