Calculated Risk in City Budget

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(Sacramento, CA)
Tuesday, May 6, 2008

When city finance director Russell Fehr sat down to crunch the numbers for the upcoming fiscal year, he certainly had his marching orders from the city council.
Fehr: “Maintain public safety services to the highest level possible.”
So … he did.  The proposed budget calls for 8 percent cuts to police and fire, and 20 percent reductions everywhere else.  But it also uses $19 million from the city’s reserve – what you might call a “rainy day fund.”  That’s twice as much as city staff recommended back in March.  Mayor Heather Fargo says there’s good reason.
Fargo: “If we cut much more than 8 percent, we end up cutting into the very things that everybody agrees are a top priority, which is patrol officers on the street and public safety.” 
That’s prompted criticism from Fargo’s opponent, Kevin Johnson.  He says the city didn’t put enough in the Rainy Day Fund when the economy was strong.
Johnson: “The city did not set aside enough reserve funding for the economic (un)certainties that we’re experiencing.  Its own target was 10 percent of our general fund, and we did not meet that.” 
But finance director Fehr says the mayor and council showed “an enormous amount of foresight” in setting aside as much as they did.  He says the reserve will have $10 million to $12 million left if the council sticks to the proposed budget as is.  Meanwhile, the city is adding another $12 million to the reserve thanks to its sale of the downtown Sheraton Hotel – which was completed on Friday.