FY 24 Budget Context and Approach
Budget Study Session – January 17, 2023
1 Successfully navigated an unprecedented global pandemic, while maintaining service levels to the community
Budgetary Accomplishments and Achievements
2 Managed resources strategically, restoring $21 million of reserves that had been utilized to address FY 20 pandemic-impacted General Fund shortfall Allocated significant funds for the community ($144 million for Healthy Community and $70.7 million for Economic Recovery) through the Long Beach Recovery Act
Prepared for and addressed General Fund liability risks such as the Measure M litigation outcome without budget cuts or service level reductions
The General Fund Projection Journey Since the Pandemic
3 FY 20 FY 21 FY 22 FY 23
PROJECTION AT
ADOPTION
Balanced $8 m shortfall $30 m shortfall $20 m shortfall
ACTUAL YEAR-END
RESULT
$21 m shortfall $2 m surplus Known in Feb 2023 Known in Feb 2024 Pandemic
Hits
• During/post pandemic, revenue
had been projected to rebound
gradually
• However, it has rebounded
sharply
• Many revenue streams
projected to have recovered or
exceed pre-pandemic levels by
FY 22 year-end
• More information to be
provided in the February report
Notable Trend: General Fund Revenues have had a Sharp Rebound 4 0
20 40
60 80
100
120
140
160
180
2019 2020 2021 2022
Sales Tax/Measure A Actuals
Sales Tax & Measure A
$ Millions
• At the time of the Adopted FY 23 Budget, the FY 24
General Fund projection was a shortfall of $27 million
• Adding in the POA and FFA negotiated contracts, and
assuming no other changes, the shortfall was projected
to increase to $43 million
• A new forecast will be developed in January/February
and presented to Council in March 2023 and it is
expected that there will still be a shortfall but not as large
What does this mean for FY 24 Budget Development?
5 • Expenses are still expected to increase, particularly with labor related negotiated cost increases; personnel costs make up more than three-fourths of expenditures
• Variables such as investment returns for CalPERS pension plans and industry-specific impacts (e.g. oil) add to
projection volatility
• Revenues would need to continue to increase at a faster pace than expense increases
• It does not seem likely that any future shortfall will completely go away on its own without intervention
Could the General Fund Shortfall Resolve Itself Over Time? 6 image: Flaticon.com
• The City is experiencing higher levels of vacancies than typical impacted by tight labor market, contributing to some temporary expenditure savings • One-times resources are typically utilized for one-time priority projects and investments. Since the pandemic, however, one-times have also been utilized to mitigate shortfalls on a temporary basis to help avoid service cuts
• There is an opportunity cost when one-time resources are used to cover shortfalls: taking away from funds that could be used towards investments and initiatives that could generate future revenue or cost savings; less funding support for unfunded liabilities and reserves; and only a temporarily solution where the shortfall is pushed out to the next year.
What Should We Do With Any One-Time Resources?
7 • Maintain good fiscal habits and
discipline to avoid exacerbating the
underlying structural shortfall
situation (e.g. avoid overall
enhancements without offsets)
• The use of one-times is a short-term
strategic approach but not
something to incorporate as a long-
term solution
• Explore new ideas to expand the
economy and grow revenue
How to Best Position Ourselves for Future Success
8 Financial Policies
Total of 21 financial policies
• Budget will be structurally balanced
• Budgeting is annual – mid-year changes to be
minimized
• User fees set at cost of service
• Emergency and operating reserves will be maintained
• Revenue projections are to be reasonably expected
• Fiscal impact statements are required
• One-times are for one-time uses
• 5 percent unfunded liability set aside
• Debt will be at appropriate levels
• The rest found in the Budget Book
• Early community engagement is planned prior to proposed budget decisions, which was done for the first time last year
• Community Meetings and General Survey will be conducted in January/February
• Community feedback will be reported to City Council prior to the release of the Proposed FY 24 Budget in August
• More information can be found here:
http://www.longbeach.gov/fy24
Early Community Engagement
9 • January-February: Staff work on FY 24 Projection Updates • January-February: Early Community Engagement
• February: FY 22 Year End Performance Report to City Council • March: FY 24 Projection Update to City Council
What to Expect Next?
10 Thank You
11