City projects large deficits for upcoming fiscal years

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The city of Berkeley will face a projected deficit of $3 million in fiscal year 2014 if no measures are taken to balance the budget, according to a report from the city manager’s office.

At a special meeting Tuesday night, Berkeley City Council discussed long-term fiscal concerns and different strategies for balancing the budget. To close the projected deficits, the city staff recommended a 2 percent general fund reduction across all city departments.

“It’s very sobering news — very tough decisions ahead,” said Councilmember Jesse Arreguin.

For the Department of Parks, Recreation and Waterfront, the 2 percent cuts account for a little more than $100,000 of its $5.3 million budget, according to Peggy Gibbons, deputy director of the department.

“Two percent is certainly going to have an impact on some programs, (but) it’s not a million-dollar cut,” Gibbons said.

However, council members raised concerns regarding the staff’s proposed 2 percent reduction across all departments because it may not adequately address the long-term financial obstacles.

“We can keep shaving 2 percent a year, (but) at some point, we have to take a hard look at evaluating programs,” Councilmember Laurie Capitelli said at the meeting. “It would seem to me that every year we’ve been shaving.”

The $3 million deficit for fiscal year 2014 comes from the difference between a projected revenue of $150.4 million and projected expenses of $153.4 million in the general fund, while the $2.1 million deficit for fiscal year 2015 stems from the projected revenue of $153 million and projected expenses of $155.1, according to the agenda item. The deficit has increased from a recent previous deficit projected at $1.8 million, which the city was able to close last year.

The city faces an additional $3.9 million in structural deficits from special funds, which are funds that account for the financing of public improvements or services, for fiscal year 2014. To address this issue, the staff is currently conducting a comprehensive fiscal review with each department to address the funds.

These long-term fiscal issues have been an ongoing source of concern over the years. According to the fiscal year 2012 and 2013 biennial budget, Berkeley faces nearly $330 million in unfunded liabilities — costs that are not presently due but must be paid in the future — of which pensions account for approximately $205 million.

“I think we need to look at long-term strategies,” said Councilmember Gordon Wozniak. “There are ways … that you don’t see when you look at it year by year.”

According to Budget Manager Teresa Berkeley-Simmons, the city staff will present the biennial budget update focusing on unfunded liabilities on Feb. 19.

Daphne Chen is the lead city government reporter. Contact her at [email protected].