City of Berkeley Faces Budget Cuts Due to Impending Deficit

Job, Salary Reductions Likely After Impending Federal, State Funding Cuts to Amplify Deficit

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City of Berkeley Faces Budget Cuts

Yousur Alhlou and Sarah Burns discuss the upcoming city of Berkeley budget.

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Reflecting a persistently downtrodden economy, the city of Berkeley will face an estimated $12.25 million deficit for the 2012 fiscal year set to begin July 1, a situation that could be exacerbated by impending federal and state cuts and which will most likely result in job reductions.

The Berkeley City Council will hear a preliminary presentation Tuesday regarding the 2012 and 2013 biennial budget, which is set to be adopted on June 28.

The projected biennial budget deficit comes in the wake of a $1.8 million shortfall currently plaguing the 2011 fiscal year. The city is expected to close the gap by July 30.

The largest deficit for fiscal year 2012 stems from the city's Department of Public Works, which will face a projected $3 million to $4 million budget gap. The Department of Public Health, specifically pertaining to public and mental health, faces a projected $2 million to $3 million deficit for the next fiscal year, according to city spokesperson Mary Kay Clunies-Ross.

The refuse fund - currently negotiating a proposal with the city's Ecology Center to close an estimated $1.2 million deficit for fiscal year 2011 - will experience another $2 million shortfall for fiscal year 2012, according to Clunies-Ross.

The city also faces a projected loss in federal funding in the near future.

Federal funding for a wide range of public works projects, poverty alleviation services and weatherization programs will face a projected $950,000 to $1.5 million reduction in the upcoming months.

While many of the job reductions in fiscal year 2011 came from "freezing" positions, Clunies-Ross said the city will likely cut current active positions for the 2012 year budget.

While in the past two years, city departments have experienced a 10 percent job reduction - excluding sworn uniform personnel - Clunies-Ross said that the city will face up to seven terminations and 14 staff salary reductions or job transfers.

Councilmember Gordon Wozniak said while previous budgets mostly allowed for job freezes and transfers, continued economic difficulties have limited turnover among employees, resulting in a lack of positions the city can freeze to reduce personnel costs.

One of the major factors influencing the city's increasing costs is a rise in the cost of retirement pensions and health care, Wozniak said.

For example, rising pension costs are expected to drain the city's coffers an additional $7 million over the next two fiscal years. CalPERS - a statewide pension agency - is projected to increase its rates by 40.4 percent for police and 28.6 percent for fire personnel for the 2012 fiscal year, according to the city's 2011 budget revision.

Wozniak attributed these increases in part to CalPERS' stock market losses in conjunction with the 2008 financial meltdown.

"In 2008, CalPERS money managers lost $200 million of our pensions funds," he said. "They don't have any insurance money on it so when they lose it they call up the city and say 'you have to write us a check cause we just lost a bunch of money.'"

Though Tuesday's budget presentation is only the first step in the long budget process, the council must now begin deliberating on how best to allocate funding for different departments in efforts to create a balanced budget.

"We are finally at the point where we have to make some much harder decisions," Clunies-Ross said.


Contact Sarah Burns at [email protected]

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