SAN FRANCISCO -San Diego independent budget analyst Andrea Tevlin said the City Council and Mayor Jerry Sanders need to address a long-term budget deficit and to avoid "a continual erosion" of city services.
"The city is facing a structural budget deficit - ongoing expenses cannot be supported by ongoing revenue," Tevlin said in a report on Sanders' 2008-2009 budget proposal. "Year-by-year budget balancing actions will not solve this problem in a way that is effective or well thought out."
San Diego has undertaken a flurry of financial reforms and budget cutting since Sanders took office in a special election in 2005 following a pension scandal that took down his predecessor and the city's top financial management. Sanders has cut city payrolls by 10% as he increased payments to pension funds, which face an unfunded liability of more than $1 billion.
This year's budget would fully fund the pension's annual required contribution and begin to pay down the unfunded liabilities. It would also increase the city's rainy-day fund by $6 million. But Tevlin warned that San Diego can't continue to rely on "one-time revenue strategies" and job cuts to balance the budget.
"No new or significant ongoing budget-balancing strategies emerged for FY 2009," her office reported. "For three years, the mayor has presented a balanced budget in the face of serious city financial challenges and the pressures of a growing city. This is good news, but likely short-lived."
Tevlin faulted the budget proposal for depending on a series of one-time revenues to balance this year's $1.19 billion general fund budget, such as $8 million of Federal Emergency Management Agency payments related to the city's wildfires last year and $16.8 million in real estate sales.
On the spending side, staff cuts are increasingly cutting into services, not budgetary excess, Tevlin said, suggesting the administration may be nearing the limits of the cost savings it can achieve by cutting excess workers. She also said Sanders' efforts at managed competition and business-process re-engineering have not reduced expenses.
The budget analyst warned that the tax- and fee-averse Southern California city will eventually have to find new revenues to match rising expenses.
"Despite recurring deficits, no new revenues have been pursued, such as a dedicated funding source for new, costly storm water mandates, and existing fees have not been evaluated for cost recovery levels or incorporated into annual budget discussions for several years," the report said. "Unless clear, decisive and long-term corrective actions are implemented, budget deficits will persist well into the future, resulting in a continual erosion of city services."
Mayoral spokesman Fred Sainz said Sanders only spends one-time revenues on one-time expenses. He said the administration inherited a structural deficit of $179 million, which had never been acknowledged, when he came into office.
"The reason why the structural deficit is so big is because Mayor Sanders was honest," Sainz said. "We are on track this year to reduce that deficit by more than half to approximately $80 million and to eliminate it altogether by fiscal 2014."
Tevlin is right to say the mayor opposes higher fees.
"We have not considered fee hikes for services provided by the general fund and the mayor has not called for new taxes," Sainz said. "We consider those accomplishments."
