The City Budget, Explained

Government

The City Budget, Explained

San Diego has a new mayor who’s facing new financial realities and is incorporating new priorities into the budget. Here’s an explanation of where the process is at, and how it will unfold from here.

An SDPD vehicle is parked in front of San Diego City Hall. / Photo by Brittany Cruz-Fejeran

Last year, the city of San Diego experienced something unusual: Thousands of residents suddenly cared intensely about the city budget.

Specifically, following the death of George Floyd in Minneapolis, residents turned out (virtually) in droves to urge the City Council to cut the San Diego Police Department’s budget.

But on top of a lack of will from then-Mayor Kevin Faulconer to cut police spending, the residents demanding change faced another hurdle: By the time they weighed in, the budget process was already so far along that city leaders were limited in what they could do to make residents feel heard.

The ordeal highlighted the confusing and bureaucratic process of approving the city’s multibillion-dollar budget.

Now, there’s a new mayor who’s facing new financial realities and incorporating new priorities into the budget. Here’s an explanation of where the process is at, and how it will unfold from here.

The Basics

Mayor Todd Gloria recently released his $4.6 billion proposed budget, kicking off the city budget process for the coming fiscal year.

By the end of June, the final budget will be adopted. The 2022 fiscal year runs from July 1, 2021, to June 30, 2022.

Between now and then, the city’s independent budget analyst will release a report analyzing Gloria’s proposal and priority memos from City Council members, and the city will hold public hearings in which the public can weigh in. On May 5, the Council’s Budget Review Committee will hear public input on the proposed budget, and on May 17, the full City Council will hear public input before recommending changes to the mayor’s proposal.

Click on the image to enlarge the timeline.

The pandemic has created some new challenges, so this year’s budget proposal includes things like $10 million in loans for nonprofits and small businesses and more than

$10 million to keep the Convention Center operational and prepared for when tourism begins full force again. The city has also taking revenue hits, particularly when it comes to income from its Transit Occupancy Tax – a tax paid by hotel guests – which relies on visitors coming to San Diego.

But there’s also an existing structural deficit – ongoing costs that eclipse the city’s revenue – that has led Gloria to make decisions like cutting the San Diego Public Library System budget by 10 percent.

Going into this year’s budget cycle, the city was projecting a roughly $85 million deficit for the current fiscal year and a $154 million gap for the fiscal year beginning in July. Federal aid from the American Rescue Plan helped cover those deficits.

Policing

That police budget cut residents sought last year didn’t happen, and it doesn’t look like it’s going to happen this year. San Diego is actually poised to raise police spending for the 11th year in a row.

Gloria proposed spending nearly $600 million on police next year, a 3 percent or $19 million increase from last year’s $580 million police budget. If approved, that would mean the city’s police spending has increased 52 percent since 2008.

Gloria’s office has defended the police budget increase by saying it’s largely a result of the increasing costs of police pension obligations. The bulk of police money is spent on employee pay and benefits and has been growing faster than the rest of the budget. The city also can’t just unilaterally cut retiree health and pension benefits.

The mayor has proposed some spending changes within the police budget. His budget calls for a $4.3 million cut to overtime – bringing the department’s budgeted overtime line for the year to $30 million – while dedicating just over $1 million to setting up the Commission on Police Practices, a new and strengthened police oversight body approved by voters in November.

The Community Budget Alliance, a progressive advocacy group, has released and alternative vision for city spending, including a roadmap to “redefine public safety,” in its People’s Budget, which “equitably invests public dollars and combats systemic racism.”

That proposal doesn’t set a spending cut goal, but identifies areas of spending the group believes should be reallocated. It calls for cut the department’s overtime budget and diverting $16 million spent on gang policing into community-focused investments instead.

City Employee Pay, More Firefighters and Library Layoffs

The proposed budget includes $22 million for city employee raises, but the city’s labor unions are all in negotiations this spring, so that could change when new contracts are signed.

Michael Zucchet, the general manager of the Municipal Employees Association, said during a VOSD event that employee compensation in the city of San Diego is 25 percent below the median of other jurisdictions the city competes with for employees – and that has resulted in vacancy rate for MEA-represented positions that’s over 15 percent.

Gloria is also proposing hiring additional firefighters, in hopes that would reduce overtime for existing staff.

One of the most controversial aspects of the proposed budget has been Gloria’s cuts to public libraries, which involve laying off 153 employees and keeping libraries from Tuesdays to Saturdays each week – a $5.6 million cut from last year’s budget.

Addressing Homelessness

Gloria’s proposed budget includes a $10 million increase in funding to combat homelessness, bringing the city’s total annual funding to $80 million. The new money will be used toward things like more detoxification beds for substance abusers, interim shelter beds, rapid rehousing assistance and expanded outreach and workforce training programs.

The city’s 2019 homelessness plan suggested it would cost $1.9 billion to deliver the thousands of homes and other aid necessary to address the problem.

The Climate Action Plan and Other Infrastructure

Gloria included $5 million for a new climate equity fund to enhance the city’s Climate Action Plan. He said he would update the Climate Action Plan, including a new “mobility plan” to reduce reliance on cars in the city, but there were no cost estimates attached to that.

The mayor also proposed $40 million for upgraded roadways with bicycle lanes, wide sidewalks and other improvements to reduce traffic. That money will specifically go to historically underserved neighborhoods.

Infrastructure issues are responsible for a lot of budget headaches, though. The city’s most recent estimate showed stormwater projects made up more than 40 percent of the $2.3 billion gap between money the city has and projects it needs to fund over the next five years.

In a Voice of San Diego event, Councilman Sean Elo-Rivera also noted the city has a $230 million deficit for streetlights and a $280 million deficit for streets and roads.

Paying Pension Bills

The city’s pension bill has hit roughly $415 million for this coming fiscal year.

Rising pensions costs are an area of financial stress for the city every year. Citywide pension costs in the coming years are projected to climb even higher.

The city pursued pension reform through Proposition B in 2012 to address its pension bills, which replaced pensions for new city employees – except police officers – with 401(k)-style plans. That measure has been the subject to years of legal wrangling, and now the city needs to “make whole” the employees hired after the reform who would have otherwise gotten pensions.

The good news is that the city will get credit for what employees have made in their 401(k)s, Zucchet said during the VOSD event, and the value of those, which are invested in the stock market, have been increasing since 2012 because of good market conditions.

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