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Oakland’s $360 million budget shortfall
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Dear John,

San Francisco is not the only Bay Area city facing major budget woes. Oakland Mayor Sheng Thao’s proposed budget for 2023-25 ([link removed]) released last month reveals the city is facing a $360 million shortfall — the largest budget deficit in Oakland’s history.

The city’s budget proposal ([link removed]) for FY 2023-24 and 2024-25 plans for total expenditures of over $2.1 billion each year — roughly a 120 percent increase in total spending compared to just ten years ago.

The mayor is proposing some cost-saving moves, like department cuts and consolidations ([link removed]) . For example, Thao plans to combine the Housing and Community Development Department with the city’s Community Homelessness Services program, and merge the Planning and Building Department with the Economic and Workforce Development Department, among other consolidations.

Thao also plans to freeze hiring for 300 city positions that have remained vacant for “sustained periods of time,” and to delay the rollout of a new fire engine. And, she asked departments “to propose their lowest priority services for reduction or elimination.”

At the same time, Thao’s budget allocates $200 million of new spending for affordable housing in the form of bonds (a.k.a. debt) already approved by voters. It also calls for a major expansion of Head Start programming and a new Department of Children, Youth & Families. In addition, the budget allocates $213 million to build, repair and upgrade parks, recreation facilities, libraries, and non-road infrastructure, and $73.9 million over the next two fiscal years for citywide street resurfacing.

But Oakland’s largest expenditure category by far is “Personnel & Overhead” — which comprises salaries, fringe benefits, and retirement funds — and accounts for more than half of total spending.

The budget proposal allocates ([link removed]) spending $1.08 billion for FY 2023-24 and nearly $1.14 billion for FY 2024-25 for these costs. The projections are based on current memoranda of understanding (MOUs) with the various public sector unions representing Oakland’s employees.

When it comes to escalating municipal budgets, salary and benefit growth is almost always a major driver, and public employee unions are the primary actors contributing to these financial predicaments.

Employee union contract agreements often impose significant challenges for a city’s year-to-year budgeting process. For example, Oakland is obligated to add $1.6 million to the FY 2024-25 budget to fund the conversion of some part-time positions to full-time under a MOU between the city and SEIU Local 1021.

Of course, when new contracts are negotiated between unions and city agencies, they will only increase the city’s obligations for employee compensation and benefits — plunging Oakland deeper in the red. Union leaders willfully ignore the fiscal reality facing city leaders when demanding more and more for government employees, despite the threat of lost services to the residents and taxpayers city officials are elected to represent.

While Oakland's leaders may be able to juggle revenues and expenses in the short term, the city will continue to face major deficit dilemmas every budget cycle unless significant reforms are instituted. Until the government employee unions are reined in, Oakland will have many more years of fiscal hardship.

Read the full article by CPC Research Manager Sheridan Swanson here. ([link removed])
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** Radio Free California #279: Don't Say 'Skittles'!
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CPC president Will Swaim and CPC board member David Bahnsen contemplate the path to a Kamala-free 2024 presidential campaign. State Farm joins the California Exodus — if only for a moment. And, California state lawmakers are working to ban the dye that makes some Skittles red. Listen now. ([link removed])

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** Labor Relations Radio E75: "As goes California, so goes the nation."—A conversation with CPC's Lance Christensen
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Lance Christensen returns to Labor Relations Radio to discuss the current state of the once-Golden State. During this wide-ranging episode, Lance and host Peter List discuss California’s legislature and its politics, the state’s economic malaise and fleeing population, and more. Listen now. ([link removed])

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** Uneducating America
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The "Nation’s Report Card" released test scores last month that paint a grim picture: just 13 percent of eighth-graders met proficiency standards for U.S. history and only about 20 percent met proficiency levels for civics. Larry Sand, president of the California Teachers Empowerment Network, examines why scores on both tests are at all-time lows. Read the article. ([link removed])
ICYMI: San Francisco's Financial Crisis

San Francisco has been driven into the ground by city leaders who coasted along on the high tax revenues of the tech boom and better economic times, but are now facing a financial reckoning. CPC Research Manager Sheridan Swanson explains how city leaders have allowed a long list of crises to spiral out of control. Read now. ([link removed])
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