Oakland is in a tough situation with the budget, right? We all knew that already. Just how tough? O.M.F.G. You have no idea.
That $4.8 million gap that we still had left to figure out for this fiscal year (the one that ends in July)? Now it’s $10.4 million. Oh, and that $33 million deficit expected for FY10-11 (which starts in July)? Yeah, now it’s $42.6 million.
Is the budget really all that bad?
The “Context” section of the agenda report for next week’s budget meeting lays it all out in pretty frank language, so I am just going to quote that for you:
The severity of the City’s fiscal crisis is truly unprecedented.
Less than four years ago, in FY2006-07, the City collected over $471 million in General Purpose Fund (GPF) revenues, and by year-end had nearly $56 million in reserves. That year alone, the Real Estate Transfer Tax revenue was at $61.5 million.
In FY2010-11, the City is anticipated to have only $10.4 million in GPF reserves by year-end, and is projected to collect just under $400 million in revenues by year-end. The Real Estate Transfer tax collection is now at a low $28 million. Collectively, this means that the City has over $120 million less in resources today (between one-time reserve funds and ongoing revenues) than we had just four years ago. During the same period, while the GPF-funded workforce shrunk by 12.5%, personnel costs in this fund have dropped by less than three percent.
The City has already implemented $170 million in budget balancing measures since July 2008, with $18.9 million approved for the current fiscal year as recently as February 16, 2010. Since the February action — which addressed most of the current year’s $23.7 million gap — our revenues continued to decline, increasing the budget shortfall by $6 million in FY 2009-10 and $11.2 million in FY 2010-11. Currently estimated financial gaps (net of previous Council actions) are: $10.4 million for FY2009-10 and $42.6 million for FY2010-11.
At the same time, means of filling the financial gaps have diminshed: (a) the City has already cut a great proportion of spending and programs, and the remaining discretionary budget is just 8 percent of the total GPF appropriation; (b) the reserves are minimal; and (c) “easy” revenue fixes, such as fee increases and uses of one-time unrestricted funds, have already been exhausted. At this point, balancing the budget structurally will require a combination of new taxes and significant cuts to public safety departments. Public safety accounts for 66.5% of the General Purpose Fund budget, and if a 15% (as an example) across-the-board cut were to be applied to non-safety departments only (also excluding debt service), only $15 million in savings would be generated while decimating key recreation, senior, library and internal programs. Moreover, cuts to youth and library programs would violate local Measures K/OO/D and Q. At the same time, a 15% cut to public safety departments would generate an additional $42.6 million in savings, but would violate provisions of Measure Y.
So yes. It is really that bad.
So what are we going to do about it?
Well, with only 3 months left in this fiscal year, it’s basically too late to do get to $10.4 million by making cuts. Well, not basically. It just is. So instead, staff is proposing the following:
- restructure pension obligations ($5.5 million)
- sale of or issuance of revenue bonds for the Medical Hill Garage ($5 million)
Yeah, I know what you’re thinking. Wonderful, more tricks. But again, this late in the year, there really is no other choice.
How did the deficit even get so big?
Well, it turns out that like, every tax is lower than we planned it to be. Shocker, right? $5.3 million shortfall in sales tax, $4.1 million shortfall in utility consumption tax, $1.1 million shortfall in real estate transfer tax, $1.7 million shortfall in hotel tax, $0.95 million shortfall in parking tax, and so on and so on with permit fees, fines, service charges, interest, etc. You get the idea.
Anyway, just lower than expected revenues brings us to a $25.6 million for next year’s deficit. Then we have to account for the fact that the budget for FY10-11 was never actually balanced when the Council adopted it in the first place. It hinged on revenue that just was not going to come in, notably $9 million from a surcharge on ticket sales at the Coliseum. Add to that your typical overspending from the police department, you get a little deeper in the hole.
And then there’s the small matter of us needing to get around to, you know, hiring some police officers at some point, since the police force is already well below Measure Y mandated minimum staffing levels, and it just keeps getting lower. So that costs money too.
And what about next year?
Balancing next year’s budget, well, it’s gonna hurt. How much? Here you go:
Staff reductions, including elimination of Microcomputer Computer Specialists I and III in Information Technology, administrative staff in Finance & Management, Human Resources and Police, are anticipated to save $2.4 million; transfer of 9.0 PT Cadets to the Asset Forfeiture Fund from FY 2009-10 to FY 2010-11 would save $0.3 million. The proposal reflects the elimination of 15.05 full-time equivalent (FTE) positions, of which 13.05 FTEs are filled (8.0 FTEs were approved for elimination as of April 1, 2010; of these, six positions were filled.
