Wednesday, July 29, 2009 | If City Hall pulled a fire alarm today, would anyone believe they were in danger?
This is the crux of the financial crisis erupting in the city of San Diego. Ultimately, it is not a lack of budget-cutting tools or new revenues that hamstring our ability to secure fiscal solvency, but rather, a misaligned public perception that has not been conditioned for the drastic choices that now lay before us.
In the seven years since Diann Shipione blew the whistle on the underfunding of San Diego’s public employee pension system, City Hall has been marked by periods of indifference and belittlement of our mounting fiscal woes. What has become of the tough talk of using political capital and the public mandate to advance dramatic proposals for structural government reform and improving taxpayer accountability? Managed competition, which is approaching its three year anniversary of a city initiative and overwhelming voter approval, has been effectively shelved. Threats of bankruptcy to bring the labor unions back to the negotiating table quickly evaporated. Not to say that positive fiscal changes haven’t been made — but some are temporary and unable to bring the sustainable solvency we’ve needed for near a decade.
Creative short-term budget balancing techniques have instead dominated the dialogue on how to fix our fiscal problems. The excessive use of one-time solutions, marginal policy changes and fund raiding by the Mayor’s Office and City Council to close both annual and mid-year budget gaps have given San Diegans the false impression that our financial problems are small, errant worries and can be managed.
Continuous official revisions to the size of annual budget gaps obscure the problem. Is this political strategy unique to San Diego? No — but it’s not what we need, and our taxpayers deserve better.
To be sure, reforms have trickled into City Hall, but in the smallest of doses and with the least pain on parties. Consider last year’s changes to pension benefits for public employees, which purportedly saved $22.7 million — but only after new hires completely replace existing employees vested under the old plan, perhaps in the year 2038 or later. However, when the public reads splashy press releases and news stories about achieving “significant cost savings” from “pension reform,” how are they not to believe that the message City Hall is trying to send is “Mission Accomplished”?
Incrementalism has failed to resolve San Diego’s financial problems precisely because it enables the public to believe they don’t exist. As a result, taxpayers become understandably obstinate when they are asked to change their expectations of quality public services.
Consider last fall, when the mayor planned to close public libraries and recreation centers en masse to slash a $43 million mid-year budget shortfall, but was routed by hundreds of angry citizens and their representatives on the City Council.
Clearly, the lesson is that government demands for public sacrifice aren’t likely to be well received when they appear detached from any narrative of an ongoing financial crisis. Moving forward, does anyone today believe that taxpayers are ready for the news that San Diego City Employees Retirement System, or SDCERS, could hand us a new bill for $1 billion in additional pension obligations, possibly ramping up payouts from the city’s general fund by up to $100 million more each year?
Perception is important. Sunny announcements and rosy editorials give the sense that great public monuments are only a breath away from fruition, stymied only by a lack of true believers.
The downtown Central Library has been lauded by civic cheerleaders as “shovel ready” and “innovative,” yet it is fashioned together by a financial patchwork, including a last-minute insertion of public school bond dollars and a philanthropy drive which is $35 million short. At the end of the day, who will tell the public that City Hall casually assumes that we will somehow “find new money” to cover long-term operating expenses after five years, when all along we haven’t been able to come up with the necessary construction money since 2002? Who will give money when there is none left to give? Certainly not local taxpayers, who have rejected a library tax in the past.
San Diegans deserve a spotlight, not a flashlight, to illuminate our true long-term financial problems. The failure of City Hall to release an updated five-year forecast, a five-year overview of the revenues and expenses for the city’s general fund, is egregious. Last publicly updated in November 2008, at that time the forecast painted a bleak and troubling picture.
Long term, the forecast projected a cumulative deficit of $223 million, which has significantly worsened in our economic downturn. The five-year forecast assumed, for example, that in the fiscal year (FY 2011) that will begin next June, property tax receipts would increase 1 percent. However, the county assessor announced weeks ago that the receipts would instead decline by 0.58 percent.
This is a problem, and it has to change.
I’m confident that a fresh start from City Hall’s failed approach can be made. Only with the mayor and the City Council acting as diligent leaders in a long-term financial crisis will everyone understand just how big the hole is and what fate we truly face as a community.
Only then we can start fundamentally rethinking how the city works, what we want for the future of our community, and the tradeoffs that are going to be required. Unfortunately, because of the delays we will need to ask difficult questions of whether to cut more expenses like police and fire or accept tax increases.
Cutting expenses will be more achievable if the mayor and City Council this year move managed competition forward. The cost savings that can be achieved can significantly lower both the city’s pension and retiree healthcare liabilities.
The city must advance a comprehensive pension solution — either moving more employees to a complete 401(k)-like plan and/or raising the retirement age for city employees to match that in the Social Security program. And we need to look at the entire range of services the city provides, and get San Diego out of activities that are not related to the core business of government. If political cautiousness persists at City Hall, the public should be given an opportunity to vote on these matters at the ballot booth.
However, with no re-election on the horizon and with three years left in office, I believe Mayor Sanders can become the leader we need now — and with all of our support he can be successful in righting our sinking fiscal ship, if he is willing to act. At this point we need a city of financial leaders, not political leaders.
Lots of forecasting numbers and political problems at City Hall are insider baseball, but that doesn’t mean the public should be kept in the dark on their financial future. We’re in crisis mode, and we need to start acting like it. Spreading the urgent message of ongoing financial hardship and starting to make the tough choices will help everyone get into the right mindset to overcome our fiscal challenges, and to prepare for brighter days.
Steve Francis is the founder and former chairman of AMN Healthcare and a candidate for mayor.