By Khalida Sarwari
San Jose’s budget director this week predicted more layoffs and service reductions and eliminations will be required this year due to the city’s $116.2 million shortfall, an increase of about $20 million over the preliminary projection in October.
In October 2009 City Manager, Debra Figone had projected a $96.5 million shortfall in the city’s general fund for the 2010-2011 fiscal year. The city’s budget office released the updated general fund forecast Tuesday showing the city’s budget deficit has increased, San Jose budget director
Jennifer Maguire said.
“The $116 million deficit is daunting,” Maguire said. “We are facing many layoffs in the city and we hope to reach concessions with unions so we can minimize impacts on our city, but no matter what services will have to change.”
The increase primarily results from an estimated $15 million increase in retirement fund contribution rates, Maguire said. The city suffered losses due to the financial markets, so part of the reason behind the increase is to begin making up the impact of those losses, which will
have to be done over a 20- to 30-year period, she said.
The second reason for the increase is because the preliminary figure was projected prior to an actuarial evaluation, Maguire said.
“We have more information on how revenues are performing and more data for the fiscal year that’s helping us refine these numbers,” she noted.
Revenue projections have also been reduced by $8 million, especially in business tax revenues and interest earnings, as a result of the economic downturn, Maguire said.
“We’re like any other city in California, everybody’s facing this type of situation,” Maguire said.
On the bright side, Maguire said reduced expenditures for utility and fuel costs as well as debt service have offset the shortfall by roughly $3 million.
Expenditures include salaries and benefits, such as health insurance and retirement, and expenses like supplies, contracts, electricity, fuel, gas and service for city-financed buildings.
Maguire said in November, the City Council had directed a three-prong strategy to closing the budget gap, including generating new revenues, finding efficiencies, and employment compensation reductions up to 5 percent.
“We’re going to have to revisit that,” Maguire said. “This is our ninth year of cutting in San Jose. We have been cost cutting and cost cutting over the last eight years, so finding that much money in efficiencies would probably be difficult.”
Instead, she said the city is considering more across-the-board layoffs and reducing or eliminating city services. “Everything is on the table, police services, fire services, closing down community centers, looking at park ranger programs, paving off streets,” Maguire said. “There
are no easy choices at this point.”
The City Council is considering placing a ballot measure in the June 8 primary election for a 2 percent tax increase at the city’s two cardroom clubs, Bay 101 and Garden City Casino. Increasing the tax from 13 to 15 percent and the amount of playing tables at the clubs would generate about $5 million for the city, Maguire said.
On March 12, Mayor Chuck Reed will release the “Mayor’s March Budget Message for Fiscal Year 2010-2011,” a report that will give the city manager directions in balancing the budget and any revisions in the three-prong strategy for closing the budget gap, as well other priorities to
consider.
The City Council will hold a meeting on March 16 to do an initial review of the document and on March 23, the council will take action on the document following a public hearing.
On May 3, the city manager will release a proposed operating budget, a financial plan recommendation that will be reviewed by the City Council and at public hearings. By June, Maguire predicted the city’s budget would be balanced for implementation beginning July 1.