Sacramento's Long-Term Budget Problem on Officials' Minds


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(Sacramento, CA)
Friday, May 30, 2008

It’s widely known that Sacramento has a $58 million budget deficit this year.  But if you look at the fine print in the city’s proposed budget – page 14 out of around 300 – you’d see a sentence that goes something like this:
 
Milstein: “Over the next five-year period, if the city were to do nothing, the cumulative gap would be over $200 million.” 
 
Budget manager Leyne Milstein says Sacramento’s expenses are growing so fast that revenues can’t keep up.  She and other officials are especially concerned about expenses rising sharply after the city’s labor contacts expire in 2010.
 
Milstein: “So we’re in a position where we need to realign our expenditures to be within our revenue growth.  We only have a limited amount of one-time funds to fill that gap.” 
 
In fact, city manager Ray Kerridge’s proposed budget calls for using two-thirds of the city’s reserve funds to balance the books.
 
Kerridge has said Sacramento has to be ready to capitalize when the economy rebounds from its current slump.  He wasn’t available for this story, but Assistant City Manager Marty Hanneman was.  He says in order to boost its revenues, the city is changing its mindset.
 
Hanneman: “We want to be more like a business entity, where we’re working efficiently, looking for smart business investments.  So the city is really a part of the business community, and growing with everyone else as they grow here too, instead of just watching things happening around us.” 
 
So for example, he says, Sacramento is in the middle of forming a non-profit economic development corporation – its own business, in a way.  It would allow the city to invest in economic development projects and programs to bring in more tax dollars, like attracting businesses and keeping jobs.
 
Meanwhile, Hanneman says, officials have other ideas, too, like shifting extra hotel tax revenues to the general fund and merging departments to cut costs.  Hanneman says all those strategies are either in place now or will be within the next year.