Editor’s Note: The Sacramento Metro Chamber of Commerce thru their political action committee has endorsed Kevin Johnson for Mayor.

SACRAMENTO—The city of Sacramento’s $58 million budget deficit ballooned because Mayor Fargo did not act sooner and bolder last year when the crisis was impending.

City officials released details of the 2008-09 budget last Thursday that showed the need to dip into the city’s reserve fund of $30 million to weather the crisis. “But it’s only a partial fix, as of now $20 million of the deficit is pushed off into the following year,” said Sacramento Metro Chamber President and CEO Matt Mahood. “Unless something drastic is done very soon, we believe by the time next year comes, the numbers will be much larger.”

“On Mayor Fargo’s watch, the city projects the largest deficit in our city’s history. In 2006-07, Sacramento had a surplus of $30 million. Since then, we’ve gone upside down. If this were a private industry business, the mayor’s job would be in serious jeopardy for failure to act prudently.”

The city of Sacramento has had a goal of having 10 percent of its General Fund held in reserve since at least 2005 (specifically mentioned in the budget resolution in section 6.1), but hasn’t reached that level in the previous five fiscal years. According to the city’s approved budgets over the past several years, the reserve has only been as high as 8.3 percent or $29.15 million of the $352 million General Fund, but dipped to a critical low of 5.9 percent in 2007-08 budget.

The mayor and council are expected to lead and direct city staff, Mahood said. “But Fargo failed to act boldly on this crisis. She cites that her leadership has brought ‘progress.’ But with such a substantial budget deficit, we struggle to see the progress she claims.”

Mahood cited these concerns with the mayor’s budget and her approach to removing the deficit:
· At the May 15, 2007 city council meeting, Fargo casually dismissed the impending deficit as “modest.”

· At the June 12, 2007 city council meeting, she said the city “had done a pretty good job” on the budget. “…We are actually making some significant changes, even in some rough financial times and I think as long as we really monitor it closely…we can get closer to where we need to be…”

· The city has been irresponsible to not set aside enough reserve funding for economic uncertainties to achieve its own target of 10 percent for reserves of its General Fund. Had the city had a 10 percent reserve put aside since setting that target in 2005, it would have an additional $17.6 million or 74 percent of the projected budget in the bank.

· Neighboring cities have larger percents of reserves: Rancho Cordova has 20 percent (according to the Sacramento Bee) and Elk Grove has stashed away a 19 percent budget reserve: $13 million in FYI 2007/2008 on a $68.2 million general fund.

· The proposed budget does not take into account that the state will likely “share the pain” of its budget deficit with cities across the state. The State’s Legislative Analyst has proposed ongoing revenue shift that would cost Sacramento an additional $8 million per year. This fact, though mentioned in the document is not taken into consideration numerically in the city’s proposed budget.

· The proposed budget still leaves a $35 million deficit to deal with next year.  The Mayor and the City Council need to make more of the tough decisions this year to close the budget gap.  Postponing the difficult decisions and carrying over a large portion of the shortfall to the next fiscal year will only exacerbate the situation.  They will push $20 million of the FY 08/09 deficit into the next year.

· There will be an additional $15 million needed for increased labor costs in 09/10 from pay raises handed out recently.

“Sacramento’s future cannot accept lousy budget planning,” Mahood said. “The bright side, is that this crisis will force the city to better manage its expenditures. We encourage them to use this opportunity to consolidate services where possible, streamline process, eliminate bureaucratic barriers that fundamentally are anti-business and are job-killers for the city and its citizens.”