Savings from the 15% cuts to elected offices – requested by the City Council on February 16, 2010 – are included in the above estimate. Details on the specific reduction measures are available for the Mayor’s Office (2.0 FTE Mayor’s PSE 14s and operations and maintenance reductions), City Council (6.0 FTE Legislative Analysts would be eliminated, including 4.05 FTE in the GPF) and City Attorney’s Office (3.0 FTEs eliminated and savings from filling a position at a lower rate). The City Auditor’s Office will have operational savings for FY 2009-10; this office has informed staff of its intention to seek a City Attorney opinion on minimum staffing levels for chartered City departments prior to providing detailed reductions.
Program reductions and eliminations, including the Linkages Grant Match and the Homeless Mobile Outreach programs in the Department of Human Services ($0.3 million).
Grant reductions of varying levels ($1.9 million), including
25% reductions to City institutions, including the Oakland Zoo, Chabot Space & Science Center and Children’s Fairyland
50% reductions for City-affiliated entities (AIDS Prevention & Education Initiative, Hacienda Peralta and the City/County Collaborative on Children & Youth) and non-profit organizations (Family Bridges, Fruitvale Senior Center, Vietnamese Senior Services, Family Bridges, Fruitvale Senior Center, Cypress-Mandela Training Center, Symphony in the Schools, Women’s Business Initiative, Jack London Aquatic Center, Oakland Asian Cultural Center, OUSD Academies Program, Artists’ Grants and the Day Laborers’ Program).
100% reduction for the Oakland School of the Arts
Proposed new revenues and other financing, including a proposed new public safety parcel tax and increased and expanded utility consumption tax; an increase in the parking citation revenue expected from better collection rates); one-time and ongoing annual proceeds from the sale of billboard space to Clear Channel, Inc. (which is the subject of a separate staff report included on the April 1, 2010 special City Council agenda); anticipated new grant revenue to offset firefighter personnel services costs; and stricter enforcement of false alarm fines ($24.1 million). Proposed new taxes would need to be approved by the voters; this notion is discussed later in the report.
Sale of assets ($12.8 million), including lease of the George P. Scotlan Convention Center to the Oakland Redevelopment Agency (ORA); sale of two properties to private parties; and sale of the Henry J. Kaiser Convention Center. Sale of assets is the subject of a separate staff report included on the April 1, 2010 special City Council agenda.
No, I don’t understand how the City is going to get $24 million from false alarm fines either. Nor do I understand why the Auditor thinks it is okay to just refuse to take any kind of budget cut just like every other department in the City has been doing for two freaking years.
And what about taxes? Well, the report is pretty frank about that too:
Ballot measures to raise additional revenues are simply unavoidable. We can not solve the current fiscal crisis with one-time measures and program cuts alone, unless significant reductions to public safety are made. The possible ballot measures are a public safety parcel tax and temporary increase and expansion to the utility users tax; combined, they could generate up to $20.6 million in new revenues as soon as FY 2010-11. Another ongoing source of revenue would be a quarter-percent add-on sales tax, otherwise known as a transactions and use tax (TUT).
So did I depress you enough?
Don’t like these cuts?
If you have, like, you know, ideas about the budget, you should share them with the Council. Because otherwise, they’re just going to get like 300 e-mails saying the City shouldn’t cut any grants and the Council will decide that must be what everyone actually wants and that’s what they’ll do. Contact info:
- District 1 Councilmember Jane Brunner
Phone: (510) 238-7001
- District 2 Councilmember Pat Kernighan:
Phone: (510) 238-7002
- District 3 Councilmember Nancy Nadel
Phone: (510) 238-7003
- District 4 Councilmember Jean Quan:
Phone: (510) 238-7004
- District 5 Councilmember Ignacio De La Fuente:
Phone: (510) 238-7005
- District 6 Councilmember Desley Brooks
Phone: (510) 238-7006
- District 7 Councilmember Larry Reid
Phone: (510) 238-7007
- At-large Councilmember Rebecca Kaplan
Phone: (510) 238-7008
Special budget balancing meeting (PDF) happens on April 1st. Expect it to be long. Happy Friday!