At its meeting Tuesday night, Berkeley City Council unanimously voted to adopt the biennial city budget update to close a projected $1.8 million deficit for the upcoming year, allowing fiscal year 2013 to begin with a balanced budget.
The biennial budget update will close the budget gap through a combination of loan adjustments and cost reductions, despite ongoing concerns regarding unfunded liabilities which could create additional financial obstacles down the road.
To close $1.6 million of the $1.8 million gap, the city approved a loan from the Worker’s Compensation Fund to the city’s refuse fund — used to finance refuse collection and solid waste disposal services. The loan to purchase new refuse collection trucks was originally borrowed from the general fund and will now be repaid to the fund in fiscal year 2014.
For the remaining gap, the city proposes to cover the $248,000 balance with the use of one-time funds from the general fund reserve.
The city also faces structural deficits, which occur when a governing body spends more than the revenue it brings in. According to the budget update report, in the short term, the “only method to effectively eliminate” the structural deficits is through labor cost reductions, including eliminating approximately 22 full-time equivalent staff positions.
Mayor Tom Bates proposed several recommendations regarding the budget update, allocating $64,733 in one-time funds to four city organizations — Berkeley Youth Alternatives, Japanese American Services of East Bay, Bay Area Community Land Trust and the LifeLong Medical Care Acupuncture Clinic — recommended by the council.
“I think it’s a document that reflects our values,” Bates said. “Hard times — I think it’s the best we can possibly do.”
Although many groups thanked the mayor for the additional funding received, other residents expressed doubts about the recommendations in the budget report.
“How are we going to plug those holes in a moving forward fashion?” said Berkeley Budget SOS member and mayoral candidate Jacquelyn McCormick at the meeting. “Our infrastructure is disintegrating, our pools are closing … we’re cutting funding to our social services agencies.”
The development of the fiscal year 2012 and 2013 biennial budget first began in October 2010 and was adopted on June 28, 2011. The budget is updated mid-yearly and at the beginning of each fiscal year, July 1.
According to the biennial budget, the city faced a projected $12.2 million deficit for fiscal year 2012 and a $13.3 million for fiscal year 2013, but the balanced budget that was passed last June resolved this problem by eliminating 79 positions, cutting services and raising fees on various services, such as permit inspection fees.
Earlier in February for the mid-year biennial budget update, the city’s revenue fell short of expected, leaving a $1.9 million shortfall in general funds for fiscal year 2012. However, this budget gap was closed by identifying the capital projects not scheduled to begin in fiscal year 2012, using the funds to cover the shortfall.
According to the budget report, CalPERS, a state pension fund that uses investment returns to provide for employee pensions, will increase city costs by almost $7 million over the next two years. The city is addressing this as a long term issue and still implementing changes, such as increasing retirement contribution rates.
However, without additional balancing measures, the city will continue to face structural deficits since “the proposed balancing measures do not resolve the ongoing structural problem of exceeding revenues.”
Daphne Chen covers city government.