2022-2023 Preliminary General Fund
Forecast and Budget
January 14, 2022
Jim Shannon, Budget Director
Bonny Duong, Assistant Budget Director
Claudia Chang, Deputy Budget Director
City Council Study Session
Agenda
2 1. City Manager’s Opening Comments
2. Overview of the Budget Development Process
3. Historical Perspective of the General Fund Budget
4. 2022-2023 Preliminary General Fund Forecast
5. Review of Budget and Performance Measures for City Service Areas, Core Services, and Programs
6. Considerations for the 2022-2023 Budget Development Process
7. Public Comment
8. City Council Dialogue (Questions and Comments)
2. Overview of the Budget Development
Process
City of San José Budget Development:
Policies and Practices
City Charter Requirements for the Budget Development Process Mayor
• Delivers a budget message [March Budget Message] to the City Council that includes a statement of fiscal priorities for the following fiscal year; which Departments, Offices or Agencies the Mayor proposes to be expanded or to receive budget reductions; and specific recommendations concerning any proposed additions to or deletions from the budget City Council
• Holds a public hearing to consider the Mayor’s budget message and make any revision or changes in it which the City Council deems advisable
• Reviews, amends and approves the City Manager’s Proposed Budget City Manager
• Submits a budget request to Mayor and Council (included in the Five-Year Forecast document as the Budget Balancing Strategy Guidelines)
• Submits a balanced budget for the activities of the City proposed for the ensuing fiscal year which reflects accurately the recommendations and priorities specified in the budget message as approved by the City Council (Proposed Budget released at the beginning of May) 4 City of San José Budget Development:
Policies and Practices
Operating Budget and Capital Improvement Program Policy (City Council Policy 1-18)
Requires the use of a performance-based budget, specifying budgets at the Core Service level that correspond with specific performance targets Maintain fiscal integrity of operating, debt service, and capital improvement budgets • Ongoing operating program costs will not exceed the amount of ongoing revenue to pay for those costs
• Interfund loans will not be used as a funding mechanism to address ongoing gaps between revenues and costs
• If a new program is added on an ongoing basis, an ongoing revenue source will be identified to fund the program costs
• Any available carryover balance will only be used for one-time purposes 5 City of San José Budget Development:
Policies and Practices
City of San José Budget Principles (approved 3/08, revised 9/08) Identifies the mission of the City to provide quality services, facilities and opportunities that create, sustain and enhance a safe, livable and vibrant community for its diverse residents, businesses and visitors
Approved during an extremely challenging budgetary environment and focused on achieving and maintaining a structurally balanced General Fund budget; a partial listing of principles are provided below:
• The annual budget should be considered in the context of five- year projections and ongoing revenues shall equal or exceed ongoing expenditures for Proposed and Adopted Budgets • If a structural imbalance occurs, a plan shall be developed and implemented to bring the budget back into structural balance
• Once General Fund budget is brought into balance, one-time resources shall not be used for current or new ongoing operating expenses
• Negotiations for employee compensation considers the City’s budgetary position, revenue growth, and changes in cost-of-living expenses
• Fees and charges should be fully cost recovery, where possible 6 City of San José Budget Development:
Policies and Practices
City Manager’s Budget Request and Budget Balancing Strategy Guidelines The Five-Year Forecast released at the end of February provides an estimated budget condition for the General Fund – surplus or shortfall – and several Capital Funds for the next five years
The Forecast document includes the City Manager’s budget request and recommended budget balancing strategy guidelines on the general approaches to use in the development of a balanced budget for the following fiscal year (satisfies Charter requirements)
The guidelines are typically incorporated in the Mayor’s March Budget Message and are subject to City Council modification and approval 7 City of San José Budget Development:
Policies and Practices
City Manager’s Budget Request and Budget Balancing Strategy Guidelines (cont’d) The draft guidelines included in the City Manager’s direction memorandum to Senior Staff for 2022-2023 budget submittals included, but was not limited to, the following:
