City Council Revises Plans Due to Projected Decline in Revenue Stream

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Facing a lingering $1.8 million deficit, the Berkeley City Council revised its plan to implement services - and cuts - for the next four months and introduced cost-saving strategies for its upcoming biennial budget Tuesday, highlighting increased fiscal frugality in today's uncertain economy.

The decline in the city's revenue stream - from an estimated $146 to $144.25 million for fiscal year 2011 - is attributed to a decline in property and sales taxes as well as parking fines, most of which are sensitive to the economic climate, according to city Budget Manager Theresa Berkeley-Simmons.

Property tax revenue, for example, was reduced by a little over $500,000 in fiscal year 2010.

However, the projected $146 million in general fund expenditure is on track. The city has saved $1 million due to unfilled positions and layoffs, while city employee "give backs" - voluntary non-paid days off - have saved the city $1.7 million for fiscal year 2011, according to City Manager Phil Kamlarz.

But that one-time solution will not save the city from having to implement further cutbacks to close the mid-year and projected budget deficit.

Seven positions are scheduled for termination and 14 employees will face potential pay cuts or job transfers, according to Kamlarz. The city has already eliminated 130 positions in the past two years.

The city is also reducing expenditures by deferring approximately $813,000 in capital improvement projects for fiscal year 2011, according to Berkeley-Simmons. Deferred projects include a bike and pedestrian program and storm response and maintenance projects.

"We thought we were going to get through this," Deputy City Manager Christine Daniel said at a budget briefing Tuesday. "At mid-year, we realized we have a worse problem than we expected."

The city's budget woes, though, extend beyond June 30, when fiscal year 2011 will conclude.

A general fund deficit of $3 million in fiscal year 2012 and an additional $4 million in fiscal year 2013 are expected to plague the upcoming budget.

The projected deficit stems largely from cost increases in employee benefits. Over the next two years, the city's contribution to its employee pension plan is expected to increase by $7 million. Additionally, health care premiums have increased by more than 70 percent since 2005 and will cost the city a projected $16.3 million, according to Kamlarz.

A long-term plan to address unfunded liabilities - city contributions to pension plans - has yet to be finalized, but a $253 million debt in funding due to a decline in assets looms over the budget for now.

"Costs are escalating, but revenues are declining," Berkeley-Simmons said at the briefing.

Although city personnel has decreased by about 10 percent in the past two years, police and firefighter funds are protected, according to Kamlarz. Police expenses make up 54 percent of the general fund, and although service cuts are expected, sworn personnel will not be fired.

"We're trying to minimize the impact on service," Kamlarz said.

The second largest deficit will impact public and mental health services. The city's department of health services will shoulder a projected $3 million deficit in fiscal year 2012, which will result in direct cuts to services.

The city is also expected to lose $1 million in federal funding - administered by the city to community service agencies - according to Kamlarz. Affected funds will include the Community Development Block Grant, which provides for affordable housing and poverty outreach programs in the city.

Still, state funding remains uncertain until California's budget is finalized in June.

"The budget is based on projections," Kamlarz said. "A lot of this is a what-if budget."

Governor Jerry Brown's proposed budget calls for $12.5 billion in cuts - amid a $25 billion budget deficit - and the city will have to wait for a ballot measure outlining city fund allocation in mid-March, Kamlarz said.

State cuts will target the redevelopment sector, affecting mainly the city's Fourth Street redevelopment project.

"Most of the downturns have come back fairly quickly, but this is longer and deeper," Kamlarz said.

At its meeting Tuesday night, the council also delayed discussion of a budget option co-authored by Councilmembers Kriss Worthington and Max Anderson addressing state and city cutbacks by calling for reductions in state funding to prisons, Medi-Cal and the institutionalization of nursing services, among other measures. Worthington and Anderson submitted the proposal - titled "Preventing Early Obituaries by Proposing Logical Economic Solutions" - to the council with the hope that it would be sent to Brown for consideration.

The council will continue discussion on the biennial budget on March 8.


Yousur Alhlou covers city government. Contact her at [email protected]

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