Now is NOT the time to abandon good budget policy

The City of Oakland has unfunded pension liabilities (approximately $1.5 billion) and negative fund balances (approximately $100 million).  Health care costs and other required payments to the State of California are forecasted to go higher in the coming years. 

And while the current two year budget cycle appears susceptible to balance, it should be noted that in the three years that follow (FY 2015-18) every annual budget shows a NINE FIGURE DEFICIT, ranging from a low of $111 million to a high of $200 million.  

Just four years ago this Council recognized the folly of spending windfall revenues to fund on-going obligations.  With that in mind the Council passed a rule about the Real Estate Transfer Tax.  Any revenue above $40 million in one year was to go to a reserve or to pay down negative fund balances or paying for capital improvements.  In adopting the rule the Council recognized that responsible fiscal planning required using one-time funds to pay down debt and not create new continuing obligations.

It would be a mistake to abandon this policy the first time it would actually take effect. And yet the City Council is considering that very move today.

To abandon the rule demonstrates a lack of fiscal discipline.  A rule was set to show responsibility - it is a good rule and to abandon it the first time it would apply shows the same old spend whatever we have even when we are in debt. 

Further it leads to the likelihood of repeating past mistakes.  The City got in a tough spot in past years when it took a spike in certain income (particularly real estate transfer taxes) and spent it as ongoing income.  It was wise to set a rule saying any income above some amount will be used to put our long term finances in order NOT to leverage us up further.

The Oakland Metropolitan Chamber of Commerce urges the City Council to maintain the real estate transfer tax policy it adopted just four years ago,  thereby demonstrating a your commitment to responsible budgeting and to serving all the citizens of Oakland.

 

SUPPORT: Council President Amendments to Mayor’s Proposed Budget

It is always important in budgeting to be responsible, sustainable and make choices among competing priorities.  Choices are not easy and reasonable people can disagree.  Today the clear need in Oakland is to address crime and promote job growth. 

There are three principal budget proposals: (1) Mayor Quan, (2) Council President Amendments (dated May 30,2013) and (3) Councilmembers Brooks/Gallo/Reid  (dated May 30,2013).  We salute the work and sincere advocacy each effort embodies.  As noted above budgets require making choices.

The Oakland Metropolitan Chamber of Commerce supports the Council President Amendments which we recognize as building on the good work done by Mayor Quan.  The Amendments add elements to the budget made possible by a slight revenue increase since the Mayor established her budget.  That these improvements are possible is testament to the prudent, careful work done by the Mayor.

The City of Oakland spends over one billion dollars every year, the General Purpose Fund makes up about $430 million of that.  Because the competing proposals agree in many ways and have a few critical differences we want to lay out our priorities and explain some of the suggestions we find most problematic.

The Council President Amendments budget does the best job of focusing on public safety.  It maintains the Mayor’s plan to run four Police Academy classes and add to civilian staff at OPD.  Spending on police makes up only twenty percent of the total budget.  Over the past six years while city staffing has fallen 16%, sworn OPD staff has dropped 27% and civilian staff has fallen 34%! A focus on rebuilding OPD is needed.

The alternative suggested by Brooks/Gallo/Reid has several particulars with which we disagree.  Eliminating the CHP support contracts that add patrols to Oakland would be a terrible loss.  Cutting the number of civilian staff being added to OPD would undermine the effort to increase the number of officers on the street and could hinder the solving of crimes and the crime reduction strategy just now being implemented. That plan also puts the funding for police academies on a less certain footing – which puts in danger the ability to grow OPD above 700 officers (and perhaps even above current levels). 

Instead among other things it uses that money to reinstate spending in City Council office budgets and most significantly adds several million for a COLA for city employees.  We understand the City is negotiating with employee unions and we encourage that work continue.  It is worth nothing that while the economy shows signs of improving, the unemployment rate in the City of Oakland is still high and thousands of people in the private sector have seen wage reductions, benefit reductions and other challenges.  In a choice at current levels between spending to increase OPD staffing and offering pay increases we choose public safety.

One other note on spending to address crime.  At current levels one of the biggest factors restricting job growth in Oakland is crime.  In previous communications, we have shared with you anecdotal evidence that fear of crime may cause some employers to leave and prevent others from coming to Oakland.  Investments in public safety today won’t just hopefully save lives and property but pay dividends in increased investment, more jobs and a broader, more robust tax base that will make greater city spending possible.  

Problems remain.  There are negative fund balances, underfunded pension and health liabilities, increased contribution demands coming from state programs and the normal upward pressure on costs.  Revenue streams are scheduled to expire and there are no guarantees that current revenue upticks will continue.  This Council and Mayor will need to find ways to do more with less and serve the needs of the businesses and citizens of Oakland.

The Council President Amendments to Mayor Quan’s Proposed Budget is the best option and deserves your support.  It has ours.