Mayor’s budget proposal: Deficient, but not a deficit

Okay, time to take a look at the Mayor’s proposed budget. The very first thing I would like to note about this budget is that the 802 page PDF is not properly tabbed, making it a ginormous pain in the ass to try to read. Dellums’s version of transparency in government, I guess.

Okay, let’s get started. For next year, we’re anticipating an $83 million General Fund deficit. The Mayor’s idea of the best way to deal with that is to put off a bunch of costs to a time when he’s no longer Mayor.

So, revenues for the General Fund were $50.8 million less than last year, but expenses are $32 million higher, leaving us with an $83 million hole to close. Those extra expenses include the extra funding we’re going to have to give Kids First, a 4% cost of living pay increase for police ($5.6 million), and rising medical costs. Oh, and also a little over $4 million in expenses that we couldn’t afford last year, so just pushed off to deal with in July.

So what are we going to do about all this? Well, we’re going to have to cut some of our 4000+ positions. This is what’s been proposed to be cut from the General Fund:

  • Mayor: cut 1.50 FTE (positions are currently vacant)
  • City Administrator: cut 1 FTE
  • Contracting and Purchasing: cut 1.5 FTE
  • Information Technology: cut 5.6 FTE
  • Finance & Management: cut 6.91 FTE
  • Human Resources: cut 5.45 FTE
  • Fire Services: cut 2 FTE
  • Library Services: cut 14.05 FTE
  • Parks and Recreation: cut 9.54 FTE
  • Total FTEs cut: 52.55

So…perhaps you’re thinking right about now that losing less than 60 FTEs seems, um, pretty painless compared to what you were told to expect over the last few months. Perhaps you’re thinking that it doesn’t seem like very many cuts in the face of an $83 million deficit. If you aren’t thinking those things, then you should be. I’m going to take the actual expenditure cuts and revenue enhancements the Mayor proposes first, then we’ll get to the trickery.

Okay, revenue increases include the following:

  • $0.50 million from a business tax amnesty. (one-time revenue)
  • $0.55 million from the change to the City’s real estate transfer tax on July’s ballot.
  • $0.30 million from the marijuana tax on the July ballot.
  • $1 million from higher parking ticket prices
  • $1 million by increasing charges for services (like at Rec Centers and such)

And that’s it. Now, the cuts.

  • Those 52.55 eliminated FTEs I listed above? Yeah, that’ll save a whopping $2.8 million.
  • Save $0.8 million by downgrading a few positions and fiddling with some work schedules.
  • Monthly city shutdowns. (This amounts to a five percent pay cut for civilian employees.) Saves $3.44 million.
  • Five percent retirement increase in retirement contribution for civilian employees. Saves $3.57 million.
    • Okay, I have to pause here. I’m trying to avoid too much “we should do this or we should do that” while explaining the budget, because my suggested balancing measures are going to get a post of their own later on, and I’d rather wait for that. But, I cannot let this one go. They’re calling this a 10% concession. Which, well, it is, but this is the absolute dumbest way of implementing a 10% concession I can even think of. First, those stupid shutdowns are insanely unfair to Oakland’s residents, who should not be deprived of basic City services 12 times a year. Second, if you’re going to reduce staff paychecks by 5%, a retirement pick-up is a dumb way to do it. Since retirement contributions are determined as a percentage of wages paid, the smart thing to do would be to reduce salaries by that 5%. Then, when you pay the same percentage to CalPERS, you’re paying less money. Anyway, more on concessions in a later post.
  • Save $0.18 million by eliminating the Senior Shuttle and save $0.15 million by eliminating the Senior Set-Aside.
  • Save $3.8 million if the Kids First compromise on the July ballot passes.
  • A couple of other small, and not very interesting changes.

Okay, so that’s everything you’re going to lose from the General Fund under this budget. So where’s the rest of the money coming from? Two places. The Federal government, and magic.

The Feds first. The proposed budget eliminates 140 police officers from the General Fund. We’re expecting/hoping to get money from the federal government to pay for those police officers instead. We’ll find out at the end of summer if we get the money or not. If we do (which this budget anticipates), then, we’ve just scored ourselves $23 million. If we don’t, then we’re going to have to come back and make more cuts in order to pay for those officers. If we do get the grant, the funding will last three years, and at that point we’ll have to go back to paying for the officers out of the General Fund (or pass another police tax to pay for them, or something).

