San Jose Mayor Sam Liccardo, in the face of what he warned is “a looming national economic downturn,” announced today that the city’s general purpose reserve will reflect 8% of the general fund operating expenses, the largest reserve in at least two decades.
Repeating a message from his June budget message, Liccardo said that for the first time in decades the city’s projections for its general fund show a very modest surplus over the next five years, which he attributes to reductions in retirement costs and rising revenues.
At the same, Liccardo’s announcement urged caution by future mayors and city councils, as pushes to bolster the city’s fiscal condition. The mayor terms out this year.
“As we see the clouds gathering, it’s time to tighten our belts and bolster our city’s reserves to weather the economic storms ahead,” said Liccardo. “Recessions have deep and difficult impacts, but good preparation and fiscal discipline can soften the blow.”
By comparison, the city’s reserves represented 5% of the general fund prior to the Great Recession of 2007-2008.
“The City of San Jose will experience a long-term decline in the cost for retirement benefits for the next decade, as a result of our longstanding efforts to implement pension reform,” the mayor said in his statement. “The dividend of these many years of sacrifice and belt-tightening today provides the resources that are helping us to get homeless residents housed, expand our police department, expand library hours, and restore other essential services.”
In the annual report for 2021-22 by City Manager Jennifer Maguire released today, while actual revenues across all city funds totaled $4.6 billion, 7.5% ($376.8 million) below the budgeted estimate of $5 billion, spending was 19% ($1.1 billion) below the modified budget of $5.8 billion.
For most funds, according to Maguire, the actual 2021-2022 ending balance was above original estimates.
“If”?
Liccardo is lying. The economic shambles, especially including inflation caused by Covid lockdowns and the ensuing money-printing and the lost tax base from failed businesses and fleeing Californians with means, will ensure a continuing fiscal crisis for San Jose. Liccardo knows this but wants to pretend he left the city in good fiscal shape and that the next mayor will have squandered things. Don’t believe it. He’s already hedging on the pretty picture he painted in his State of the City paean to himself.
If you do the math, they spent more than they took in. Spending was $1.1B below the modified budget of $5.8M = $4.7B in spending, and revenues were $4.6B , below the forecast of $5B. So, spending $100M over revenue. That’s good coin.
Should get interesting if revenues drop another 10% with a recession…..would wipe out the 8% surplus (on the general spending, not all spending) lickisplit.
Liccardo is trying to pump up support for his mayoral candidate, Matt Mahan. Given that most expect Mahan to just follow whatever Liccardo says, maybe Liccardo can ‘predict the future.’
We are having a hard time recruiting (and keeping) firefighters and police officers, so touting how stingy we are with retirement benefits isn’t particularly wise. We have 200 less officers than at the beginning of Chuck Reed’s ‘pension reform,’ with 100,000 more people, and the hiring plan Liccardo and Mahan have endorsed puts hiring on a slow path. With trouble recruiting in a town where the cost of living is already prohibitive for teachers and other public servants, I wouldn’t be that proud of touting how much money we’ve withheld and will continue to withhold from public employees. Public service salaries are generally lower than private industry–the benefits and retirement are important.
The police don’t need to worry about their retirement benefits. Their worry should be losing their salaries because police and fire head-counts will drop by hundreds before this recession/depression era ends. We’ll lose all our libraries again first but that’s a drop in the bucket. We only have ourselves to blame for allowing woke politicians and health directors to cause this economic calamity. Congratulations everyone, we’re getting what we voted for.