• Develop a budget that balances the City’s delivery of the most essential services with available resources and considered in context of long-term service delivery priorities • Pose explicit questions of equity – including who benefits and who is burdened – when considering changes to City services to achieve a balanced budget • As the City remains committed to balancing ongoing expenditures with ongoing revenues over the long term, use a combination of ongoing and one-time solutions to achieve a structurally balanced budget over a two to three-year period that prioritizes the incorporation of items funded on a one- time basis in 2021-2022 and community and economic recovery workstreams currently budgeted in the American Rescue Plan Fund
• Evaluate program-level budgets to identify opportunities to shift resources or reconfigure operations to mitigate service delivery impacts, meet objectives of City Roadmap, and respond to Council direction and organizational risks
• Explore alternative service delivery models and policy changes that improve service outcomes and efficiency
• Ensure that the City’s residents and businesses are educated and engaged, as well as have the opportunity to provide feedback regarding the City’s annual budget 8 City of San José Budget Development:
Policies and Practices
City Roadmap
• First formally implemented in 2020-2021
• This tool lists the City’s most important programs, strategies, and policies to enact significant organizational change
• Approved by the City Council, the tool focuses the work of the City and informs the budget development process to ensure that sufficient resources are in place to achieve Roadmap objectives
9 City of San José Budget Development: Calendar
11 October – December January – March April – June
Community Input on budget priorities and direction through direct contact with Mayor and City Council, and community-wide surveys, meetings, and March Budget Message public hearings
Community meeting on
Proposed Budget, initial and
final public hearings on
Proposed Budget
Mayor and City
Council
Review and approval of the prior
year’s Annual Report
Mayor’s Budget Town Hall,
priority-setting and City
Roadmap approval, review and
approval of Mayor’s March
Budget Message
Review Proposed Budget during
May study sessions, release
City Council Budget Documents
that recommend modifying
Proposed Budgets, review and
approval of the Mayor’s June
Budget Message
Administration Present Annual Report on the
financial performance of the
prior fiscal year, develop a
preliminary General Fund
forecast and develop preliminary
budget strategies
Release City Manager’s Budget
Request and Five-Year Forecast
for General Fund and Capital
Improvement Program, finalize
strategies for development of
Proposed Budgets
Release City Manager’s
Proposed Operating and Capital
Budgets and Fees & Charges
Report, release City Manager’s
Budget Addenda
3. Historical Perspective of the General
Fund Budget
Historical Perspective of the General Fund:
Impacts Economically Sensitive Revenues
13 $100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
$240,000
$260,000
$280,000
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
2018-2019
2019-2020
2020-2021
Sales Tax
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
2018-2019
2019-2020
2020-2021
Property Tax
Dot-Com Bust
Great
Recession
Great
Recession
$ in thousands
(All figures not adjusted for inflation)
For 2015-2016, amount excludes one-time “Triple Flip”
wind down monies; Local Sales Tax implemented October 2016 Graph begins in 2004-2005 due to a change in the
calculation formula of property tax
14 Historical Perspective of the General Fund:
Relatively Low Revenue per Capita – Sales Tax
0.00 100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
General Retail Food Products Transportation Construction Business To Business Miscellaneous Sales Tax Per Capita
Sep 2020 – Aug 2021
Sales Period
15 Historical Perspective of the General Fund:
Relatively Low Revenue per Capita – Property Tax
Mountain View
$726Palo Alto
$612
Cupertino
$321
Sunnyvale
$461
Santa Clara
$350
San Jose
$272
Data: Analysis of 2021-22 Assessed Value; per capita based on 2021Q3 Population Estimates Historical Perspective of the General Fund:
Escalating Retirement Costs
16 $46.3 M
6.5%
$352.2 M
22.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
% of General Fund
General Fund Retirement Costs
General Fund Adopted Retirement Costs % of General Fund Adopted Budget Historical Perspective of the General Fund:
Other Impacts
17 The City’s budget was impacted by two other major factors:
The State of California enacted several revenue takeaways Operations and maintenance costs of new City facilities constructed with bond funding during the “Decade of Investment”
Historical Perspective of the General Fund:
Resolved Ongoing General Fund Shortfalls Exceeding $800M 18 -$120
-$100
-$80
-$60
-$40
-$20
$0
$20
$40
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ($ in millions)
Historical Perspective of the General Fund:
Budgeted Positions Well Below Peak in 2001-2002 (All Funds) 19 7,481 7,445
7,240
6,814
6,699
6,870 7,019 7,012
6,650
5,867
5,427 5,522 5,655 5,759
