Fresno faces $27.8 million budget gap, tough cuts

Published online on Thursday, Oct. 22, 2009

Fresno city officials plan a mid-year round of severe budget cuts, including layoffs, to address an estimated $27.8 million budget gap looming for the next fiscal year, beginning July 1.

It's the second time in less than six months that the city has brought out its sharp knives as the recession continues without relief. In late June, the City Council approved a budget that cut general fund spending almost $27 million via layoffs, pay freezes and leaving vacant jobs unfilled.

Mayor Ashley Swearengin told the council about the projection Thursday and said the shortfall -- almost one-eighth of the city's $227 million general fund budget -- was so big that the cuts needed to start in the current year's budget.

"Everything is on the table," Swearengin said after speaking to the council. "We can't close this budget shortfall without considering every option."

That there will be layoffs among city employees is a certainty, she said: "It's just a question of how many."

The $27.8 million shortfall far exceeds even the city's $17 million emergency reserve. Even if it didn't, Swearengin has previously urged the council to keep the reserve intact.

City officials met Thursday afternoon with employee unions to brief them on the budget gap. Other meetings with city department heads were planned today and in coming weeks.

One-third of the estimated gap is attributable to expenses, principally a $7.2 million spike in retirement costs, largely needed to offset declines in the investment value of the city's pension accounts.

The rest of the gap results from revenues coming in far lower than estimated when the current budget was drawn up.

For example, sales tax receipts were predicted to total $69.3 million in the current fiscal year, and the same amount in the year beginning July 1. Now, updated projections call for $62.4 million this year and $64.2 million next year -- a combined shortfall of more than $12 million.

"People are holding onto their money" instead of spending it on taxable merchandise, the mayor explained.

Swearengin told the council she would give it a plan for closing the budget gap by Nov. 19 and wants the cuts to go into effect Jan. 1.

City budget director Renena Smith told the council that cutting expenses is her office's focus "at this point," but she left the door open to raising fees for some city services.

"We're creating a buffet" of budget choices, Smith said. "We don't know yet what will actually get serious consideration."

Council members swallowed hard as they heard the outlook. But given the lack of detail about what might be cut, their reaction was subdued.

"This is going to be a tough nut to crack," Council Member Larry Westerlund concluded.

Less than four months ago, the council approved a budget for the current fiscal year that cut some $27 million from the general fund. In all, city revenues have dropped by one-fifth during this recession. The result has been spending cuts of roughly the same magnitude.

Employee union leaders were displeased but hardly shocked by the mayor's announcement.

"I don't think this was a big surprise to us," said Jacky Parks, president of the Fresno Police Officers Association, which represents about 800 employees. "We didn't expect to hear good news."

The general fund accounts for less than one-quarter of the city's overall budget and includes police, fire, parks and public works spending, with about 2,300 employees.

Smith said her office is working on a separate budget update for departments that operate separately from the general fund, including those running the city's airports and its water, sewer and bus systems. The impact on those departments remains undetermined to date.