LB Mayor Unveils Budget Recommendations for 2012

Long Beach Mayor Bob Foster and City Manager Pat West on Tuesday unveiled to reporters their proposed 2012 city budget plan that they said will chip away at the city's current deficit. West presented the budget, and Foster gave three major recommendations for the upcoming fiscal year.

As it stands now, the city is facing a $20.3 million deficit going into 2012, though with planned restructuring, that number could drop to as low as $6 million by 2014, according to the manager-mayor's proposed budget, which is not a final document and must be approved by the City Council. The deficit is mainly due to salary increases and pension cost increases, with no accompanying increase in revenue to support them. 

First elected in 2006 then re-elected as mayor in 2010, Foster stated that this is the "worst budget I have had to deal with in all the years I have been mayor." Though, he said, it does provide the "brightest spot for fiscal stability."

Focused mainly around attrition rather than growth and fiscal sustainability rather than spending, the budget asks "to do more with less." Indeed, in the past eight years $188 million in deficits have been addressed through eliminating more than 600 government positions, consolidating departments and reducing service levels.

The proportionate share approach makes sure to reduce all departments equally across the board. Because Police and Fire consume about two thirds of the General Fund, the cuts to these departments are therefore the most significant.

Of the 259 positions eliminated this year, 32 sworn Police and 27 sworn Fire jobs will be no more, and each department will undergo major structural reorganizing. Public safety departments must take these cuts because, as West illuminated, if a proportionate share approach were not enacted, Police and Fire would take up 100% of the budget by 2030.

By comparison, Library Services maintain the smallest portion of the budget (3.2%) but still take its cuts in the form of replacing library services with new "Reading Rooms" and fewer materials. In addition, one department, Community Services, was eliminated, and some examples of reduced services include fewer materials for teen centers, senior centers and afterschool programs, and slower responses for things such as potholes and building maintenance.

One of the major points of the mayor's three-pronged recommendation is to reform pension plans. Foster reported that he has reached an agreement with the Long Beach Police Officers Association (LBPOA) to to sit down and start talking about how they might negotiate a good and fair pension reform plan. No numbers or specifics or documents were offered at the press briefing as to how pension changes would be made when contracts don't expire for some years. 

The primary cause of the current fiscal crisis, Foster said, was when in 2002 pension benefits were granted to government employees, not only for future terms but retroactively for the past 20 years. However, in 2008, Foster spoke in support of five-year agreements instead of three-year ones for firefighters and some other city employees, as shown in this video posted by LBReport.com.

Now, he is asking employee organizations to come to the table to renegotiate pension increases as a way to stabilize the economy, though, so far, he said, most conversations have not been "fruitful."

"We've gotten ourselves into a hole, and as we all know, the first step to getting out is when you're in one, stop digging," the mayor said, remarking further that sustainable pension plans are in everyone's best interests.

With a background in energy, the mayor's second recommendation is to exercise conservatism in setting oil prices since it is an extremely volatile commodity. Budgeted at $55 a barrel currently (up from $45 last year), he suggests not raising the price any higher so as to prevent unexpected lows, as has happened in 2009, when a budgeted $85 a barrel dropped to $25.

Finally, Mayor Foster recommends strict discipline in rebuilding the city's reserve accounts. As past sources of revenue proved unstable, and as expenses that relied on these sources continued to grow, an unbalanced and insecure fiscal climate emerged. Therefore, the mayor asks for "one-time funds for one-time use," or in other words, not counting any chickens before they're fully hatched.

The big issue, Foster said, is focusing on achieving fiscal balance by 2014.

Though the budget aims to slash services, cut jobs and reorganize departments presently for the sake of future long-term sustainability, areas of uncertainty for the Long Beach economy include California state laws, like the recent elimination of the Redevelopment Agency and loss of $1.7 million in Vehicle License Fees.

The successes from 2011, however, should not be overlooked. According to West, Police and Fire have maintained Priority 1 response times, more infrastructure has been undertaken in the past five years than in the past three decades, oil revenue is increasing, and 2011 has seen new parks, new housing, Workforce Development success and $9 million in a Budget Stabilization Fund. Another bit of positive news is that CalPERS (California Public Employee Retirement System) has increased its market share over the past year, which, according to the budget report, if it continues, should reduce the deficit by around $17 million by 2014.

To conclude, the 2012 fiscal budget relies on a five-pronged approach to reducing the deficit, including department reductions, pension reform, government reform, potential new revenue and employee contributions.

Tonight, the City Council was to take a first look at the budget, and must approve a balanced budget by September 15th. Then it will go back to the mayor to veto some or all of the budget, then back to Council, and must be approved by October 1st, the start of the fiscal year.

Budget hearings and study sessions open to the public will be held during the intermediate stages of budget finalization. The Community Budget Book and up-to-date meeting schedule can be found at the City website.