5,945
6,159 6,250
6,413
6,647 6,592 6,647
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
Historical Perspective of the General Fund:
Discretionary vs. Non-Discretionary Expenses
Much of the City’s expense budget is
non-discretionary, which cannot
feasibly be immediately reduced
20 Discretionary
57%
UAL and OPEB
Retirement
Contributions
20%
Other Non-
Discretionary and
Revenue Offset
Expenses
23%
To achieve a balanced budget when facing a
shortfall, the City can only reduce
discretionary expenditures
This has made budget reductions even more
difficult to achieve in years past
Breakdown of the
2020-2021 Base Budget
Historical Perspective of the General Fund:
Impacts due to Persistent Shortfalls
To resolve the shortfalls, the City implemented: 1) numerous cost saving strategies, 2) approved several revenue measures, but 3) still had to enact painful service reductions To bring the General Fund into structural balance, City Council approved a General Fund Structural Deficit Elimination Plan (2008) and a Fiscal Reform Plan (2011) • We – Council, staff and the community – worked very hard to bring the budget back into balance Cost reductions included:
• Wage freezes and reductions
• Pension reform
• Outsourcing and public-private partnerships
• New technology deployment
• Civilianization of sworn functions to lower costs
Voter-approved revenue increases included:
• Increased Cardroom Business Tax rate and allowed tables in June 2010, additional adjustment in November 2020 • Established the Marijuana Business Tax in November 2010 • ¼-cent Sales Tax (June 2016)
• Business Tax modernization (November 2016)
• Real Property Transfer Tax (March 2020) 21
Historical Perspective of the General Fund:
Impacted due to Persistent Shortfalls (cont’d)
Significant service reductions in both public safety and non-public safety areas • Reduced police field patrol, special operations (metro, downtown, VCET, curfew, canine, horse mounted units) and investigative services in all areas
• Reduced police school liaison, PAB lobby hours/staff, police pre-processing center, training, performance analysis and research
• Reduced fire apparatus staffing and fire companies
• Reduced community centers (down from 56 at peak in 2007-2008 to 12 in 2013-2014); established the re-use program • Reduced neighborhood and regional parks maintenance and park ranger staffing • Reduced/eliminated recreational services and special events support • Reduced/eliminated services to seniors, persons with disabilities, and youth • Reduced code enforcement staffing
• Reduced strong neighborhoods initiative
• Reduced long-range planning services
• Less resources for pavement maintenance (special funds, grants) • Reduced traffic maintenance program (e.g., traffic signals, streetlights, roadway striping) • Eliminated funding for sidewalk repairs and street tree services (property owners responsible) • Reduced street landscape services
• Reduced transportation operations services (e.g., traffic calming, neighborhood traffic studies) 22 Historical Perspective of the General Fund:
Limited Restoration of Some Services
23 During the relatively stable period between
2012-2013 and 2019-2020, the City was able to
solidify its fiscal resiliency, but service
restoration was limited
The focus was on direct service restoration to the community in a sustainable way, and balanced with necessary strategic support and infrastructure to facilitate service delivery Examples of limited restorations:
• Library branch hours returned to six days per week
• Elimination of Fire Station brownouts
• Small addition of budgeted Police Sworn staff
• Modest increases to recreation and community services • Modest increases to parks maintenance staffing
4. 2022-2023 Preliminary General Fund
Forecast
Preliminary General Fund Forecast:
Outlook for the Remainder of 2021-2022
Many areas of economic activity have
recovered, and revenues are tracking to
meet or exceed the budgeted estimate in
many categories
Sales Tax surge experienced in Apr – Jun has
so far continued through Jul – Sep, and is
expected again for Oct – Dec
• Year-over-year growth in the second half
of 2021-2022 is expected to moderate
since we started to first see the return to
growth during this time last year
Continuing to experience strong residential and
commercial property sales, both in price and
volume
Cardrooms resumed normal operations and
utility-related revenues remain solid
25 Preliminary General Fund Forecast:
Outlook for the Remainder of 2021-2022 (cont’d)
A few headwinds remain, some significant
The pandemic continues; the Omicron variant will likely have some dampening effect, though staff is not attempting to quantify the impact
Though somewhat higher than 2020-2021, Transient
Occupancy Tax receipts remain significantly reduced
Fee activity revenue is rebounding, but still well below pre- pandemic levels
