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Potential cutbacks will soon officially be on the table as the city stares down a projected $124 million deficit for the upcoming budget year.
City leaders recently asked city departments to report back this month on potential cuts that could help the city address a budget gap that has ballooned as the coronavirus pandemic has ravaged the local economy and tax collections.
The past few weeks, city administrators have asked the city’s police and fire departments to suggest 2 percent cuts, and other departments that support public safety, including human resources and information technology, to propose how the city might cut spending by 4 percent.
All other city departments – including parks and recreation, the library department and the city auditor’s office – have been asked to explain how they could cut costs by 8 percent, city spokeswoman Nicole Darling said.
Darling said departments have been asked to first look at cuts they proposed for the current budget year that weren’t incorporated into the final budget in their proposals for the new fiscal year starting in July.
The proposals for future cuts could include slashed positions, reduced hours at city facilities, layoffs and delayed capital projects, among many other possibilities.
The requests to departments mark the start of a months-long process to balance the city budget.
Mayor Todd Gloria and interim Chief Operating Officer Jay Goldstone must decide in coming months how to address a large budget gap that could shift throughout the process. Per city rules, Gloria must deliver his proposed budget to City Council by April 15 and the City Council must approve a final budget in June.
The size of the deficit and the city’s approach to balancing its budget could be affected considerably by the status of federal aid and the state of the pandemic’s impact on the city and its tourism industry, among other variables. Meanwhile, an increased projected pension bill has already ratcheted up the city’s expenses for next year and city employees whose salaries have long fallen behind their counterparts in other cities are pleading for raises during labor negotiations now underway.
Gloria has said he brought on Goldstone, who helped the city make tough calls during the recession and in the aftermath of it pension scandal, in hopes his experience could help the city avoid significant neighborhood service cuts.
Nick Serrano, Gloria’s deputy chief of staff, wrote in a statement that Gloria will use the recent requests to city departments to assess its options.
“The mayor and his leadership team will be evaluating these suggestions and doing a deeper dive over the coming weeks with the goal of minimizing impacts on core city services,” Serrano wrote.
Such requests have been common in recent years. In November 2019, for example, then-Chief Operating Officer Kris Michell asked city departments to propose 4 percent cuts to help pave the way to put together the current year’s budget before the pandemic dramatically changed the process.
Now, months into the coronavirus crisis, the situation is more dire.
Goldstone acknowledged during a virtual gathering of the local chapter of the National Albondigas Political Society on Friday that the cuts of years’ past such as axed support staff positions are unlikely to address the city’s budget gap this go-round.
The city has already trimmed about $87 million the past four years.
“My understanding is in the last couple of years there’s been over 100 and some positions eliminated out of budget – most of them internal – so some of the low-hanging fruit’s probably not there,” Goldstone said last week. “We’re putting everything on the table.”
Goldstone and the city’s independent budget analysts also advocate for considering whether to dip into the city reserve accounts to try to lessen the cuts. As of last June, there was more than $200 million in the city’s general fund reserve account.
“I don’t want to necessarily cut services only to six months later or a year later have to restore them and rehire people and retrain people,” Goldstone said last week.
To avoid that outcome, a December report from the city’s Independent Budget Analyst’s Office suggested the city may need to consider tapping into unspent funds, its general fund reserve and perhaps a separate pension reserve fund created to provide a backstop for years the city is struggling to cover its hefty annual pension bill. The report also noted that the city could waive the commitment to set aside funds for infrastructure called for in a 2016 ballot measure, a step the city took to balance this year’s budget.
Mike Zucchet, who leads the city’s largest labor union, said the pandemic is precisely the kind of rainy-day event the city’s emergency accounts are meant to address. He also argued the city should prioritize finding ways to give raises to employees to address years-long retention and recruitment challenges, an outcome he said is likely possible if city leaders dig more closely into assumptions already baked into budget projections for next year.
For example, Zucchet said, the five-year budget outlook produced on former Mayor Kevin Faulconer’s watch assumes the city will add parks and joint-use facilities that Gloria could decide not to proceed with given the city’s financial and staffing constraints.
“How are we possibly gonna staff them?” Zucchet said. “We can’t staff the assets that we have.”
Before making any decisions on next year’s budget, Goldstone said he wants to hear from city departments. Then he’ll work with Gloria to start crafting a plan next month.
The City Council is set to formally weigh in this week. Last week, Council members submitted their own budget priorities to the city’s independent budget analyst. Those memos are set to be released later this week.
Council members publicly agonized over the decisions they’d have to make in the new year last month after a presentation on the city’s five-year financial outlook.
“We do face a very daunting challenge to keep a balanced budget and serve our residents and not hurt them too much financially during this time,” Councilwoman Monica Montgomery Steppe said, reflecting on analysts’ suggestions that fee increases could help the city address its budget gap. “That’s gonna be very hard.”
Montgomery Steppe, who represents southeastern San Diego neighborhoods, is among the City Council members who have recently surveyed residents on their budget priorities.
Councilman Chris Cate, who chairs the City Council’s budget committee, said more than 590 residents from his district – which includes Mira Mesa and Sorrento Valley – responded to his office’s survey.
The basic ask, said Cate: “We’re not going to be able to have it all. If you can’t have it all, what can you do without?”
At least one city department has also shared its feedback with City Council offices.
In a Jan. 5 email obtained by VOSD, City Auditor Andy Hanau wrote that city administrators had asked his department to propose an 8 percent cut he said would require his office to furlough and lay off staff, an outcome Hanau argued could have badly timed consequences. He sent the email the day before City Council members’ deadline to submit their budget priority memos.
“While we recognize that the city’s budget will be highly impacted next year, furloughing and laying off city auditor staff will limit our ability to identify city cost savings, revenues and efficiencies at a time when they are most critically needed,” Hanau wrote. “I therefore respectfully request that the City Council support fully funding the Office of the City Auditor in their [fiscal year 2022] budget priority memos.”
The office avoided cuts last year after the City Council weighed in.