On June 2, the City Council continued the effort to reach a balanced budget by June 30, only 26 days away. The highpoints of budget action are as follows:
- Staff has reduced the estimate of the FY 2019-20 budget deficit from $7 million to $2 million. That reduces the impact on the $19 million of reserves, reducing the reserves to $17 million instead of the previously projected $12 million.
- The City Council had previously adopted approximately $15 million in FY 2020-21 savings (“Additional Cost Savings”} shown below, reducing the projected deficit from approximately $30 million to approximately $15 million.
- On June 2, the City Council adopted approximately $5 million in other additional costs savings (Additional Cost Savings, cont’d”) shown below, reducing the projected FY 2020-21 budget deficit to a little over $9 million. Deleted from the list was $236,000 in Library savings from removing part-time employees. All of the documents are also available for the public at https://www.ci.richmond.ca.us/1427/Presentations.
That pretty much summarizes the low hanging fruit. From now on the process will get contentious.
- The unions want to make up the remaining deficit by spending down reserves by $4 or $5 million and freezing all remaining vacancies.
- The city manager wants to save the remaining reserves and protect budgeting for the remaining positions.
The City Council ultimately will have to make that policy decision. There appear to be only four choices:
- Spend down the reserves: Reducing reserves is tricky business because the actual impacts cannot be known at this time. The unions argue that this is what reserves are for – to tap into when there are unusual circumstances, such as the impacts of COVID-19. The unions are also confident that future revenue raising ballot measures will save us. The city manager and finance director point out the risks of a lowered bond rating, the need for cash in between revenue infusions such as property taxes, the need for up front cash for reimbursement-funded grants, and the uncertainty of future emergencies, such as a fall COVID-19 resurgence. Staff also reminded us that the Chevron settlement funds continue to dwindle, dependence on the Chevron tax base in uncertain COVID-19 could affect next years’ property taxes, the specter of funding Kid’s First still looms, and COVID-19’s effect on the equites market will push PERS contributions even higher and faster than previously anticipated. The current $17 million in reserves represents only a little over one month’s operating expenses for the city and is one-third less than the widely accepted minimum recommended 15% level that the City Council previously adopted as a goal. See https://www.mercurynews.com/2015/05/29/moodys-downgrades-richmond-cites-pension-debt-increased-spending/ and https://richmondconfidential.org/2015/10/16/city-forced-to-increase-debt-rethink-its-finances/
- Freeze all vacancies: While this sounds simple; it isn’t. Some of the vacancies are critical positions, such as the city attorney. Many are in the police department, including critical positions such as dispatcher. According to community surveys dating back to 2007, crime and public safety remain the highest priority of residents. Some positions are grant funded and would not provide any general fund savings. Some positions were removed from the list because they are not funded by the general fund, such as Wastewater and Richmond Housing Authority positions.
- Negotiate some concessions from the unions: There is no indication that the unions are interested in concessions. All of these require negotiations (“meet and confer”), which are difficult and time-consuming and probably could not be completed in the next 26 days.
- Layoffs: The city has more unilateral power to exercise this option, but the unions, of course, are dead set against. Based on how the firing of Carlos Martinez went down, the majority of the City Council is now union-controlled. Layoffs are not going to happen.
Where does this leave us? Look for the City Council to take the easy way out and kick the can down the road. The City Council has been little help so far in helping to shape these critical budget decisions, expecting staff to figure it all out with some final hat trick. Councilmember Willis has helpfully said more than once, “ I just don’t want any layoffs or any reductions in services.” Duh! The City Council will ultimately spend down the reserves and freeze more positions, including police officers (following the George Floyd murder, the City Council has moved further towards an anti-police mindset). There will be no layoffs and no concessions. The final few million dollars will consist of hat tricks that do not address long term, unsustainable practices. Pools and libraries, which have the most vocal of all constituencies, appear to be largely unaffected.