Oakland’s leaders have avoided fiscal responsibility for years. Now they want residents to pay the price.
Oakland has overspent its tax revenues by more than $100 million annually since 2021. The city Finance Department has been shouting about this, but city leaders, including the previous and present administrations, ignored the problem.
They defied fiscal reality by spending one-time state and federal COVID relief money to cover the ongoing budget gap. That relief money ran out this year, leaving the city with a two-year projected deficit of $352 million over the current and next fiscal years.
The major root cause of this deficit is unaffordable labor compensation increases that exceed inflation and unsustainable growth in social service and administrative spending since 2018. If not corrected, it could drive the city into bankruptcy.
But Mayor Sheng Thao’s proposed budget for fiscal year 2024-25, which starts July 1, does not try to fix the ongoing deficit. It aims to postpone the fiscal reckoning another year and close the two-year deficit with a patchwork of one-time maneuvers that sacrifice the city’s future.
If passed by the City Council this month, the proposed budget would plunder city assets using the one-time proceeds from the sale of the Coliseum property to help plug the funding gaps for the current and next fiscal years. It would raid monies from taxpayer-funded ballot measures that were intended for libraries, parks, addressing homelessness and blight reduction and instead spend them on baseline city expenses. It would drain the city’s unused fund balances that could be used for service improvements. And it would slash public safety staff.
The budget would cut or freeze 172 police and fire positions. Among other things, that would mean a drop in sworn officers from 711 to 678, disproportionately affecting communities that already suffer from high rates of gun violence. It would cut 10 fire-safety-inspector positions, currently vacant, impairing programs designed to prevent deadly tragedies such as the 2016 Ghost Ship warehouse inferno in the Fruitvale District that killed 36 people and the 1991 Oakland hills conflagration that killed 25 people, destroyed more than 3,000 homes and caused an estimated $1.5 billion in damage.
This budget crisis has two major causes:
First, average city employee total compensation has risen by 37% since 2018 versus Bay Area inflation of 23% for the same period. This growth was driven mostly by retirement and fringe benefits, which increased 72% since 2018. Employees’ total compensation, which includes benefits, is now about 1.8 times their base pay and averages about $220,000 per worker per year. The average household income in Oakland is about $140,000 a year. As of 2022, Oakland city workers were paid an average 17% per employee more in salary and benefits than San Francisco city workers, and 781 of the 4,600 budgeted employees were paid $300,000 to $700,000 a year in total compensation.
Second, the city greatly expanded its administrative and social service programs over the past four years using COVID relief money. But it never offered a long-term plan to pay for that expansion with commensurate revenue growth. Sacrificing public safety positions has become a ‘piggy bank’ to pay for expansion elsewhere. Police have lost 224 sworn and non-sworn budgeted positions since 2020, an 18% drop in its service capacity. In Bay Area inflation-adjusted dollars, the combined police and fire budgets have shrunk by 8%, while administrative and social service departments have grown by 36%.
If City Council members approve the mayor’s proposed budget, scheduled for discussion on Wednesday, they are choosing to sacrifice the city’s future to prolong its uncontrolled spending addiction.
The costly delay in fiscal discipline doesn’t save the city from austerity measures. The city’s budget administrator explained in the June 12 council meeting that the ongoing and unresolved deficit in the proposed budget would still be more than $100 million and that the city’s elected leaders would have to make more difficult spending cuts this coming fiscal year.
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Besides cutting public safety resources, the go-to solution for our City Council is more taxes. They have spent most of their time in City Council budget discussions this spring talking about how to scratch-out a few million dollars of business tax revenues, whether they are charging fees to residents for sidewalk repairs and raising a million or two from parking control. They are even considering asking voters for $182 million of new bond measures this year to upgrade city “cultural institutions.” Meanwhile, they talk abstractly about stimulating small-business growth while businesses flee the city because of crime.
What they don’t discuss is the rapid increase in city personnel costs. Hardworking municipal employees deserve cost-of-living adjustments and benefits in line with comparable markets. But we cannot justify the city’s current approach, which confers outsized paychecks at the expense of the well-being of 436,000 Oakland residents. That’s the elephant in the room that city leaders have refused to acknowledge. The question for all of us is when they finally will.
Tim Gardner is a 16-year Oakland resident. He has a Ph.D. in biomedical engineering, served on the faculty of Boston University, founded a research and development software company and now leads strategy for Cytiva, a global provider of biopharmaceutical manufacturing technology. He specializes in data science and is also co-founder and publisher of “Oakland Report,” a news site providing analyses and critiques of local governance.