Now, the magic. Or, more appropriately, the future. Do you remember the other day when I mentioned all that money we have to spend to repay negative fund balances? And how we put these negative funds on 10 year repayment plans back in 2005, but then didn’t actually stick to the plans, which made the negative balance worse and just ends up costing us more? Well, the Mayor’s proposed budget introduces the brilliant idea of just, um, not paying anything at all into them for the next two years. And that’s not just not paying back the deficits, that’s not paying into them at all, even for ongoing costs. So basically, the Mayor is proposing we balance the budget by going $50 million more into debt. In theory we’d resume payment of them in 2011. Yeah, that 2011. The one where we already don’t have any money. But hey, it saves us $23.78 million this year.

Then we’re saving $4.3 million by transferring 26.32 FTEs currently paid by the General Fund into other funds. And we’ll save $6 million through debt restructuring (extending payment periods), which, like the suspended payments to negative internal funds, might help us out today, but will only cost us more money in the long term.

So all the above is just dealing with the General Fund deficit (the $83 million you keep hearing about). But there are shortfalls in other funds as well, so the budget also proposes to cut positions from them. Here’s how that breaks down:

  • Park maintenance: losing 20.18 FTE
  • Tree services: losing 4.00 FTE
  • Street maintenance: losing 12.00 FTE
  • Traffic maintenance: losing 3.00 FTE
  • Facilities maintenance (painting and custodial services): losing 19.00 FTE
  • CEDA development services: losing 21.22 FTE
  • No more Bookmobile
  • And a number of other positions scattered over a whole bunch of functions.

And that’s, well, all I have time for today, but I think it’s a pretty solid overview. I’ll take a look at it in more detail over the coming weeks. As for what the Council thinks of all this, well, we’ll find out on Wednesday, when they meet at 4 PM (PDF) to discuss the proposal.

13 thoughts on “Mayor’s budget proposal: Deficient, but not a deficit

  1. Andy K

    Great over view. Very clear.

    Seems that there should be a way to further reduce the no. of city employees.

    Looking forward to reading your proposals.

  2. Patrick

    This is just dreadful. It also strengthens my belief that we should declare bankruptcy now, before the state legislature makes it illegal for us to do so. It is just unconscionable that the Mayor – or anyone, for that matter – thinks that shifting payment responsibilities to future years is a solution to anything. How does this meet the the Charter test of a “balanced budget”? Balanced with what – blatant stupidity? This is the kind of crap that buried Arthur Andersen. And it’s going to bury us, too. DECLARE BANKRUPTCY.

  3. OnTheGoJo/Joanna

    Patrick, how is filing for bankruptcy going to help this city? It won’t. Bankruptcy doesn’t just magically make all your bills go away, especially a municipality. It puts you on a fiscal diet and allows you to renegotiate things like leases, repayment schedules, and union contracts.

    The City is going on a fiscal diet – what they cut back and how much, etc is all up in the air, but it’s crystal clear that the spendfest is over.

    Leases. What leases does the City have that are worth getting out of? Maybe you know of something I don’t know.

    Union contracts. Oh wait, those are in negotiation now so we don’t have a thing to gain by filing bankruptcy.

    So what’s left? Are you a CPA that can magically figure out why Oakland should file bankruptcy when no one there has already figured it out? Do you need to hear it from a City emp?

    Bankruptcy isn’t going to make the debt go away, nor is it magically going to pay the bills going forward for some period of time.

    Oh yeah, and the City has assets (land) that they’d have to sell or give up if they went bankrupt – and that would only put us further in the hole if we then had to lease space for things like schools, fire departments, police departments, etc.

  4. Robert

    Why do the 52.55 FTEs to be laid off save only $2.8M ($53K/FTE) while the 26.32 FTEs to be transferred to other funds save $4.3M ($162K/FTE)?

  5. Patrick

    As I’ve stated elsewhere on this blog, I would far prefer a bankruptcy court judge oversee the restructuring of our budget than our Mayor and City Council. The current City Council is largely responsible for the budget debacle we’re in now – and obviously our Mayor is interested in smoke and mirrors budgeting. A City that declares bankruptcy puts itself in a better position compared to the unions, because it becomes about what a city requires and how much they can afford to pay, as opposed to our current “gee, we want to give our employees everything on a golden platter” council and unions who are more than willing to demand raises that are 10% OVER the rate of inflation over the past 5 years and try to justify it by whining how much they work (37.5 hour work week anyone?).

    It doesn’t take a CPA to figure this out Joanna, just someone who has ever managed to balance a checkbook once. By far the largest portion of our budget is wages and benefits. And that figure is rising. How will we deal with it next year or the year after? How long are we supposed to pretend that we can afford raises (like the 4% the police are about to get) and never-ending rises in pension costs, medical costs, etc.? How are we to pay back the fund imbalances? We can’t – because wages and benefits eat up such a huge portion of our budget that there is no leeway.

