Sanders Vows to Cut Jobs, Not Services

Tuesday, April 10, 2007 | Mayor Jerry Sanders announced Monday that his budget for the coming year will not cut the services that residents receive from City Hall. Instead, his plan will rely heavily on employee layoffs to bridge an $87 million funding gap carved out to pay down big-ticket obligations such as the pension deficit.

Sanders said he plans to cut about 300 employees from the city’s payroll and 360 full-time positions that are empty but currently funded from the 2008 budget. The strategy, Sanders said, will allow the city to commit millions to long-term responsibilities for retirement costs and infrastructure while avoiding the cuts to community programs that had been foreseen in the run up to budget season.

“We’re working with employees every way we can, but some are just not going to be able to be employed at City Hall,” Sanders said.

The budget, which will be unveiled in its entirety Friday, has been seen as a major moment in Sanders’ administration. The mayor held off on cuts last year, drawing critics for failing to make the cuts promised during his 2005 campaign. Still, many have granted Sanders leeway until this year because the mayor was in the midst of assembling his administration as last year’s budget was being put together.

Sanders has long promised to confront multibillion-dollar shortfalls without raising taxes. Now, he says he won’t have to cut services to make up for the deficits either.

His predictions that the services San Diegans receive from City Hall will be left unscathed mark a change of tune. His 2005 mayoral campaign emphasized his willingness to make tough cuts to the government — in lieu of raising taxes — in order to make up for the costly mistakes that led to mounting long-term deficits in a wide variety of departments.

As recently as January, Sanders spokesman Fred Sainz said, “It would be delusional to believe the city is going to be able to maintain same service levels that it had this year.”

The mayor’s new outlook paints a brighter picture. Employees will have to be let go, he said, but he cautioned that the layoffs won’t necessarily translate into reduced services for residents. All of the cuts Sanders seeks in 2008 will not impact city programs, such as library hours, cultural programs, or the amount residents pay for recreational sports leagues, he said.

“We don’t necessarily expect more pain for the taxpayers, because taxpayers have said, ‘Look, we’ve been paying our fair share,’” Sanders said.

Officials from the white-collar and blue-collar labor unions didn’t return calls for comment.

In addition, Sanders’ proposal will set aside an extra $30 million for the Police Department and $11 million for the Fire Department. The mayor would not comment on whether the additional funding is for salary raises; both unions are currently engaged in confidential labor negotiations.

Sanders said layoffs will most likely occur at the management level and be aimed at “people behind desks and not ones actually responsible for performing the services.”

But measuring service levels is a complexity in itself — one that the mayor’s staff said can only be estimated. Jay Goldstone, Sanders’ chief financial officer, said certain measurements of work output can be computed, but that “we don’t have the ability or the systems in place to measure everything at this very moment.”

Others questioned whether Sanders’ claims could even be feasible.

Council President Scott Peters pointed to the related debate over the mayor’s authority to make funding cuts after a budget had been approved. Several council members are concerned that Sanders’ efforts to streamline city government could reduce the services they approve every time they adopt an annual budget. When council members proposed legislation that would require any midyear cut that “materially or substantially” affects services be reviewed by the council, Sanders’ office said it didn’t have the ability to make such a determination.

“If they can’t measure service levels, how can they say the cuts don’t affect service levels?” said Pam Hardy, Peters’ spokeswoman. The budget authority issue will be considered by the council Tuesday at 11 a.m.

Sanders credited his ability to juggle the competing demands — maintaining city services and filling gaping deficits while refraining from raising fees and taxes — to his reorganization of the $2.8 billion bureaucracy he oversees as mayor. The procedure, which he calls “business process reengineering,” or BPR, will trim $49.3 million from the city’s rolls next year, he predicted.

He held his press conference at a city vehicle service yard in Oak Park to underscore the performance of the BPR program. The fleet services that operate out of the facility have been cut by 35 positions and $2.6 million, Sanders estimated.

But Andrea Tevlin, the council’s independent budget analyst, said she was not yet satisfied with the BPR program. Seven of the 10 BPR analyses that the mayor has conducted have not yet been reviewed by the council, and none of them accurately estimate impacts to the services residents receive, she said.

“We’ve not seen a word about them,” said Tevlin, whose office will be issuing its first critique of Sanders’ budget April 27. “But they are being put into the budget, so we’ll have to be reviewing the BPRs at the same time we’re reviewing the budget.”

Faced with the looming deficits that have become the focus of City Hall scrutiny over the past several years, Sanders vowed to shift money that would otherwise go toward the operation of the city’s bureaucracy to historically neglected areas.

Past decisions to underfund the city’s retirement plan while increasing employee benefits have stretched the city’s recent budgets while leaving the pension fund with a $1 billion deficit. The city is also strapped with a $1.4 billion retiree health care deficit and an infrastructure shortfall of $900 million. The mayor identified layoffs as the most workable vehicle for freeing up the money required to start filling those fiscal holes.

In addition to the layoffs, Goldstone said other moves allowed the mayor to spare services. He said tax revenues generated more cash than had been initially anticipated. Goldstone also said the annual pension bill the retirement board presented the city in January was less than the city initially forecasted.

Also, $15 million that was going to be used for infrastructure will be freed up through the sale of city land, and the formation of a tourism promotions fund by hoteliers allowed the city to spend hotel taxes elsewhere, Goldstone said.

Among the mayor’s funding priorities this year:

• A $165 million payment to the pension system, which is more than the $138 million annual bill the retirement board set earlier this year.
• The establishment of a trust fund to pay for future retiree health care. Sanders wants to deposit $25 million into the fund in 2008, with payments ramping up in the coming years.
• Spending $38 million on capital improvements and deferred maintenance of city facilities and equipment. About $33 million of this amount would be spent on street repair and storm drain improvements.
• Using $10 million to upgrade facilities so that they comply with disability laws and another $18 million to combat storm water pollution.
• Depositing $5 million apiece into the legal liability fund and the city’s cash reserves, which are closely scrutinized by the Wall Street markets that have shut the city out for the past two years.

The mayor also laid out a vision for future years, when he expects to funnel more money from the city’s operations to the long-term expenses. He predicted that his total workforce will be reduced by more than 12 percent within the next two fiscal years while several of the payments toward the behemoth shortfalls ramp up. For example, Sanders forecasts the $25 million retiree health care expense this year to jump to $50 million in 2009 and $75 million in 2010.

Sanders’ announcement marks the first of several budget-related press conferences he plans to hold this week before unveiling his entire proposal Friday. The strategy, which echoes last year’s method of releasing hints of the spending plan piecemeal, has caused several people around City Hall to privately grumble, as the snippets offer a weeks’ worth of well orchestrated glimpses and not a complete picture of the financial plan.

Sainz said other press conferences this week are slated to address specific areas of the budget: parks; public safety; and deferred maintenance.

When asked why he doesn’t release the budget all at once, he chuckled: “Because that wouldn’t be any fun. We’re giving you a week’s worth of stories.”

Please contact Evan McLaughlin directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.