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A Budget with Accountability for Wellbeing
May 25, 2017
by Rick Cole
This is budget time for cities as California public agencies operate on a fiscal year that begins July 1. In Santa Monica, we budget on a two-year cycle. Since I started as City Manager two years ago just after the adoption of the last two-year budget, the proposed Fiscal Years 2017-19 Biennial Budget I presented to the City Council this week is the first that I’m responsible for preparing.
As I told the City Council in this Powerpoint overview, this budget marks a transition. The budget is balanced over the next two years and there is no immediate threat to our strong fiscal health and our AAA bond rating. But the budget looks ahead to what happens at the end of the next two years when we project the cost of doing business will be rising faster than our revenues.
The proposed budget represents the overall management and spending plan for the City’s public safety, quality of life, infrastructure construction and maintenance, transportation and development-related services, and the internal governance services that support them. The budget covers the operating and capital activities of 31 funds across 15 departments and approximately 2,300 permanent and temporary full-time equivalent positions. It maintains the City’s core services, while allocating new and repurposed funding to programs that reflect Council priorities.
Notably, this transitional budget incorporates an evolving new “Framework”. The purpose of this Framework is to directly link the results we seek to accomplish with the funding needed to achieve those results. It also is the basis for measuring performance, through a new approach we are informally calling “SaMoStat”.
We will leverage this framework to measure how we are advancing wellbeing and sustainability. Specifically, the core pillars are: Community, Place and Planet, Learning, Health, Economic Opportunity, and Governance. It’s a framework that lets us be accountable to each other while producing results where everyone is at the table looking at the same numbers.
As I’ve noted in an earlier post, our long-term pension liability stands at $387 million and growing. If the current cycle of economic expansion continues during the next two years of the budget cycle, it will be the longest in the past century. Already, turmoil in Washington is sending mixed signals about the resilience of our national economy and is damaging the international visitor trade that contributes to Santa Monica’s strong tax revenues.
We cannot afford to be complacent.
Our reliable economic engine needs an overhaul and rising costs (beyond our direct control) force us to re-evaluate how we work, how we deliver services and what matters most to our citizens. Despite our diverse tax revenue base, all our major sources of revenue are seeing either slowing growth or (in the case of utility taxes) an actual decline. This comes at a time when pressure on expenditures is accelerating. Even without an economic downturn in the next two years, the City will face increasingly hard choices in the next budget cycle. The five-year forecast shows two years of positive General Fund structural balances before an anticipated deficit of approximately $3.8 million in FY 2019-20 that increases to almost $19 million (3.7% of the General Fund budget) in FY 2021-22.
We can and will avoid those sobering threats. But only with a rigorous focus on the efficiency and effectiveness of our programs and expenditures -- and accepting the reality that we will need to be exceptionally disciplined in setting priorities.
This budget begins that transition. Despite taking on new and expanded responsibilities and initiatives, the size of our permanent staff is holding steady (there will be a slight reduction of 3.8 permanent Full-Time Equivalents.) To cope with our rapidly rising costs of staffing (pensions, workers comp and medical benefits) we will need to gradually reduce our workforce if we are to maintain our competitive compensation levels. That means being more efficient technologically, but also using performance management to sharpen how we work, with less emphasis on process and more on results. Finally, we need to be more responsive and efficient in serving both our residents and our businesses, recognizing that we are not compared to other cities but to how companies like Amazon, Toyota and Facebook serve their customer’s needs.
The fiscal health of Santa Monica remains strong. But it will only remain sustainable if we adapt to changing times. The proposed Budget is designed to put us on course to do that over the next two years.