    Please remember that this budget is balanced by accounting tricks amounting to MILLIONS of dollars and the layoff of 140 police officers (amongst dozens of other layoffs). Even if we do get the COPS money, it is only for 3 years. THEN WHAT? Do we just lay off a percentage of every department every year so that the remaining few can get their unsustainably high wages and benefits?

    I mean no disrespect to our public employees but that plain, hard truth is that they make too much and get too much in benefits. Period. Oaklanders could easily afford 1100 police officers – if their pay was similar to police officers in New York City, for instance. Instead, we accept substandard services from a city who pays it’s employees the highest wages in the Bay Area. The Mayor’s inaction seems to suggest that he thinks this is OK. And, the City Council actually created this mess. A bankruptcy judge will say NO, this is what the City of Oakland NEEDS and this is what they can afford to pay for it. And that is a far better proposition for Oakland than getting shitty service so that the employees (who largely live in other cities) can enjoy unsustainably high pay and benefits.

  6. Patrick

    Oh, and your suggestion that the City would have to sell the land that schools and police departments sit on is just ridiculously stupid.

  7. V Smoothe Post author

    Because the FTEs being transferred out of the General Fund get paid more. $3.5 million in the General Fund gets saved by transferring legal counsel FTE from the General Fund to the Self-Insurance Liability Fund. Compare that to only $0.81 million saved by cutting 14.05 FTEs in the library.

  8. Christopher

    If the General Fund’s expenses are only ~$400M (of which Dellums’ claims only $114M are truly discretionary) of the city’s total $1B budget, there must be some way to negotiate or rebalance more expenses to the $600M “non-discretionary” part of the budget. If the city grinds to a halt (or burns down), those earmarked special programs will have little purpose.

    V’s earlier post (“Where does our money go?”) says CEDA, Public Works, and “Non-Departmental” expenses are almost $500M of the city’s total budget. Is there nothing that can be saved from these programs?

  9. Christopher

    After a cursory scan of the adopted 2008-2009 budget, I see that the Oakland Coliseum costs the city about $40M per year. How much revenue does the Coliseum generate (for the city)? I say, let’s blow it up. No Coliseum, no non-discretionary capital improvement projects.

  10. gem s.

    I think a chunk of the Coliseum money is to pay off some sort of bond debt created by a poor deal made to finance upgrades to the complex back in the 90′s. It was supposed to pay for itself with Personal Seat Licenses, but was a complete bust. Oakland and the County now jointly hold that debt, which is in the tens of millions annually. Not going away by blowing up the Coliseum, sorry to say.

  11. CitizenE

    Funny, no details provided on the $6 million in annual “debt restructuring” savings. Hmmmm. If we were playing the card game of the same name, now would be time to scream “Bullshit”.

  12. V.V.

    I think its time for a complete overhaul on how the city garners revenue for the services and recreate the economic model the city needs to generate and stabilize its finances. In short, manage new policy for industry and commercial revenue as reinvents its blue collar employment. The city is mainly blue collar and low income families- thus the revenue falls on them- and it decreases when employment and opportunity for ventures is scared off. The city wastes too much time increasing taxes, fees, and short bust projects when it could make itself more investor friendly and self-efficient; by increasing opportunities and infrastructure to supply income for its citizenry for tax revenue be sustainable. I believe the city and community must take the leadership to promote small/local businesses to thrive and not base itself on macro-commercialism for answers. The question then is what is the city’s capacity to provide the incentives to take charge of its own destiny?
    Oakland isn’t exactly the shadow of SF but rather its sister city- and based on that Oakland can develop a competitive attitude and alternate economic environment for trade and inventiveness. the labor supply is there, the want for employment is there- It’s the opportunity and active role the city needs to take for assuring the basic elements for Oaklanders receive a steady income that would supply revenue for services. At the moment, Oakland hasn’t done such as a unit to assure that sort of progress. In a downturn economy, it is more than providing services to people- the government has a role to set the economic mood and reinvent itself for betterment of the community. It may sound fundamental to textbook philosophy, but cities thrived on the security of trade on a center and we are on that familiar page.It is the city to find itself and promote that trade and at the moment a community-business partnership is needed with more input and activity.
    As far as for financing, local credit unions and banks are possible partners – they have more invested in the community than larger banks- and are perhaps more willing to supply the partnership a city needs.

    Food for thought.

  13. SF2OAK

    I’m with Patrick on this.
    This is the key sentence: “I mean no disrespect to our public employees but that plain, hard truth is that they make too much and get too much in benefits. Period.”
    If they were run like Fed Ex or UPS or some degree of efficiency well we wouldn’t need as many and we’d get trackable measurable results, as it is now they are milking the broke taxpayer. If BK will get union to move and get past promises recsnded then that’s what we need.