Ron Dellums releases proposed Oakland FY09-11 budget

Finally! It’s out. Full post on the way tomorrow, but if you just can’t wait, read it here (PDF).

Here’s (PDF) a press release summary of the proposal. Below, watch the Mayor’s presentation to the Council on the budget.

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32 thoughts on “Ron Dellums releases proposed Oakland FY09-11 budget

  1. OP

    The proposal to balance the budget is to cut 140 officers? I know that’d been the word for a while, but I figured the budget might at least present some more serious alternatives. Even if it’s not in the budget someone had better have worked out some contingency plans…

    My question: Who is this supposed to intimidate?
    A. The unions
    B. The voters
    C. The City Council
    D. The Fed Gov.

    Probably all of the above (well, except for maybe the City Council… despite the mayor’s unpopularity they have not resisted his fiscal decisions much), but I’d put most of my money on D. The only thing that makes sense is that Oakland is hoping for COPS funding to bail us out for the next few years. Dellums previously stated that the word from Washington was that Oakland could not rely on funding and had to put together a budget, but this clearly isn’t realistic.

    Either Oakland has the grant in the bag and this is for looks (in which case, although not really a sustainable way to govern, it’s still a big success for the administration) or this is a high stakes game of chicken. Oakland is one of the highest-crime cities in the nation, it could be seen as spiteful for the Feds to let the city go without adequate police protection for $20 mil just because local officials refused to make tough cuts. Of course, the Feds could call the bluff…

  2. Patrick

    And I actually hope they DO call the bluff. This may work now – but then what? We can’t afford current OR future costs in Public Safety, let alone much of anything else. A one time freebie will only prolong the inevitable. Why not do it now? DECLARE BANKRUPTCY.

  3. V Smoothe Post author

    I’ll get into this whole police thing tomorrow, but if people really can’t wait to talk about it, there’s two things you need to know.

    1. The City does expect to get the grant, that’s why they budgeted this way.
    2. The number of police cut would not be 140, as the Trib reported. It would be over 200. The 140 cut comes from the General Fund, and they would also have to stop collecting Measure Y taxes if they laid off those officers. So that’s 140 police being cut from the General Fund and 63 police from Measure Y, bringing the total police to under 600 officers.

  4. TheBoss

    I’m curious what makes the Oakland budget so much worse than other medium to large cities in California — I’m assuming it is worse, of course. This is perplexing to me, as I know that we have the highest sales and property taxes in the state.

    I realize this is not a simple question to answer, but it seems like that might be the place to start in trying to set things right.

  5. OP

    No, let’s hope Oakland gets the funding. I am the first to agree the city needs to completely restructure its finances and put a lot greater effort into forecasting fiscal effects before starting new programs/services, but the truth is that will not happen overnight. If we can get a fed lifeline so much the better; massive cuts wherever they fall will have serious effects on the lives of Oaklanders, especially those who are already worse off, and we shouldn’t wish that on people just to make a point about good government.

    I’d like to say that any breathing room we are given will give us time to set our house in order, but, I think like Patrick, I am not convinced current elected officials are up to the challenge. These massive furloughs we’ve seen the past years aren’t exceptional: it was the same story in 2003, and no doubt several other years before. The pension issue on the near horizon does not bode well either for a fiscal turnaround.

    This next election there will be a lot of voices on public safety issues; let’s hope there are a few fiscal accountability types as well.

  6. Patrick

    OP, I understand what you’re saying. I’d love to believe it, too. But, as I gave up smoking weed regularly years ago, I just can’t agree with you.

    Nothing happens “overnight”. There is not such thing as “breathing room”. This is about money. Cash. Moolah. Either we have it now – and in the forseeable future -or we do not. Hello, Oakland! We don’t have the money.

    We can vote x, y and z out of office, but the financial picture is still the same: Oakland cannot afford to pay our Public Safety employees (or any other public employees) the wages and benefits they are currently receiving, let alone legacy costs.

