Commentary: Why Rush the Budget? Let the New Council Handle It

City Manager Steve Pinkerton is recommending that the city council enact an Urgency Ordinance adopting the budget for fiscal year 2012-2013 on Tuesday night.  The question is why that is the case, as just three weeks ago he indicated that there were no statutory obligations to pass the budget by the end of June.

This budget represents the fifth consecutive year that require budget reductions in order to maintain the city’s General Fund operating budget, as well as to address further reductions in funding levels from state and federal sources supporting transportation and social services programs.

The city manager writes, “As we enter the new fiscal year, the continued uncertainty over the general economy, as well as State and Federal budgets suggest the need for contingency plans across selected areas of the City budget.”

He continues, “Our collective goal has been to maintain a fiscally prudent city operation while minimizing impacts on core and essential services. However, our ability to accomplish this is challenging in the current economic environment; and while the City has, arguably, not experienced the same level of recessionary impacts as seen in many other communities, the continued uncertainty over the general economy and prolonged State budget crisis pose significant threats to our ability to sustain the level of services to which our community is accustomed.”

The FY 2012/13 Budget includes measures to reduce the General Fund structural deficit to $940,000 and draws fund balance down to 9.5%, which is below the suggested fund balance reserve of 15%.  The budget increases general fund expenditures by $1 million from last year, while revenue increased only $600,000.

However, there are positive developments in the budget.

For several years now we have been warning about road maintenance and the declining condition of the city’s roadways and bikepaths.  This new budget deals with that issue head on, increasing funding by nearly $2 million.

That puts the expenditures at $3.14 million, of which $2.34 million come from the general fund and another $800,000 from the roadway impact fee.

Meanwhile, the city has taken steps to deal with the unfunded liability in retiree medical.  Under previous plans the city would slowly ramp up to full annual funding at the 20% level.  Under this budget, they get there now reaching $1.74 million with a one million overall hit to the general fund.

On PERS (Public Employees’ Retirement System), the city is not going to wait for PERS to rate-smooth their way into the reduction in the earnings forecast; the city proactively will fund the $678,000 all funds and $490,000 general fund hit.

Finally, the city takes the hit on the PERB (Public Employment Relations Board) ruling to the tune of $1 million, of which $405,000 comes from the general fund.

To pay for this, the city is going to find $3 million of the cuts, with $1.7 million from the general fund in the city’s reorganization plan which combines a number of factors like functional efficiencies, retirement, attrition, shared services and community partnerships to reach savings.

A huge hit is coming from the employee groups.  The city, instead of the $2.5 million hit last year, is looking at $4 million from all bargaining units and $3 million from the general fund.

By our count then, the city is getting more than halfway to the $7.5 million general fund cuts in one budget.

Despite these “positives” at least in terms of dealing with longstanding issues, there are reasons we might consider waiting.

First, a few weeks ago the city manager told the Vanguard that there was no reason required by law to pass the budget by June 30.

Second, we have a lame duck council, with two members leaving and two joining the council come July.  Why not allow the new council, that is going to have to live with the budget anyway, to make these critical choices?

Third, the budget depends heavily on the negotiated bargaining.  Projecting a savings of $4 million is ambitious, to say the least.  Plus it opens the city up, at least potentially, to charges of unfair labor practices.  A failure to reach that $4 million mark will likely mean additional layoffs over and above the 29 FTE reduction already projected.

Both Dave Owen and Chris Kassis told the Vanguard last week that they believe that the city has learned from their failed imposition of the last, best, and final offer back in 2010.  State law makes it far easier to implement this time.  Therefore, the belief is that the city will be able to impose impasse fairly easily if talks break down.

However, DCEA (Davis City Employees Association) has become a critical hurdle for the city.  In general, it appears that labor negotiations are going slowly.  Dave Owen informed the Vanguard last week that the next labor negotiations meeting is not set until July 10.  Other bargaining units have not even set theirs.

The word the Vanguard is getting is that other bargaining units are now looking to DCEA to determine their moves.  Part of the reason is that DCEA did not take the same concessions as the other units did in 2009-10.

The Vanguard believes that the city is making a tactical error focusing on the rank and file employees.  Instead, the city has developed a critical road map by imposing the Fire Management Group with a new MOU that lays out the blueprint for the city to follow in terms of PERS, OPEB, Cafeteria Cash-outs and other structural reforms.

The city now needs to lead from the top.  The department heads and management group need to accept an MOU similar to the empty bargaining unit for firefighter managers.  They need to lead by example and not expect the rank and file DCEA or PASEA to lead the way.

Moreover, the city reform efforts need to focus on the firefighters.  It was the firefighters whose salary increase ate up the half cent sales tax first passed in 2004 by the voters.  It was the firefighters whose move to a 3% at 50 with retroactive benefits that put pensions at an unsustainable level.  It was the firefighters who bundled their contributions in hopes of buying a friendly council that made much of these moves necessary.

And it was the firefighters that were hit by the Grand Jury in 2008 for union cronyism and preferential treatment, and about which the Vanguard had to file a lawsuit against the city to have them release findings that had been hidden to the public for nearly four years.

The city could save $1.5 million by doing what 85% of communities across the state have done – go to a three-person fire engine.

That should be one of the first things the city does.

Finally, there is a final reasons we ought to wait.  Last year’s budget was heavily prefaced with tier cuts.  The Vanguard has opposed these kinds of cuts in the past as they lead to the loss of service to the public.  However, at least we knew what it was we were cutting.

This budget has very little in the way of specifics and the council is largely handing the city manager a blank check here.

To be quite frank, the city manager blundered when he decided to cut tree trimming without laying out an explicit rationale for it.  The city manager has been charged with fixing the mess and avoiding the fate of Vallejo and Stockton.  However, he is still a newcomer to this community and needs better guidance from the council about the politics of some of these cuts.

Given all of this, it makes sense to push this off and allow the new council to deal with the budget, primarily because they are the ones that have to live with the choices anyway – why not let them decide what their collective priority is?

—David M. Greenwald reporting

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