Monday, April 16, 2007 | There’s a lot at stake for Mayor Jerry Sanders in the next several weeks and months, as the City Council and the San Diego public begin sifting through the fine print of the broad promises he unfurled Friday.
If it’s successful, Sanders’ plan will allow the city to pay down long-neglected expenses that drove the city to the brink of ruin, such as the $1 billion pension deficit, without changing the levels of service San Diegans receive or the amount they pay in fees and taxes.
It’s a feat that Sanders himself didn’t think was realistic just a few months ago.
The prospect that residents will escape unscathed on both fronts could be a major political win for Sanders. He vowed to hold the line on taxes and fees since his campaign for mayor in 2005, when he convinced voters that he could confront the city’s climbing payroll expenses simply through cost-cutting measures.
But if the layoffs Sanders is proposing curtail the services residents currently enjoy, as his critics predict, he will have left San Diego voters with an empty promise by the time 2008 — the year he runs for reelection — rolls around. By proclaiming library hours, park maintenance and other municipal services safe Friday, Sanders raised the ante in a high-stakes game of politics and financing. By widening his ownership over the city’s service levels, he added a new layer for his electors — and potential opponents— to scrutinize.
When he was settling into the mayor’s chair last year, Sanders was quick to reason that cuts to library hours, park maintenance and other city services resulted from past mistakes. And he warned that budget pain was in store for everyone, from employees to residents. Now, as the deliverer of Friday’s good news, he has taken ownership of the city’s financial situation and will likely be held accountable if the dips in service he had earlier predicted do indeed materialize.
What’s at Stake for Sanders
This budget season marks a key moment in history for the Sanders administration, and how this budget plays out could go a long way to determining his popular fate. The former police chief glided into office with a concise mandate from voters: fix a city in financial and political turmoil.
He put off tough choices in 2006 under the guise that it was a “stabilizing year.” Since last year’s budget, he has taken steps to convince voters and his political supporters that reform was on the way, despite some early miscues.
Now, he’s promising the best of both worlds in a budget that he — and not past city officials — will own: addressing the city’s numerous long-term deficits while keeping all services intact. Unexpectedly, he claims that only city employees will have to bear the brunt of the city’s past financial troubles.
“I think it’s a really reasonable budget,” said political consultant Ben Haddad, chairman of the San Diego Regional Chamber of Commerce’s public policy committee. He continued: “If it holds up, I suppose he passes the test.”
Sanders has framed the debate over city finances by saying that the city must decide what services it can afford and cut those it can’t, straying from the strategy of past city leaders who eyed services first and then cobbled together ways to fund them. Sanders says he would not entertain tax and fee increases until he was convinced the city was running as efficiently as possible and that voters desired new programs or services.
In November, Sanders estimated that he would need to plug an $87.4 million hole in the 2008 budget, and he instructed voters and employees to brace for cuts. The mayor predicted massive layoffs and hinted that a smaller city workforce would mean fewer services. His spokesman, Fred Sainz, said just months ago that it was “delusional” to think otherwise. However, Sainz said this week that he had misjudged the effectiveness of the mayor’s streamlining efforts.
Sanders’ proposal would cut 672 jobs from the city’s rolls, including about 300 that are currently filled by employees. He said the layoffs result from an initiative to streamline the government’s operations so that he can redirect millions of dollars to areas of the city that past officials have neglected to properly fund, such as the maintenance of streets and facilities, the creation of a trust fund for retiree health care, and guarding against storm-water pollution.
“Sometimes you have to push your people a little harder,” Haddad said. “I think the public employees are going to step up, even if it’s tough for a few of them.”
Sanders boldly argues that employing fewer workers does not mean providing decreased city services. Streets will be swept at the same rate, trash collection will continue on the same schedule, and the check-out lines at libraries won’t be longer, Sanders said.
It’s an audacious claim that critics call dubious, and it will likely spawn a heated debate before and after the council adopts a spending plan for the next fiscal year, which begins July 1.
Labor unions will be poking holes in the argument, and council members will become increasingly concerned about the complaints they will hear from residents if Sanders’ pledge falls flat.
“There’s no way services are not going to be reduced if cuts are made,” said Joan Raymond, president of the union representing blue-collar city workers. “I don’t think the mayor is being very forthright with public about negative impact of the cuts.”
The mayor has acknowledged that the city doesn’t have a proper way of measuring service levels, a hint that he will try to characterize the impacts of the cuts as too hazy to determine if and when a fight arises.
“I don’t think we’re out of the woods, so I don’t want to tell anyone that there aren’t going to be cuts to services, because that’s a difficult thing to say,” Council President Scott Peters said. “We just don’t know.”
If Sanders can deflect the criticism over service levels that will likely come in the coming weeks, it will be an added bonus for the mayor, who had up to last week only pledged to make significant dents in big-ticket expenses while not raising taxes. Sanders said some advisers suggested that he more tightly clamp down on the service budget in order to assure the two previous promises were accomplished, but he didn’t see it as necessary.