    It’s laughable to see people talking about a “Fed lifeline”. WAKE UP! All we’re doing is printing money at the Federal level. All this does is lower the value of the dollar, which reduces our spending power and increases interest rates. Overall, this is a disservice to all of us. Sorry, folks, but the party is over. The time to balance the budget is NOW. As our City leaders are anything but: DECLARE BANKRUPTCY.

  7. Josh A.

    Oakland, you’re so screwed.

    EVEN IF the federal money comes in, this budget is ‘borrowing’ out of all sorts of funds (or delaying payments), which will surface later… has anyone gotten around to auditing the books yet?

    Didn’t think so.

  8. Rachel Richman

    We should launch a community campaign – the way UC Merced did to get Michelle Obama as a speaker – to win the federal grant.

  9. Robert

    V, I think you are being na├»ve about Dellums’ motives. He has never been behind an 800 officer force, and only agreed to do it after a lot of pressure from the community. I don’t think he would be all that disappointed if the city did not get the COPS grant, because it would provide him the cover to lay off 140 (or 200) police.

  10. Christopher

    > The time to balance the budget is NOW. As our City leaders are anything but: DECLARE BANKRUPTCY.

    How much of Oakland’s budget problems are debt payments? Even if Oakland declared bankruptcy and wiped out 100% of its debt (ha), would the city even know how to balance a budget?

    Thanks to V.’s research and blogging, we’ve seen Oakland’s expenses and budget. It’s easy to play “armchair mayor”, but does anyone have any *practical*, palatable suggestions for saving $80M from the budget?

  11. V Smoothe Post author

    1. Declaring bankruptcy is not helpful at the moment. Our problem (one of them, anyway), is that we simply cannot afford our operating costs. Bankruptcy won’t change that.

    2. Again, the City is anticipating receiving the COPS grant, so for the moment at least, nobody is actually expecting to lay off any officers. But Robert, you’re definitely wrong about the Mayor not wanting the City to get the grant. Whether he not he would personally love to reduce the police force to less than 600 officers, the fact is that any cuts in sworn staffing would require the City to stop collecting Measure Y taxes, thereby eliminating the funding source for his treasured street outreach and re-entry programs. No way does he want that.

    3. I have plenty of thoughts about what should be done with the budget, but I think it’s important to make sure people understand the relevant issues first. So in that vein, I still have several background posts I need to put up first.

  12. Robert

    Bankruptcy could help our problem with operating costs by opening up, from a much stronger bargaining position, union contracts to renegotiation.

    And while I am sure Marleen would disagree, Dellums may believe that as long as the budget funds the police through a grant, he is entitled to collect the measure Y money regardless of whether the city actually gets the grant.

  13. V Smoothe Post author

    Well, if we were in contracts that we needed to renegotiate, bankruptcy might be helpful. The thing is, we aren’t. Civilian employees and firefighters are both working under expired contracts currently, and the police contract expires in a year.

  14. V Smoothe Post author

    Yes, but bankruptcy wouldn’t change that. All bankruptcy can do is reopen contracts for negotiation. Since we’re already in negotiations for a new contract, bankruptcy would accomplish nothing.

  15. Robert

    Bankruptcy court has the power to void the contracts. And employees are essentially the lowest priority creditors in a bankruptcy, so their negotiating position is very poor.

  16. V Smoothe Post author

    I’m not sure what about this you’re not understanding, Robert. We don’t have a contract. Therefore, there is no contract to void.

  17. Patrick

    That’s not true. By renegotiating contracts under court supervision, the contracts would have to be viable over the long term. So, none of this 10% over inflation wage hikes. And I would trust a bankruptcy court’s decisions more than I ever would trust the City Council.

