The City Council tonight will hear a report on mid-year budget revisions for the current fiscal year, designed to respond to a revenue shortfall of $1.8 million. According to City Manager Phil Kamlarz, planned savings are already on track for $1 million. The remaining $800,000 of the deficit will be covered by deferring capital expenditures, primarily from the street rehabilitation budget. An increase in projected expenses from the adopted budget is being covered from $4.62 million from the reserves.
The trimming of the budget comes on top of the effort to close an expected $16 million deficit in the FY2011 budget before it was adopted by the council last year. The original plan was to eliminate 77 jobs, 47 of which were unfilled at the time. Because of the voluntary work reductions by staff and other cost saving measures, including a hiring freeze, that gap was closed with only seven layoffs, Kamlarz explained during a briefing meeting with the media this morning.
The drop in revenues compared to the adopted FY2011 budget came from a wide number of sources:
- Secured property tax: down $528,083 because the expected 2% cost of living adjustment actually was -0.24%
- Utility users tax: adjusted downward by $494,084 because of declining natural gas prices
- Parking fines: projections lowered by $200,000
- Ambulance fees: down by $463,370 because of change to a national fee schedule and lower transport volumes
- Sales tax: down by $216,136 even though revenues are beginning to creep up
- Franchise fees: decreased by $279,844
On the positive side of the ledger, business license tax has been adjusted upward by $149,434, interest income has been increased by $300,000 and other revenue has soared by $1,037,592, largely because of one-time late billings of FY2010 fire inspection fees, residential preferential parking fees and delinquent business license taxes.
Tonight’s report also contains projections for the FY2012 and FY2013, which show deficits of $3 million and $4 million respectively in the general fund. Those projections assume no additional federal or state cuts, no funding for new programs, no further decreases in revenue and no cost of living increase. In addition, many of the city’s special funds — which have restrictions on use of the revenues — are facing deficits. In FY2012, the report estimates a $2-3 million deficit in the public and mental health fund and $2 million in the refuse fund.
Kamlarz said that the city is tackling the deficit in the public and mental health fund, in response to a report last fall which was highly critical of the way the mental health division was run. “The punchline,” Kamlarz said, “is now we have to change how we do our work.” A report on the refuse service is due in March.
The effort to tackle the budget deficits will also need to be joined to the struggle to bring the city’s unfunded liabilities under control, as detailed by Budget Manager Teresa Berkeley-Simmons last month. Kamlarz said this morning that the kickoff meeting for negotiations about the police department had taken place recently. “Everyone understands the problem,” he said. Police and fire comprise 52.5% of the city’s general fund expenditures, as well as the majority of the unfunded liabilities.
Kamlarz and his deputy, Christine Daniel, also said that there was considerable uncertainty over state funding. Governor Jerry Brown’s proposed state budget requires a vote on new revenues in June. “It’s a migrating target for us,” Daniel said. “If the election doesn’t get set, half the solution [for the state budget] is revenues and those won’t be available.”
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