I know I’m a little late to the game in addressing San Diego Independent Budget Analyst Andrea Tevlin’s review of the city’s five-year financial forecast, but I’ve just had a chance to read it.
I think it’s best if I briefly mention the highlights (lowlights?) from the report and then try to move the debate forward by listing some of Tevlin’s potential solutions to the budget deficit this year and beyond.
First, Tevlin agrees with Mayor Jerry Sanders that the city is facing a “calamitous financial situation” and for the most part concurs with the projections of Sanders and his crew.
The most significant areas of disagreement relate to revenue assumptions for this year on property and hotel taxes and the funding of retiree health care. Tevlin believes the mayor’s estimates on the taxes could be too optimistic and health care costs could exceed the city’s budgeted payment to the fund. As a result, Tevlin believes the city’s deficit for next year could be $200.9 million, or more than $20 million higher than the mayor’s projection of $179 million.
In later years, her greatest area of disagreement with the mayor’s forecast is its assumption that there will be no salary increases for employees over the life of the forecast.
“Given the 6% reduction to compensation in Fiscal Year 2010, we do not believe it is realistic or a sound business decision to assume no salary increases for the entire forecast period,” the report states.
At the end of her report, (starting on page 31), Tevlin lists some potential solutions to the budget deficit. But she includes a major caveat.
In contrast with our review of the Outlook in prior years, relatively few meaningful solutions appear to exist short of budget and service reductions. Furthermore, a number of the solutions identified below are longer-term in nature, and cannot be relied upon to address the projected shortfall in FY [2010].
- Delay reserve contributions: Delaying contributions to the general fund, workers’ compensation and public liability reserves could save the city $23.3 million this year. The report cautions that the city should consider the effect that this decision could have on its credit rating.
- Unanticipated vacancies: The city has 800 vacant positions, more than it expected. The city’s hiring freeze could result in savings this year and beyond and positions should be reviewed for permanent removal.
- Managed competition: The city’s outsourcing program continues to slog ahead with the latest news of impasse between the city and the two affected unions. Implementation of the program could result in savings, the report says, but likely not much and maybe not at all in time to effect this deficit.
- Pension and benefit reform: The city could explore pension and benefit reform through a suspension of retirement benefit cost of living adjustments and reform/elimination of the deferred retirement option plan. But doing so will likely will not reduce near-term budget deficits.
- New revenues: Past IBA reports have suggested possible stormwater and trash collection fees, but they and any other substantial revenue increases cannot happen in time to effect this deficit.