  18. Patrick

    In addition, court oversight would accomplish the same thing for contracts currently in negotiation. The starting point would not be the current contract, but rather what the City needs and how much we can afford to pay. If the City needs 900 police officers, and it is possible for us to have that with what we can afford, the court will set pay and benefits accordingly. Just because Oakland wants to offer super high wages and benefits doesn’t mean it is prudent to do so. And, the court will impose that without any touchy/feely worries. If the new starting race for police must be $50K a year to afford the number of police officers we need, and we can attract people willing to work for that wage, that’s what the court will impose.

  19. journalist

    keep bankruptcy off the table . . . it wrecks your credit rating and thus you cant borrow down the line (or get much for municipal bonds) . . . in additon, lawyer fees and the stigma associated with bankruptcy makes life even worse for the city (as if things weren’t bad now) . . . if bankruptcy were more of an option dont you think more California cities would have filed by now . . . the answer is not bankruptcy

  20. TheBoss

    I don’t know if a bankruptcy judge will actually do this, but what Patrick is saying is exactly right. The problem municipalities and the state are having is that the political process has been hijacked by the unions who essentially sit on both sides of the bargaining table and award themselves pay that is unsustainable.

    We are now coming to the end of this process, where that pay will simply have to be reduced — if only because there’s no money to pay it. If a bankruptcy judge is the right person to do that, then I’m all for that. Alternately, perhaps the citizens will wise up and elect people who will actually push back against these folks.

  21. Robert

    Patrick, thanks for saying with more clarity my point.

    journalist, there are certainly downsides to bankruptcy, but they may not outweigh the gains. And it needs to be on the table as a real possibility during negotiations with the unions.

  22. journalist

    Unions buy politicians . . . case in point:

    Assembly Bill 155 by Assemblyman Tony Mendoza, D-Artesia, would make it harder for local governments to seek bankruptcy protection.

    who do you think is behind this bill? And yes its making its way through the Capitol right now . . . times are so bad and so many Cal. municipalities are thinking about bankruptcy that the unions have been able to get this bill introduced to stop it . . .

  23. Patrick

    jounalist, a credit rating really only matters when you’re borrowing money – and who in their right mind would lend us money now anyway? Besides, after bankruptcy we’d be in an even better position to repay loans – and any lender would recognize that, regardless of bankruptcy. And frankly, the “stigma” of bankruptcy, if accompanied by long-term fiscal benefits and an improvement /increase in services is far preferable to me than our current situation.

  24. journalist

    I understand Patrick you are frustrated . . . i get it, but think about it, one of the most violent cities in the nation, with a very high poverty rate just declared itself bankrupt . . . how long do you think it would take for Oakland to overcome that problem ? keep bankruptcy off the table . . .

  25. Patrick

    Nope. Through bankruptcy we could restore fiscal health to our city – and be able to fully staff a police department and reduce crime. THAT is how to overcome our problems – not worrying about what people will think..

  26. CitizenE

    This budget is such a mess, it is REALLY painful to read. The City has an ongoing issue with its Internal Service Funds. These funds capture the cost of certain centralized activities, including the City fleet and facilities. These costs are then charged off to the various funds who benefit from the activities. The problem is, that the City has not been recovering these costs (undercharging the other funds). This makes the other funds look artificially good (or better, anyway). But, the cash in these funds is overdrawn and must be covered by the General Fund. This problem has been noted by the City’s outside auditors for some time now.

    This budget proposes to FURTHER run the Equipment Fund and the Facilities Fund into the ground by another $48 million. The projected ending cash balances for these funds at the end of the two year budget is a NEGATIVE $99 MILLION! This smoke and mirrors budgeting that started under Robert Bobb continues unabated.

  27. Hayden

    Earlier, TheBoss stated Oakland has “the highest…property taxes in the state.” Would that this were so, but aren’t we capped at 1% of assessed valuation along with the rest of the state? Perhaps this calculation incorporates parcel taxes? Even if that edges us up, it seems like it should be pretty minor.

    On a related matter, municipalities in states like Illinois that have property taxes as low as ours are typically relying on other tax income, such as from industry. I wonder what percentage of our General Fund is paid by our massive industrial waterfront–the Port of Oakland?

