SAN FRANCISCO — California city and county officials Thursday laid out the budgetary silver linings that exist amid the dark cloud of the financial crisis that has rained hard on municipalities.

"What you read and what people are actually doing are two different things," Debra Saunders, vice president at Fidelity Capital Markets, said during The Bond Buyer's California Public Finance Conference here. "Coping means rolling up your sleeves and digging in."

Fitch Ratings managing director Amy Doppelt said localities that have been able to successfully dig in through the tough times have had a lot in common.

She said they have built up reserves in good years, adjusted budgets mid-year, and have had realistic expectations along with contingency plans.

As examples of the prudent management during the difficult days, officials from San Diego and Los Angeles County discussed their budgeting tactics.

Mark Saladino, treasurer and tax collector for Los Angeles County, said the county has had to slash spending but is in a better position than many because it has not been saddled by outrageous pension liabilities.

The Board of Supervisors "did not give in to union pressure," Saladino said. "L.A. County reformed our system 30 years ago."

Though for the 2010 to 2011 budget, the county still faced a $510 million shortfall from mainly falling tax collections and increased costs. The county plans to partly fill the gap by a one-time bridge funding of $167 million and labor cuts of $115 million.

The county has focused on cutting programs that are discretionary, which does not include debt service, pension contributions, and retiree health care.

It plans to slash $175 million from departments, including $124 million from public safety.

In San Diego, chief operating officer Jay Goldstone said the city has benefited by pulling no punches while dealing with a tough budget.

"We are trying to tackle the problem head on and to keep from handing it off to future generations," Goldstone said. "We are seeing some signs of positive revenues growth but the bottom line is that we have a $72 million budget gap that we have to solve for 2012."

Since fiscal 2007, San Diego eliminated 1,414 jobs, 531 as part of the fiscal 2011 budget, including 150 police officers and 50 firefighters. At the same time, it ramped up general fund reserves to $78 million from $23 million. It reduced spending by $300 million, of which nearly $200 million is permanent.

The city has a half-cent sales tax measure on the November ballot that could raise $102 million per year.

San Diego has also been able to make full pension payments, but Goldstone noted that rising pension costs are something that needs to be tackled.

"We are not just here to provide jobs for people, we are also here to also provide services," he said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.