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Thursday, May 24, 2012
Solving budget problems by 'getting our house in order'
by Melissa Corker, published on August 25, 2011 at 10:14 PM
Storyline: Politics
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City staff members want to fix Sacramento’s budget problems by revamping the city’s current organizational structure – and they want to do it by February.
Northern California still struggles to recover from one of the worst recessions in more than 75 years, and the city of Sacramento has been hit especially hard.
Interim City Manager Bill Edgar reminded council members Tuesday of the reality of the city’s fiscal situation: A budget that is $39 million less than it was the prior year; 141 city employee layoffs, including 41 sworn police officers, and a $26 million structural imbalance expected to extend into 2016.
“The impacts (of the current budget structure) have been noticeable and significant,” Edgar said.
Speaking at a budget workshop at City Hall Tuesday, Edgar said that, in order to turn things around, the council will have to make some difficult policy choices and take a “longer-term strategic approach” than they have taken in recent years.
Due to years of worsening economic conditions, Edgar said, the city’s current organizational structure needs to be “re-sized” to fit available resources.
That is the aim of the restructuring project that Max Fernandez, director of the Community Development Department, and his staff will be working on over the next six months.
Fernandez told council members Tuesday that the goal of restructuring is to “achieve significant cost savings” and make the city more efficient wherever possible.
“Nothing is ever easy,” Fernandez said. “It will be difficult and take a lot of thought and processing by the right people, and I think we have a lot of the right people on this.”
Edgar said department staff has developed a three-pronged approach to improving the way the city works by restructuring budget and labor processes and streamlining organization in five areas:
* Department of Utilities and Department of Transportation
* Public safety
* Citywide contracting and purchasing
* Parks and Recreation Department and the Convention, Culture and Leisure Department
* City Clerk’s Office and Mayor/Council Administrative Functions
Fernandez will be taking a close at each of those areas to identify specific ways to reduce costs, including finding “any potential for consolidation.”
The city has already consolidated several departments in the past year, including the Code Enforcement and Community Development Departments and the Human Resources and Labor Relations Departments.
As Edgar and Fernandez began to organize the project in June, they asked department leaders in the focus area to put together teams that include talented people currently working with the city.
“We’re getting experts in the various parts of the operation that will be affected by this work plan,” Fernandez said. “We are going down as deep in the organization as we need to to get the right people.”
By bringing in people who have first-hand understanding of the focus areas, Fernandez said, the teams can draw on their expertise and skills to find “new, better, more efficient” ways of delivering city services.
Fernandez said it’s important to work quickly so the project can be completed by February to give City Council time needed to implement cost-saving measures before the next budget is complete.
“The No. 1 goal here is saving money,” Fernandez said.
Councilman Jay Schenirer disagreed, however, saying the “No. 1 goal” for the city should be to “provide all the services we can using the resources we have available.”
“This (budget restructure) is going to be one of the most important things that we do for a long time,” Schenirer said. “We don’t want to face down another $26 million budget shortfall anytime soon.”
Restructuring plans are in the “infancy stages” Fernandez said, but he assured council members that the process is under way.
“We have a very aggressive timeline,” Fernandez said, “and a good support team working to get the job done.”
Mayor Kevin Johnson said at a press conference Tuesday that the idea of restructuring is a “step in the right direction” for the city.
“I think it’s the first step,” Johnson said. “I think we can be a lot smarter. There’s plenty of economic development opportunities, but the first thing we need to do is get our house in order.”
“(The City Council is) committed to having a balanced budget,” Johnson said.
Fernandez and other city staff involved in the project will return to City Council with a progress report in late November.
The final report – including staff recommendations for council action – is expected to be completed in February.
Melissa Corker is a Staff Reporter for The Sacramento Press. FOllow her on Twitter @MeilssaCorker.
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The housing bubble burst way back in 2005, and Sacramento unemployment has been above 8% since 2008. Now in 2011 we are supposed to believe that the city suddenly realized the gravity of the situation and is now going to get serious about managing our finances? If our leaders had not been asleep at the wheel since the start of the economic cycle so long ago, we would have all those years of missed savings to work with now.
Here is a quote directly from the City's 2007 Budget (4 long years ago...). Page 8:
Much like the rest of the nation, Sacramento has been hit hard by the downturn in the
housing market. Forbes recently listed Sacramento as the nation's fifth-weakest
housing market. The change in the local housing market is having a significant effect on
the overall regional economy. Specifically, the City will experience over the next several
years deep reductions in growth of property taxes revenue after several years of very
high growth rates. There have also been reductions in sales tax and utility users' tax
revenues.
http://www.cityofsacramento.org/finance/accounting/documents/2007_CAFR.pdf
The current city budget, approved in June, is the first in five years that demonstrates a hint of fiscal discipline. The pillaging of cash reserves was halted and reserves were even augmented by $4 million.
But the hard decisions are still being dodged or merely "studied:" (1) outsourcing garbage collection to rein in sky high costs (as recommended by the city's own consultant two years ago); (2) reforms in fire department operations (as recommended by its consultant two years ago); and (3) critically needed reforms to rein in exploding retiree health care costs and escalating pensions costs (as recommended by its consultant two years ago). Well, you get the picture.
One good sign: the city and the firefighters union recently entered into a new contract that requires firefighters to start contributing to their own pensions 6% of their salaries, starting in 2013. It should have been the full 9.6% employee pension share recommended by CalPERS, but it's a start. The savings will be offset, however, by a 5% salary increase (technically a deferral of a 5% raise already called for under their current contract) that will begin in 2012. The net savings to the city will be modest, but the precedent is important.
Next steps in controlling labor costs (which are now 80% of the city budget and rising): requiring city managers and police to contribute to their own pensions and requiring other city employees to pay their full employee's share of their pensions, as well as getting off the rocket ride of rising retiree health care costs, an unfunded city liability that amounts to hundreds of millions of dollars.
The big question: Will the council have the policitcal courage to do the right thing in the face of city union opposition? Or will we see another round of deep cuts in public services?