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Pop the champagne. Cut the cake. Pass out the party hats.
Last month, San Diego Mayor Jerry Sanders announced he had closed the city’s long-term budget deficit, one of the most significant and persistent problems he faced when he was elected almost seven years ago. The mood at a press conference was ebullient.
“I don’t know that I thought I was going to see this day,” Sanders said then. “It’s one of those where you’re almost reluctant to say anything now because we’ve been under the cloud for so long.”
Yet just a few days later, Sanders’ staffers took umbrage at the suggestion that the mayor had declared an end to the city’s fiscal crisis. All he did, they said, was announce that the city’s budget gaps were no more.
How can you fix San Diego’s budget, but not end its financial crisis? If you’re confused, you wouldn’t be the only one. Resolving the city’s budget deficit has a lot to do with your police and fire protection and your roads, but not everything.
Here’s a guide to help you understand what the mayor’s victory declaration means and the current state of the budget.
Every year, California law requires cities to balance their budgets. And every year San Diego complies. Sanders presents a budget in the spring and the City Council passes one by the summertime. This year’s day-to-day operating budget, which funds most of the general services you expect from the city like fire and police, stands at $1.1 billion.
But for at least a decade, San Diego’s budgets have had a problem. The day the council approved the annual budget, it simultaneously approved a deficit for the following year. That’s because the mayor and the council used one-time pots of money to balance the budget. One-time pots of money are reserves, accounting tricks, transfers from other funds. Sanders and others have at times derisively termed these fixes “magic.” Once you use them, poof, they’re gone. For the next year you have to find new money to balance the budget.
Persistent annual budget gaps pointed to a larger problem, what was known as a structural deficit. It meant the city was fundamentally set up to spend more money each year than it collected. In other words, the city’s obligations — like pension payments and public safety funding — outstripped the city’s tax revenues no matter the state of the economy.
For San Diego, these kinds of deficits have stretched at least as far back as 2003, according to the city’s independent budget analyst. The city has had to make budget cuts and use one-time solutions every year since, until now. Just during the last five years, budget analyst data shows the city has used $227.2 million in one-time fixes to keep its budget in balance.
Sanders’ announcement means that starting with next year’s budget these kinds of fixes won’t need to happen anymore. The city’s annual expenses are in line with its annual revenues.
The mayor doubled down on this promise by restoring some of the services that disappeared in previous rounds of budget cuts. He added back hours to branch libraries and recreation centers. He said the city could once again pay to maintain fire pits on beaches.
What’s Not Fixed:
Budgets exist on paper. San Diegans see the results of budgets in the services they receive from the city. These services have diminished during Sanders’ tenure.
Take library hours. Even with the restoration of a few of them, some branches will have their doors open a third less than they did a decade ago.
The structural deficit’s effect on other services is harder to track. Sanders used to provide more than 600 ways to measure the city’s performance every year, from tree trimming to pothole patching. When the worst of the cuts came, he stopped. San Diegans have no reliable way to understand how the deficits have affected city services, the budget analyst has said.
Other services continue to decay each year because there isn’t enough money. Cracked streets and other crumbling infrastructure present the starkest example. Recently, the City Council approved a plan that relies on borrowing almost $500 million over the next five years to help repave streets and replace storm drains.
But not even that is enough. Roads and other infrastructure will still get worse until at least 2017. And all the borrowing will require taxpayers to pay those loans back over the next three decades, pushing today’s costs to another generation. If the city took on those costs today, the budget wouldn’t be fixed — it would have a $100 million deficit.
So even though Sanders says the city’s expenses line up with its revenues, there’s important stuff not counted in that calculation.
The city’s budget may be fixed, but San Diego isn’t.
Reaching structural balance is an achievement for Sanders. Persistent one-time fixes to the budget were never a sustainable solution to San Diego’s financial problems.
Sanders has to present next year’s budget, his last, to the City Council by April 15. There will be pressure for more service restorations, street repaving and other things politicians want to do. They all cost money.
Even proposed solutions to other financial problems add to this dilemma. Proposition B, the June pension reform initiative backed by Sanders, will cost the day-to-day budget more than $40 million between 2014 and 2016, according to a recent financial analysis.
Getting the budget balanced wasn’t easy. Keeping it that way won’t be, either.
Liam Dillon is a news reporter for voiceofsandiego.org. He covers San Diego City Hall, the 2012 mayor’s race and big building projects. What should he write about next?
Please contact him directly at firstname.lastname@example.org or 619.550.5663.
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