SACRAMENTO, Calif. — Sacramento is now facing a $66 million budget deficit for the upcoming fiscal year and city leaders have four months to decide what kind of cuts to make.
This estimate is up from Jan. 23, when City Manager Howard Chan told the Council the projected deficit would be “north of $50 million.”
“We face a challenge, but it's not an insurmountable challenge,” said Mayor Darrell Steinberg.
The deficit comes as revenues — or income — remain flat, while spending and expenses related to things like homelessness and cost of living have gone up.
“It's a combination of multiple things that have happened over a number of years,” said Pete Coletto, the city’s Finance Director.
His department projected a $24 million deficit back in April, but Coletto said that estimate did not include pay raises for city workers, since the outcome of contract negotiations with several unions was unknown at the time. Now, those labor negotiations are done and they cost the city $45 million dollars, Coletto said, making up a large chunk of the projected deficit.
“The biggest part of the city budget is the cost of hiring public workers,” Mayor Steinberg said. “But who are those people? They're your police officers, they're your firefighters. They're the people who maintain our parks. They're the people who make sure that our water and our sewer systems are working.”
The city needs to remain competitive, he said, and even with the raises, many workers could find higher-paying work in other nearby cities.
Back at the Jan. 23 council meeting, City Manager Howard Chan said city workers deserve the raises they got, but added, “it is also true that what we approved — and what you all approved and what we’ve been discussing over the last several months — we cannot afford. It’s not sustainable… There are not going to be easy discussions and decisions to be had.”
Elected city leaders are in charge of making spending decisions, so ABC10 asked Mayor Steinberg how the deficit ballooned to $66 million on his and his councilmember colleagues’ watch and whether other cuts could have been identified and made prior to now.
“I’m in my eighth year as mayor, and for seven years we've had budget surpluses. So it's a pretty good track record,” he said. “And now we have a budget problem.”
By the city charter mandate, Coletto said, the city council must pass a balanced budget by the end of June, as the new fiscal year starts July 1. That means finding a way to make a $66 million deficit disappear in just over four months.
Is it possible to pass a balanced budget that doesn’t include layoffs?
“That's certainly going to be our goal. I don't guarantee it, but I think it's possible,” Steinberg said.
The council will get its next budget update at its meeting Tuesday.
“The city manager has been very clear that instead of doing just across-the-board cuts for every department, he wants to take a strategic approach to it,” Coletto said.
He said Chan has asked each department head to submit suggestions for cost reductions. Chan will then present a proposed balanced budget in late April. Councilmembers will have budget hearings in May and they must pass a balance budget by June 30.
The City of Sacramento is not alone in this. A blog post on the city’s website explaining the deficit points out San Diego, San Francisco and Oakland are currently facing similar deficits. It call comes as the state is now facing a $73 billion deficit.
City leaders say they want to hear from the public. They’ll be announcing a series of community meetings, to be held in March. They want to hear the public’s priorities and ideas about possible cuts.
The city does have a ‘rainy day fund’ like the state does, called an economic uncertainty reserve, but Coletto said it’s designed for a recession. Whether the city dips into it to alleviate this current budget deficit is ultimately up to the Council, but this deficit is not the result of a recession. Rather, it’s a matter of spending more than the city is taking in – what Coletto calls a structural deficit.
