On May 26, and at additional meetings in June, Oakland’s City Council will be considering one or more of the three budget proposals submitted on April 29 by Mayor Jean Quan. Mayor Quan has named the three budget proposals Scenario A (All Cuts Budget) Scenario B (Cuts Plus Savings from Employee Concessions) and Scenario C (Cuts, Plus Employee Savings, Plus Income from a Presumed $80 per Parcel Property Tax).
Make Oakland Better Now! (MOBN!) has combed through these documents, and still has many unanswered questions. The answers may be available, but as far as we can tell, they don’t appear in the budget documents. In our first two posts, here and here, we asked what the budgets told us about City priorities. In the coming days, MOBN! will raise more questions and try to explain why the answers matter.
A “reserve” consists of money set aside in each year’s budget as protection against unexpected surges in expenses or drops in revenue. An appropriate reserve is essential to responsible budgeting because not every expense, nor every element of income, can be accurately predicted two years in advance. Oakland Ordinance No. 12946, Section A.(1), requires that Oakland set aside a reserve of 7.5% of its General Purpose Fund, which may be appropriated by Council “only to fund unusual, unanticipated and seemingly insurmountable events of hardship of the City, and only upon a declaration of fiscal emergency.”
One would expect that in the General Purpose Fund, the required reserve would either be a budget line item, or that the budgeted revenues would exceed expenditures by the required 7.5%. None of the proposals has a General Purpose Fund reserve line item that we have been able to find. And here is how revenues and expenditures compare:
Scenario A
|
2011-12 |
2012-13 |
|
|
Revenue |
$395,187,332 |
$402,354,163 |
|
Expenditures |
$395,077,068 |
$402,221,003 |
|
Balance |
$110,155 |
$133,160 |
Scenario B
|
2011-12 |
2012-13 |
|
|
Revenue |
$387,187,223 |
$394,354,163 |
|
Expenditures |
$387,098,053 |
$393,446,261 |
|
Balance |
$89,170 |
-$92,098 |
Scenario C
|
2011-12 |
2012-13 |
|
|
Revenue |
$400,212,788 |
$410,379,728 |
|
Expenditures |
$400,272,744 |
$410,328,505 |
|
Balance |
-$59,956 |
$51,223 |
At a budget town hall on Tuesday night, Acting City Administrator Ewell stated that we would be unable to know what the reserve amounts would be until the City had closed its books for 2010-11, which would likely be this fall. In other words, if the City finishes this fiscal year with a positive GPF balance, that balance, plus with the minimal positive balance in Scenarios A and B or less the negative balance in Scenario C would constitute the City’s reserve for 2011-12. Mr. Ewell acknowledged that this was not likely to amount to the 7.5% required by Ordinance No. 12946. In fact, it seems likely there will be no reserve – and therefore, no margin of error – at all.
The City Council adopted its reserve policy in 2009 as part of the last two-year budget process, and in response to a situation where Oakland was starting a fiscal year with a reserve of only $9 million. The ordinance requires a 7.5% reserve in the first instance, and allows that reserve to be appropriated only to meet a need which is “unusual, unanticipated and seemingly insurmountable.” Certainly the City is having a difficult time balancing its budget. But is that difficulty “unusual?” Is it “unanticipated?” If not, is a no-reserve option even legally an option