This week we saw something very unusual – in fact I did not realize at the time just how unusual it was – we saw a Democratic Governor veto a budget that failed to, in a real way, balance the budget.
According to Governor Brown, it was the first time in history that the state budget has been vetoed.
What followed was of course, the Democratic legislative leadership feeling undercut, but at the same time, Governor Brown put the blame squarely on the Republicans for refusing to work with them to pass a real budget.
By real budget, I mean one that does not just balance the budget on paper but really balances the budget.
And that is what the City of Davis is looking to do for the first time since I have been following city politics.
This week marked a dramatic shift for the first time in the way city government has been run.
While the city operates with a much smaller budget, at the same time it has used a number of tactics to make the budget appear balanced. There are really three areas that we can point to. First, when the city has been able to afford all spending, it has placed the spending into an unmet needs category. This makes it appear that the city has a balanced budget when the reality is that they have simply been unable to repair streets and roadways.
Deferred maintenance is particularly pernicious because it is not a flat cost, but rather a cost that will grow in the future. If I do not fix the leak in my pipes now, I will have massive repair as the water begins to erode the inside of my walls. And so, what was once a fairly manageable cost, can explode over time.
Second, the city has used unrealistic projections. The state is really good at that. But the city for the past several years has also projected overly-rosy revenue, that ends up needing to be scaled back or other things cut as the year goes along.
Finally, the worst example is the unfunded liability. Both in terms of pensions and retiree health care, the city has paid considerably less now than it will owe in the future. But because the timeline is about 30 years, they can get away with it.
The current economic crisis drew attention to these unsustainable practices. The city had, as most cities had during the previous decade, increased both salary and benefits to employees. We were able to keep up, at least on paper, due to double-digit revenue increases in property taxes as well as a sales tax hike and parks parcel tax.
In 2008, during the council elections, both Stephen Souza and Don Saylor got re-elected with claims that we had a balanced budget with a 15-percent reserve. This was evidence of their fiscal stability.
In reality, it was a ticking bomb that only became apparent to most after the collapse of the real estate market cut off the engine of Davis’ economic vitality.
But that did not change our policies. Instead of fixing the core problem, we cut around the outside. Budgets were balanced on retirements, cost-cutting and transfers.
What changed was the election of Joe Krovoza and Rochelle Swanson in 2010 and the replacement of Don Saylor with Dan Wolk in 2011.
Even with those changes, the city manager was still proposing a budget that did not touch structural issues, did not put real money back into unmet needs specifically road maintenance, and only balanced the budget on paper using tier cuts and ignoring flaws in his economic model.
With the new budget, we have yet to see the specifics of what it looks like just yet, but the idea is bold and impressive. It deals methodically with each plank.
First it restores funding for road repair and street maintenance to $1 million. Next it provides a much more realistic projected cost for pensions. Finally, instead of cutting around the edges, this budget looks to make critical structural changes.
Some are concerned that this throws employees under the bus. I do not think it does. It simply recognizes, for the first time in a decade, that the policies that began in 2000 are not sustainable and we have to fix things.
The reality is that in tough times we have to prioritize our spending. Not all spending is critical, not all needs are the same. Our state government has for too long balanced its budget through gimmicks, false projections, and cutting spending to education and social services.
I know they do not want to do that, but they’ve done it just the same. The result is that we have kicked our problems down the road, while at the same time cutting services to those who need it most.
We need to bite the bullet hard, and then figure out what we need to spend money on first and foremost.
—David M. Greenwald reporting
[quote]He said upon vetoing the budget, “That’s big, and it sends a powerful message that all of us have to do more, we have to rise to a difficult but higher level.”
What followed was of course, the Democratic legislative leadership feeling undercut, but at the same time, Governor Brown put the blame squarely on the Republicans for refusing to work with them to pass a real budget.[/quote]
So how is blaming Republicans rising to a higher level?
[quote]First, when the city has been able to afford all spending, it has placed the spending into an unmet needs category. This makes it appear that the city has a balanced budget when the reality is that they have simply been unable to repair streets and roadways.[/quote]
I have always disagreed with this less than honest tactic.
[quote]With the new budget, we have yet to see the specifics of what it looks like just yet, but the idea is bold and impressive. It deals methodically with each plank.
First it restores funding for road repair and street maintenance to $1 million. Next it provides a much more realistic projected cost for pensions. Finally, instead of cutting around the edges, this budget looks to make critical structural changes.[/quote]
This is precisely what was needed. But the City Council has to stand fast and carry through with it. I have faith that they will…
[quote]Some are concerned that this throws employees under the bus. I do not think it does. It simply recognizes, for the first time in a decade, that the policies that began in 2000 are not sustainable and we have to fix things.[/quote]
Amen! It will be very tough on city employees, but these are hard times…
The Repubs haven’t done anything they hold the key to raising revenue and were smug to do nothing and make the dems swallow all the cuts and then whine about those same cuts. Jerry Brown simply said you no work you no get paid. Lets see how long they want to stand up to that.
For what it is worth, I think congratulations are due to this blog and its contributors for keeping the budget issue front and center. There is still much to be accomplished, but at least for now, it seems we have a fiscally realistic city council that knows there is a large group of residents (maybe not a majority, but at least a large group) who will support them when they make the hard decisions that must be made. David, keep up the good work.
I still think it would be fair to let the voters of California weigh in if they would like to continue to have FY 2010-11 level taxes.
The comments made by Observer seem especially pertinent to me tonight. Earlier today I heard a short portion of an NPR story on how investigative journalistic coverage of government processes on the level of the school boards, cities, counties and state have been decreasing in California . The first thing that came to my mind wad how fortunate we are to have this resource. So my thanks also to David and to all the participants in some very lively and thought provoking discussions.