  28. Patrick

    Oakland, along with other California municipalities, are “capped” at 1% UNLESS we approve of a local rate increase. Our current rate is actually about 1.3xx%.

    I lived in Illinois for a about 4 years – and I have to say, I LOVED their income tax system. At the time, it was 2% across the board. Income taxes were done via a postcard(!): what was your income, what is the 2% tax, how much did you pay, and voila! Your refund or payment was on the fourth line. Although a regressive tax, it *did* make everyone pay their share, which is not true of California’s system. And, it was so easy and straightforward, there was really no opportunity (or desire) to cheat.

  29. len raphael

    CE, please expand on what you were saying about the internal fund transfers and if i understand you correctly, they’ve been diddled with for the past three city administrations.

    i only skimmed the outside auditor’s report. but i must have missed their comment you referred to. I was surprised to find they gave Oakland’s financials a “clean” opinion even after our Mayor announced last July that his team had discovered Deborah Edgerly’s manipulating fund transfer to cover shortages. Would have thought such a manipulation would have been a “material weakness” of internal controls that would affected the opinion. Or maybe the auditors just did more field work and decided that everything was accounted for properly, even if it might have been fiscally stupid.

    -len raphael
    temescal

  30. len raphael

    V, even though a bunch of the city employees are working w/o a contract, wouldn’t a bankruptcy court be able to void unfunded some of the retirement benefit promises, especially for current employees?

    that’s something that would be very difficult for any union leader to agree to.

    Was talking to a buddy from the burbs. He was telling me that the pattern of high wages plus great benefits plus job security for lower tier muni employees is true in Concord and Walnut Creek also. Clerks who make 80k/year and can retire comfortably at age 55. It does seem that its only professional types like attorneys and engineers who work for muni govts that are paid less than they would in private sector.

    Considering that WC and Concord don’t subscribe to Oakland’s “living wage” believes, I’d think TB is correct about the symbiosis between unions and muni politicians. A bankruptcy court can’t fix that permanently.

    -len raphael

  31. CitizenE

    len, the audit and auditor’s comment re internal service funds is here:
    http://clerkwebsvr1.oaklandnet.com/attachments/20957.pdf

    The internal service funds are a convenient way to allocate costs to various depts. and funds. Rather than charging the electrical bill from PG&E to a number of different funds (based on all the various funding sources for people working in the building), the bill is paid for by an internal service fund (Facilities Fund).

    All the costs of running City facilities (utilities, custodial and guard services, repairs, etc.) are captured in this internal service fund, then should be allocated out to the various depts. and funds that use the facilities on some rational basis or bases — sq. footage, headcounts, etc.

    Problem here is, that the City is not allocating the full costs of the facilities, but rather letting the Facilities Fund (and other internal service funds) go deficit. This is all reported in the City’s annual financial report (page 104):
    http://www.oaklandnet.com/government/fwawebsite/accounting/Pdf/FY%202008_CAFR.pdf

    The net effect is that the internal service funds are all in the hole and the City’s other funds, especially the General Fund, looks better than they should, because they have not been paying enough to reimburse the internal service funds. Regardless of which fund looks artificially good and which looks artificially bad, the money has been spent. On a personal level, it doesn’t matter that your savings account is flush, if your checking account is overdrawn by a greater amount — you are broke.

    The proposed budget, put together by the Mayor and his crack(head) team of financial advisors, plans to overdraw the Equipment and Facilities Funds to the point where they will be $99mm in the red. They really need to show us the big, flush, “savings account” that will cover this.

    The Mayor and his crack(head) team made a lot of announcements last summer. They might have announced that the country was going through a major financial meltdown, local and state governments across the country were reviewing and revising their budget estimates and Oakland was doing the same. Instead, they decided to blame the worldwide financial implosion on the former City Administrator. Hmmm.