Friday, October 30, 2009 · by Jeff Adachi
Published: 10/29/2009 in the San Francisco Examiner
While Proposition A, titled “Budget Reform,” takes a few steps toward changing the current process by which our city’s annual budget is decided, it falls far short of the reforms necessary to address our city’s long-term fiscal health.
Prop. A would establish a rolling two-year budget process to replace the current one-year cycle. It would also require a five-year financial plan and a certification by the city controller that San Francisco has enough money to pay its contracts. Additionally, it provides that all labor agreements be approved before the beginning of the fiscal year.
While Prop. A affords more time for reasoned decision making, it fails to address the fundamental structural problems that threaten San Francisco’s fiscal viability — skyrocketing pension costs, inflexible spending requirements and salary negotiations made without regard to The City’s ability to pay for them.
Prop. A fails to rein in The City’s pension liability. In July, the civil grand jury determined that San Francisco’s pension costs will increase by nearly 300 percent — from $178 million a year to $520 million — during the next three years. The increase is compounded, according to the report, by the fact that 40 percent of city employees are now eligible for retirement and another 15 percent will become eligible in the next five years.
The measure does not permit a reassessment of voter-mandated expenditures, known as set-asides. Currently, 60 percent of San Francisco’s $6.6 billion budget is spent through automatic spending formulas. While many of the services provided by these set-asides made sense in good economic times, in a recession it ties the hands of elected officials.
Prop. A also doesn’t control salary increases. Salary negotiations are made exclusively by the Mayor’s Office and approved by the Board of Supervisors, often without any input from department heads. It’s a common practice for raises to be handed out with no additional funding given to departments to pay for them.
This has resulted in departments having to lay off staff in order to pay raises it has no control over. For example, this year my department faces an $800,000 salary deficit because insufficient funding was provided to pay my current staff.
Unless these and other fundamental problems are addressed, The City will face even greater budget deficits, layoffs and a retirement system that will eventually go bankrupt.
So what’s the answer to improving the budget process itself?
The budget process needs an objective referee. The Municipal Executive Association, which is comprised of more than 1,000 city leaders and managers, has called for the creation of a professional budget office that would be accountable to the mayor and supervisors to develop the annual budget, facilitate negotiations with the mayor, Board of Supervisors, department heads and city contractors earlier in the fiscal calendar, and provide independent analysis.
According to a report issued by the association, “Nowhere in the process is the budget prepared or analyzed by a neutral professional manager who, while not the ultimate decision maker, is accountable for protecting the long-term fiscal health of San Francisco government and its core programs, and has the independence to stand up to political pressure.”
The study examined the budget processes of 16 similar local governments across the United States. Only King County, in Washington state, and San Francisco directly invested one elected official with the responsibility to develop a budget. In other jurisdictions — such as Chicago, Honolulu and even Los Angeles — the agency that develops the budget is accountable to both the executive and legislative bodies, and the independent budget officer is not an elected professional.
San Francisco would benefit from an independent budget office because it would require the mayor, safety board members who monitor Chicago Car Collisions, and the Board of Supervisors and department heads to work together in preparing the budget, while providing taxpayers with an objective evaluation of The City’s budget process and programs. It would also help to reconcile genuine political differences that exist, while lessening the influence of short-term political decisions.
Of course, these fundamental changes, like the efforts to redesign our nation’s health care system, won’t come easy. Transforming this process will require not only amending the City Charter, but also reorganizing The City’s various budget agencies into a single, independent budget office.
We are fooling voters and taxpayers by labeling Prop. A “budget reform.” Only real, structural reforms to our fiscal process will get city government back on the road to a sound and sustainable economic recovery.
Jeff Adachi is the public defender of San Francisco. To see a copy of the Municipal Executive Association’s report, visit www.sfmea.com.