Sacramento City Council on Tuesday began discussing a $1.5 billion budget proposal for the upcoming fiscal year, as well as financial uncertainty in the following four years.
The proposal includes adding roughly 60 positions and creating a children’s fund as required by Measure L, but city staff warned rising inflation, interest rates and labor costs could force future cuts.
If the city continues current homeless services and doesn’t receive state funding, it could see a projected deficit of roughly $24.5 million for the 2024-25 fiscal year, said budget manager Mirthala Santizo.
Another round of the state’s Homeless Housing, Assistance and Prevention (HHAP) program could alleviate the shortfall, but more grant funding has yet to be approved. Gov. Newsom in January proposed distributing an additional $1 billion to local governments and is scheduled to release a revised state budget proposal on Friday.
“We have to keep our 1,100 [shelter] beds a night and we have to do so by continuing to work at the state level to ensure consistent funding from the state,” Mayor Darrell Steinberg said Tuesday.
City Manager Howard Chan similarly warned of a potential deficit for homeless shelter funding last August. For the upcoming fiscal year beginning July 1, Santizo said about $20 million, or half of the city’s homeless services budget, comes from the HHAP program.
A new project in the budget proposal not tied to state funding is the children’s fund. Sacramento must create it because Measure L passed in November with about 63% of the vote.
The proposal contains a plan to set aside roughly $8.8 million for the fund, which can be spent on youth development and violence prevention programs. The amount is the equivalent of 40% of the city’s annual cannabis business tax revenue, which is projected to decrease in the upcoming year.
City staff have also recommended adding 58 full-time equivalent jobs for the upcoming year. Most of the additions would be tied to operational changes because of the pandemic or the economy, Santizo said.
Roughly half of the proposed new jobs are in the fire department’s emergency medical response division and related to creating a single role program for paramedics and emergency medical technicians.
Overall, the proposal would increase fire department funding by $18.4 million compared to its budget approved last June, bringing it to $191.7 million. The proposal includes a smaller boost to the police department: an increase of $3.5 million for a $228.2 million total budget.
Despite some community calls for divesting from law enforcement in the wake of the murder of George Floyd, the council has approved bigger police budgets every year since June 2018. The last time Sacramento officials passed a police budget smaller than the one it approved the year before was in 2017, according to city documents.
Council member Mai Vang reminded officials that the city passed a resolution in October 2020 to redefine public safety.
“It broadens the delivery of public safety to not only include police and fire, but also to make sure that we provide youth-centered prevention services offered by both the city and in partnership with community-based organizations,” Vang said. “So I just want us to keep that in mind as we’re engaging in budget discussion for the next three weeks.”
City staff further advised the council that future revenues are uncertain. Off-street parking revenues are still below pre-pandemic levels, Assistant City Manager Leyne Milstein said. The city is also watching its property tax income, she added, given the cooling housing market.
“Where we were seeing substantial revenue growth as we recovered from the pandemic, inflationary impact and the lack of federal dollars on our economy are really starting to take a toll on that growth factor,” Milstein said. “So, we can’t rely on that really substantial growth that we had seen.”
Milstein told CapRadio last month the city won’t be able to continue some programs it funded with federal COVID-19 relief money. Sacramento received more than $200 million in one-time federal funding between April 2020 and June 2022 through legislation such as the American Rescue Plan Act.
The next council budget hearing is scheduled for May 16, when officials will discuss the five-year Capital Improvement Program, citywide fees and charges, and the Youth, Parks and Community Enrichment Department budget. The council is tentatively scheduled to adopt the budget on June 13.
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