Oakland will need to deal with a number of fiscal uncertainties over the next 6 months leading up to the adoption of the 2023-25 biennial budget. In this post we will outline the challenges and the schedule that lies ahead.
At its meeting of December 12th the City Council received this linked report which presents the 1st quarter fiscal report and projects the anticipated revenues and expenditures for fiscal year 2022-23 and the 2023-25 biennium. In summary it projects a balanced General Purpose Fund budget for the current fiscal year and a revenue shortfall of over $200 million for the 2023-25 biennium in a General Purpose Fund budget of $750-767 million per year. How did this happen?
- Covid created a huge hole in the city budget which was partially filled by an allocation of $188 million from the federal government. This money was spent and is no longer available.
- The city also used the Rainy day fund and other available resources to balance the budget.
- At the end of fiscal year 2022-23 it is anticipated we will have an ending General Purpose fund balance of $9.16 million. In other words very little will be carried over to the following fiscal years.
- Even though the voters of Oakland approved a new business license tax which will provide added revenues of approximately $26 million a year there have been offsetting decreases in sales tax and other revenues thus resulting in no net gain.
- Expenditures continue to grow faster than revenues with an estimated $105.8 million deficit in FY 2023-24 and a $102.5 million deficit in FY 2024-25. The detailed reasons for this are discussed in the above linked report.
Following is a summary of the situation facing the city from a recent report to the Council by the Finance Department:
“As the City looks ahead to the FY 2023-25 biennial budget process, baseline estimates indicate sizable budgetary deficits that will likely necessitate significant balancing actions by the Mayor and City Council to develop a balanced 2-year budget. While GPF revenues are estimated to continue to increase year over year, projected to come in at $750.60 million in FY 2023-24 and at $766.95 million in FY 2024-25, the GPF preliminary figures show approximately negative $104 million deficit per year, or negative $208 million over the FY 2023-25 biennium as expenditures are expected to outpace revenues. For all funds, there is an estimated deficit of negative $119 million in FY 2023-24 and negative $130 million in FY 2024-25, for a total of negative $250 million.”
What happens next?
- The City Council will soon have its biennial retreat when it is expected to further discuss this issue.
- The Five-year Fiscal Forecast is anticipated to be released soon and will provide a more in depth look at the exact details of city finances.
- The Mayor and City Administrator will submit a proposed budget by May 1st.
- The Council will then deliberate and adopt a budget by June 30th.
- There is a possibility of actions being taken during this fiscal year to achieve fiscal savings via budget cuts or other actions.
We will be reporting to you as further information becomes available.