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Thursday, Nov. 13, 2008 | San Diego officials Wednesday kicked off the first public vetting (and venting) of $43 million in emergency budget cuts proposed by Mayor Jerry Sanders by acknowledging that the city’s already dire financial picture is worse than they were saying it was even last week.
The city’s pension deficit has more than doubled in the past year to more than $2.78 billion, and shortfalls in the city’s day-to-day budget are projected to range from $44 million to as much as $96 million in the coming years, according to the city’s actuary and Sanders’ five-year budget outlook.
These revelations came in the first couple hours of an eight-hour special City Council hearing on cuts Sanders proposed last week — which include the closure of seven libraries, nine recreation centers and a gym — to make up for sudden revenue drops brought about by the economic crisis. And in addition to the shuttering of facilities, Sanders is seeking to layoff more than 100 people and cut number of recruits at the city’s police and fire academies in half.
The hearing featured more than 50 speakers — almost all of them against Sanders’ proposed cuts — and at least that many questions from council members who are grappling with ways to close the budget hole without killing services that are near and dear to the hearts of their constituents.
Council members pelted the administration with questions about why certain cuts were chosen and why the mayor did not suggest specific fee increases that would close the gap. They also offered myriad suggestions for other ways money could be raised, from reducing the interest rates paid to employees in a specific pension system program, known as DROP, to the sale of city-owned land.
In the end, the council came nowhere near a decision on what should and shouldn’t be cut. And members did not give any indication that a vote would come next week at its regular meeting. They were taken aback when they learned that the so-called temporary closures of libraries and recreation centers had been built into each year of the five-year budget outlook.
City Council President Scott Peters summed up the feelings among several of his colleagues when he said he would be hesitant to close any facility “for fear that it might never open again — I don’t want to do something that is that hopeless.”
Said Councilwoman Toni Atkins: “We will do our best to do what we need to do. But this is a process that will take a little bit longer than people may want it to.”
Councilman Tony Young and Councilwoman Donna Frye spent the most time drilling administration officials. Frye brought up the proposed closing more than a dozen bathrooms in Mission Beach during the winter, calling the proposal “not rational.”
Young ticked off a list of funds, including the golf course enterprise fund, the trolley extension reserve and the airport services fund where he said millions could be found. “We need to look at those funds so we can have some air to breathe to come up with long-term solutions — use these funds to keep libraries open,” Young said.
While the hearing focused primarily on Sanders’ list of cuts, City Attorney Michael Aguirre made sure to bring up the city’s ballooning pension deficit. He provided an analysis by Joseph Esuchanko, the city’s actuary, which showed that as of Oct. 31 the pension system was $2.78 billion underfunded, with $3.78 billion in assets and $6.56 billion in liabilities.
This brings the funding ratio — which is based on the estimated market value of the pension fund’s assets — to a lower point than it was during the height of the pension crisis. In 2007, the pension deficit was $1.2 billion.
If the pension fund does not recover the 20 percent loss in market value it has suffered this year, it will cost the city nearly $200 million a year by 2011 and $228.8 million by 2014 to fund the system. These numbers are a big reason why the city’s worst-case scenario budget outlook has deficits ranging from $44 million to $96.5 million in the coming years.
Councilman Jim Madaffer used his speaking time to say that a snapshot of the pension fund’s balance in not an indicator of its long-term health. And he derided Aguirre, who earlier had suggested that the numbers warrant a discussion about the merits of the city declaring bankruptcy.
“Yes the number has dropped,” Madaffer said. “[But] we are managing it and recognize that it is a cyclical thing like the rest of the market.”
Aguirre called the recent losses “staggering” and argued the worldwide financial crisis that has caused stock markets to drop by as much as half represent a fundamental readjustment in the markets that threatens the pension system now and into the future.
“Every year we are falling further and further behind,” Aguirre said.
Before officialdom had its say, dozens of city residents strode to the front of the packed council chambers to beg, plead, cajole and castigate city officials in hopes of saving their slice of the city’s budget, whether it be a library, recreation center, junior lifeguard program or table tennis league.
Some residents came with prepared remarks, some spoke off the cuff. A few brought signs, one man came with his young daughter in his arms. “Please don’t close my library,” the girl said.
“I have watched the city cut park and rec and libraries for the past 30 years,” said Wilbur Smith, chairman of the Park and Recreation Board. “These cuts are slowly dismantling one of the finest park and rec programs in the country.”
Others were more strident. “Any of you so-called servants of the people aware that you are closing a library that was a gift from a private citizen?” Asked Valorie Matthews, a patron of the Allied Gardens/Benjamin Library, which she said was built with a donation from the late Edwin A. Benjamin.
“How dare you consider taking this gift and throwing it in the gutter.”