“I had some people that said they wanted blood in the streets,” Sanders said. “But I’ve gone out into the community and that’s not what the residents want and I don’t think it’s what they deserve.”
The budget proposal also reflects his commitment to not ask for a tax increase, an ambition that has delighted a key constituency for Sanders, the business community.
But despite their broad support for Sanders during his election, business leaders haven’t always been as jolly about the mayor’s financial ideas. Many winced last year when he expressed a brighter outlook about the city’s finances than the gloomy picture he painted on the campaign trail, leading some to believe he might fall into the routine of glossing over the government’s troubles.
During last year’s budget season, Sanders opted to seek $374 million worth of loans in 2006 to pay down the city’s gigantic pension deficit, in lieu of cutting deep into the city’s service budget. He was forced to sever the borrowing plan from the budget after receiving the criticism of City Attorney Mike Aguirre and the City Council’s independent budget analyst, Andrea Tevlin. Aguirre fundamentally disagreed with the notion of refinancing the existing debt, saying the bond issuance was illegal without a vote of the people. Tevlin argued it was unreasonable to include such a large sum in the budget with the city’s borrowing status in Wall Street in limbo.
During his 2005 campaign for office, Sanders pushed other methods for fixing the city’s finances: labor concessions, privatizing city services and overhauling the employee pension system.
Those initiatives haven’t yet materialized. Last year, Sanders’ first crack at seeking financial sacrifices from the labor unions failed. Three employee unions came away from the 2006 negotiations with pay freezes, but the benefits Sanders criticized as too expensive remained intact. This year, the public outcry over the rapid flight of police officers from the San Diego force compelled the mayor to grant the Police Officers Association a 9 percent raise, adding an estimated $16 million annually to the city’s expenses.
But Sanders said he was able to make marginal gains by restructuring health benefits in the police contract. He said he wants to include an overhaul of the city’s health plans in a package of reforms he said he will tackle in 2008, when all five of the city unions are at the bargaining table. Included in those plans are overhauling the city’s retirement system, probably to a defined-contribution plan akin to a 401(k), that would allow the city to control costs.
Sanders won the ability to privatize some city services last November when voters passed Proposition C. But it is unclear when any savings the city government realizes from the outsourcing measure would be felt, as Sanders has not yet set a timeline for launching the competitions between city departments and private businesses.
Consultants at Kroll Inc. rapped the city in August for ignoring its long-term obligations and not submitting a multi-year plan for addressing the shortfalls. Prior to the report, Sanders had pushed to squirrel away money for the city’s retiree health care obligations, currently pegged at $1.4 billion, and the $1 billion pension deficit that was regularly splashed in newspaper headlines. But Kroll’s suggestion to forecast other costs — deferred maintenance of city infrastructure, for example — prompted the mayor look beyond the retiree costs and to lump eight long-term liabilities into a five-year plan that Sanders released in November
After the release of the five-year plan, only a couple of things about Sanders’ plan were clear: The city had to find a way to pay for several enduring expenses, and taxes weren’t an option.
“I think it puts him between a very tough rock and a hard place,” said Aguirre, who favors raising taxes. Aguirre, who constantly praises Sanders, contends that the city will go bankrupt if it doesn’t raise money or successfully roll back pension benefits in his current lawsuit, which has thus far floundered in court.
The mayor’s anti-tax platform has been applauded by his boosters in the business community and the Republican Party, but it also forced Sanders to approach the problem without a key tool that others have urged him to wield: new revenue. Several City Council members and others have pointed out that the city of San Diego could garner up to $279 million more for its thin budget if it just increased its taxes and fees to the same levels as other large California cities, citing a study from a left-leaning think tank. Sanders has consistently shrugged off the advice.
As much as Sanders credits his cuts, the city will again benefit next year from the aftershocks of a local economic boom. The Mayor’s Office estimates that an extra $83 million will be collected for the city’s service budget, even with tax rates staying level. Sanders will also benefit from a one-time windfall in a smaller pension bill that resulted from some tweaks to the fund’s accounting methods and above-average investment returns.
For Raymond, the union president, the optimism that Sanders rolled out last week contradicts the doom and gloom that she said he manufactured during his campaign in order to win political points.
“I think that if you’re going to go on a reform platform, you’re going to have to go on a crisis, whether it’s real or perceived or made up,” Raymond said. “To be a reformer, he had to have a budget crisis. I don’t think we have to have a budget crisis.”
Sanders has been cautious in this regard, maintaining that things are getting better without declaring victory. Budget deficits in each of the remaining four years of the five-year forecast are estimated to be more than $100 million.
When asked if his efforts returned the city to normalcy, Sanders denied it. Instead, he said the problems were “manageable” and that his cost-cutting strategy had done enough to free up the money needed to maintain services for this year. He noted that the city will incur more expensive costs in the future, including a $25 million step up in retiree health care next year.
“I think we’ve done a lot this year,” Sanders said. “Our hope is that we can contain the costs going forward as well.”