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San Diego Budget Deficits Could Be Bigger Than Mayor Planned

San Diego Independent Budget Analyst Andrea Tevlin sits at the dais, Dec. 12, 2016.
Milan Kovacevic
San Diego Independent Budget Analyst Andrea Tevlin sits at the dais, Dec. 12, 2016.
San Diego Budget Deficits Could Be Bigger Than Mayor Planned
San Diego Budget Deficits Could Be Bigger Than Mayor Planned GUEST: Andrea Tevlin, independent budget analyst, City of San Diego

We know San Diego's budget is not as rosy next year but it turns out budget deficits are worse than expected. The released figures math test last month that spiking pension costs would create two years of's but -- budget short calls. The mayor left out some key costs from his projections. Joining us to discuss the possible shortfall is the independent project analyst Andrea Tevlin. Thank you for joining us. The mayor's five-year financial forecast that was just released said that the mayor is facing a budget deficit over the next two years but then we would return to surpluses you believe the city could have budget deficits for four years It all depends on what you include in the budget projections. But the mayor has done with his Outlook this year is to base it on baseline costs for the city without some major critical expenditures that he has so-called funded in the prior outlooks. Based on just continuing everything we are doing today there is a deficit of $37 million showing. However, he has a significant section in the back of the Outlook which talks about the other critical things -- many of them are facilities being built -- there are projects underway, there are some commitments that have been made for police etc. He discusses them but he does not have those numbers in the Outlook. In prior years he did include these major expenditures that we knew were likely going to have to happen or significant decisions would need to be made about not opening facilities are not continuing with these projects. They are not things that are want things there are things that would be significant if you stopped building a station or whatever you would have to make some significant decisions do not fund these things. Things like enforcing the new minimum wage live which will cost something. That is debt service on our revenue bonds for infrastructure. That is operating cost for fire stations. It is opening costs for a new library that is underway. New facilities for Park and recreation underway progress. None of these things are mentioned in terms of how it is going to be paid for in this forecast. They are mentioned and discussed they are not in the projections and that's what we are trying to show which is that we agree with you there are many critical strategic expenditures that are not in your Outlook but we just put the cost and. That is how the cost outlooks have been developed in the past by depending what it would take last year. Included about $50 million of new costs and was able to balance the budget because it surplus was showing -- balance the Outlook because it surplus was showing. May there be a situation where he does not have the surpluses to cover those costs? That's right. That is the situation. We do not have enough revenue at this point to cover what we are currently funding or operating. Is this unusual for the mayor's financial forecast to kind of leave out some fairly significant expenditures? It is a departure from the past. Has typically been that those things that we knew were important and that there were commitments to do and they are coming online and in the middle of a project like CAD, typically in the past this would be included in the projection numbers. They were last year and the year before that Could this be a violation of city but it it -- city budget policy or is it an oversight? I would not call it a violation of policy is an approach he tried to take because of our situation. You have to remember that this is a plan and he is basically showing that you cannot find what we have been talking about all the other things recognizing that you could have trade-offs here. Your advice to the city Council because that's part of your role is to be an impartial budget analyst. I obligated to show the cost of those items that he is talking about and in addition to that we have a list of about another 10 items that you mention with enforcement costs and that kind of thing that he did not mention that have been discussed in the past as high-priority items in the next year. Amount is just for one year and this is a five-year outlook. If you are giving advice to the city Council it looks like they may be looking for more than 3.5% for the next six years. You have to look also have a section on resources as does he and his Outlook but when we talk about what is available he has not really discussed what his plan is he's got a pension payment stabilization reserve of $60 million which we established last year. It was just for this increased cost. The Council could use that 60 million very appropriately for the increased pension costs. The problem with that is these pension increases are ongoing so that $60 million one-time reserve would be a one time and then the following year we would still need to come up with that many. I think they hoped it would last a little bit longer and then one year. We have $50 million that we could -- could be as potentially deaths he is developing in the reductions as he said. We have some other options for some excess targets. There is not a little bit of money. There are other things that are not in offset it. This is a healthful background for one that gets into the budget season we will have to get to belt-tightening We have to discuss how we are going to get there.

Independent Budget Analyst's Review of Mayor Faulconer's Five-Year Financial Outlook
San Diego's Independent Budget Analyst found Mayor Kevin Faulconer's office may have understated deficits in its five-year financial outlook.
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San Diego’s budget shortfalls over the next five years may be deeper than previously identified by the mayor’s office, according to a recent report from the city’s independent budget analyst.

Mayor Kevin Faulconer’s office prepared a five-year financial outlook last month, finding that spiking pension costs in fiscal year 2018 would lead to two years of deficits. He asked city departments to prepare for budget cuts of 3.5 percent to help mitigate the shortfalls.

But Independent Budget Analyst Andrea Tevlin found the mayor’s outlook left out some key costs that would likely increase those deficits and extend them two more years. The city usually factors in projected expenses for mayoral priorities that are likely to be included in the upcoming budget, according to Tevlin.

In last month’s outlook, the mayor’s office briefly discussed those critical future expenses, but didn’t factor them into the final deficit calculations. That included $47 million to service future bonds, $23 million to replace city vehicles and more than $17 million for new police officers and equipment.

“As a result, the deficits reported for fiscal years 2018 and 2019 are likely understated, and the surpluses identified in fiscal years 2020-2022 may not exist as projected,” Tevlin’s report said.

The city had expected a $37 million budget shortfall in 2018. Projected revenue increases were planned to help cut down that shortfall in future years. The budget would then have a $20 million shortfall in fiscal year 2019, then a $500,000 surplus in 2020, a $40 million surplus in 2021 and an $80 million surplus in 2022, according to city projections.

But Tevlin’s office said the 2018 deficit could be as high as $57 million. The deficits would then shrink to as much as $52 million in 2019, $46 million in 2020, and $23 million in 2021. Fiscal year 2022 could see a $15 million surplus.

A Faulconer spokesman told The San Diego Union-Tribune that Tevlin’s report underscored the importance of cutting expenses in the coming years.

Tevlin joins KPBS Midday Edition on Thursday with more on her findings and what it means for city services.