Fiscal watchdog group sees mixed bag in mayor's budget analysis
Pat Waite, president of Citizens for Fiscal Responsibility, agrees with Mayor Liccardo that our pension crisis has abated, but continues to blow the klaxon about the dangers of the City straying beyond its core responsibilities. To receive daily updates of new Opp Now stories, click here.
Opportunity Now: San Jose Mayor Sam Liccardo opens his budget message by lamenting, “if we
wished merely to maintain the level of services we currently provide San Jose residents into the next
year, we would commence our budget decision-making in a nearly $100 million hole.” Fair or not?
Pat Waite: We think it proves yet again that government spending is “sticky downward” and all new programs should be reviewed skeptically. Never mind that the hole of which he speaks is due to pandemic-related services that ought to be drastically reduced as the two-year crisis abates.
ON: So is there really a shortfall when it comes to core services, outside of special programs around the pandemic?
PW: The services that “require a new allocation in future years, or the services will go away” are outside the scope of both the City’s charter and the core services our community deserves. Specifically, the Mayor cites food distribution services and broadband internet access for the community as imperiled by a lack of funding availability. Mayor Liccardo notes “at the County’s request, the City assumed leadership of the effort to fund and coordinate food and necessities distribution to residents and families across the County.” Here’s a thought…push the food distribution services back to the County, who bears the responsibility for such services, or demand that the County adequately reimburse the City to continue the services. As for broadband services, open our libraries, where broadband services are available to the community as a matter of course.
ON: Does CFR think it was right for the local govt's to expand their scope during the pandemic?
PW: We believe that it was appropriate for government entities to temporarily expand beyond the delivery of their core services while addressing the needs of the community during the pandemic (although how much of the need was created by potentially overzealous attempts to halt the spread of the virus is yet unknown). We believe that now, as our lives return to “normal,” our governments should once again focus on core service delivery.
ON: What's your take on Liccardo's framework for 2022–23?
PW: The good news is that Mayor Liccardo, after bemoaning the tragedy of being forced to cut spending, lays out a reasonable framework for developing the 2022–23 budget. Although CFR takes issue with the
order implied by the seven numbered priorities, we appreciate that they are clearly identified and
focused primarily on core services. He focuses spending on actions that address residents’ concerns
with homelessness, public safety, and blight. He directs Measure E funds to activities that should help
reduce the number of unhoused residents, recognizing that fixing the issues causing homelessness is not
found in a one-size-fits-all solution. He advocates continued expansion of the understaffed San Jose
Police Department, while recognizing the need to address issues with how public safety is ensured. He
pushes exploring and supporting programs that improve our City’s resiliency along several dimensions.
Mayor Liccardo asks the City Manager to continue making long-overdue investments in East San Jose.
The mayor points out that “a transit connector to the Mineta San Jose International Airport has been a
long-sought but inadequately funded ambition of our city for more than two decades.” While CFR has
taken no position on the need for such a connection, we have one suggested funding source, should the
community feel the project is warranted. Mayor Liccardo should ask that the VTA end the folly of
extending light rail to Eastridge. The extension is far too expensive based on the cost per passenger mile
travelled and will cause an unacceptable worsening of automobile traffic along the Capitol Expressway
corridor, both during construction and thereafter. Ending the project would free up roughly $500 million
for the transit connection between the airport and downtown.
ON: Liccardo suggests SJ may have finally gotten on the right side of the pension issue. Is it calm seas, or did we just catch a good wave?
PW: Thanks to various ballot measures, employee concessions, and an incredibly long bull market,
combined with an enormous increase in pension funding, the unfunded pension obligation of over $3 billion is starting to decline. Over time, this will free up General Fund dollars to devote to improving the
quality and quantity of core services that our residents deserve. CFR commends and thanks the many
people inside and outside. That does not mean that we are out of the woods. The investments underpinning the pension funds are risky and capable of suffering a prolonged downturn that erases much of the gains that have helped our city start reducing the exposure.
ON: Liccardo repeats a phrase we hear a lot of City Hall about how thinly staffed they are. Does that assertion stand up to scrutiny? Compared to which cities, and in what ways?
PW: This is a self-referential fallacy that in and of itself is meaningless. First, some major city has to be "the most thinly staffed." Second, being thinly staffed is not necessarily a bad thing… maybe it's a sign of being less bloated than comparable municipal bureaucracies.
How about we compare various quality-of-life metrics to other cities before asserting that thinly staffed is bad. I believe that, by and large, San Jose's QOL metrics rank right up there with the major cities with which we would like to be associated. Does adding staffing change that? Probably not (although it is certainly clear that SJ allowed SJPD sworn staffing to fall to a level that affected QOL, but has since begun reversing that).
Some cites input from "dozens of public community meetings" as a cry for "more or better services." Well, any time you ask residents if things could be better, they can always identify areas for improvement. Does that mean that the marginal cost of investing is exceeded by the derived benefits, or are they "nice to haves?" Nobody ever does that analysis.
I would argue that, rather than finding new revenue sources to grow staffing, the City should focus on addressing processes and technology shortfalls that impede employee productivity. Here's an example I can provide from recent personal experience:
We're having a bathroom remodeled. The project wasn't ready for the scheduled final inspection; nevertheless, the inspector showed up and told us so. No big deal, except the earliest available next slot was five weeks out. A couple of weeks later, our project manager had another project that wasn't ready for its scheduled final inspection. She called to see if she could swap our later-scheduled inspection and that one. The incredible answer was that they could only cancel the inspection of the project not yet ready; they couldn't swap them. Why not?
ON: The mayor also laments that "the City must dedicate staff to do things the City never had to do two decades ago." Do we really have to do them?
PW: He cites San Jose Clean Energy, dealing with our housing crisis, food distribution, and free wireless broadband service. The fallacy here is that these are not things we "must" do; they are things that we "choose" to do. Were the City to stay in its lane, these wouldn't be budgetary problems. PG&E provides power (most of the time), and the sourcing profile was nearly identical to that of SJCE's initial mix. Housing the unhoused is a county service, as is, generally, food distribution. Like medical response services, the City has chosen to provide services for which another government entity bears responsibility. Either a) stop doing it, or b) make the other entity do it or pay an appropriate amount for San Jose's service provision. In the case of SJCE, they should be generating revenue sufficient to cover their costs; if not, why is the City in the electricity-providing business?
ON: How many of all these financial decisions are already baked into the cake and not discretionary?
PW: The vast majority of city spending is on autopilot. During the budget process, the Council focuses on eliminating any shortfall or allocating any surplus. Even a $100 million shortfall is a relatively minor part of the City budget (around 3%). That means that 97% of the spending in the City of San Jose goes on simply because it existed the prior year. A $25 million annual surplus (as noted in Sam's piece) is noise; there's that much uncertainty in any forecast for something the magnitude of San Jose's spending budget.
It's time that San Jose adopted a more thorough approach to budgeting, some kind of modified zero-based budgeting that over some period (five years?) subjects each major area of government to a bottoms-up analysis of its usage of funds.
Read more about Citizens for Fiscal Responsibility here.
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