Recently informed by the State that a portion of the City’s previous and current tax revenues could be significantly lower; while the City disputes and will appeal the State’s initial determination, the General Fund outlook is negatively impacted and we will take action to set aside funds in reserve as part of the 2021-2022 Mid-Year Budget Review and 2022- 2023 budget development process
26 0
4,000
8,000
12,000
16,000
20,000
24,000
16-17 17-18 18-19 19-20 20-21
Dollars (in Thousands)
Transient Occupancy Tax Collections
0.0 5.0
10.0 15.0
20.0 25.0
16-17 17-18 18-19 19-20 20-21
Dollars (in Millions)
Parks, Recreation and Neighborhood
Services
Fee Revenue Collections
Preliminary General Fund Forecast:
Outlook for 2022-2023
Revenue growth expected to moderate in 2022-2023, but levels remain strong Strong real estate market for Calendar Year 2021 will translate into solid growth for Property Tax revenues in Fiscal Year 2022-2023
• Educational Revenue Augmentation Fund (ERAF) allocation is a risk factor, as the calculation is currently subject to legal challenge from school districts While there may be lingering pandemic impacts, they are expected to be limited to a few areas, such as hotel-related taxes and fee revenue Economic growth is preliminarily expected to continue in the outyears 27 Preliminary General Fund Forecast:
Outlook for 2022-2023 (cont’d)
Decrease in projected retirement costs has a substantial impact on General Fund expenses
Both the Federated and Police & Fire retirement systems had investment returns of over 25% in 2020-2021
Both retirement boards left the assumed rate of return at 6.625% While the unfunded actuarial liability is still very large, instead of year-over-year increases to retirement contributions, the forecast has flipped – contributions are now projected to decrease year-over-year
28 Preliminary General Fund Forecast:
Outlook for 2022-2023 (cont’d)
Projection of Police & Fire pension contributions based on the Final Valuation Results for Fiscal Year 2020-2021 conducted by the Board’s actuary 29 Source: Police & Fire Board Meeting on
1/6/22, Item 3(a) – Discussion and action on
Final Pension Valuation Results as of June
30, 2021 to be presented by Cheiron
When compared to previous
projections, the historically
high returns in 2020-2021
have substantially reduced
estimated required
retirement contributions
from the City,
if future
years average a 6.625%
rate of return
Preliminary General Fund Forecast:
Outlook for 2022-2023 (cont’d)
The City has not experienced solid revenue growth AND decreasing retirement costs in a very long time, but a structural shortfall remains
Staff’s preliminary analysis indicates that anticipated General Fund revenues and the cost to deliver services previously funded in the General Fund on an ongoing basis are approximately balanced This is good news and a significant change, because last year’s projection was a $28 million shortfall
Because retirement costs are estimated to decrease over time, the forecast is expected to improve in the outyears
However, for 2022-2023, when considering the large number of community-serving initiatives funded in the General Fund on a one-time basis for multiple years, and the community and economic recovery initiatives funded in the American Rescue Plan Fund, the City still faces a structural shortfall
30 Preliminary General Fund Forecast:
Community-Serving Programs That Lack Ongoing Funding
Bringing the General Fund into structural balance requires a critical review of those community-serving programs funded on a one-time basis and those funded by the American Rescue Plan whose elimination would cause negative service impacts
31 Initiatives funded on a one-time basis in the General Fund in 2021-2022 exceeds $20 million, such as:
• Beautify San José Landscape Maintenance
• Climate Smart Implementation
• Foot Patrol in Downtown and High Needs
Neighborhoods
• Parks Rehabilitation Strike and Capital
Infrastructure Team
• Police Sworn Hire Ahead Program
• Project Hope
• Restoration of Library Branch hours for lower-
resourced communities
Initiatives funded in the American Rescue Plan Fund
in 2021-2022 totals $105 million, such as:
• Beautify San José Consolidated Model
• Child and Youth Services
• Homeless Services Outreach Assistance +
Resources (SOAR)
• Resilience Corps
• San José Abierto
• San José Bridge
• Small Business Grants
• Supplemental Arts and Cultural Grant Funding
5. Review of Budget and Performance
Measures for City Service Areas, Core
Services, and Programs
Budget and Performance Measures:
As included in City Council Policy 1-18, the City maintains a performance- based budget that contains a wide range of financial and service-level data The City’s operating budget is organized by:
• City Service Area (CSA) – multiple departments and/or portions of departments • Core Services – unique to departments (except Strategic Support) • Programs – unique to departments (except Strategic Support-related programs) CSA and Core Service data includes performance outcomes, activity and workload, expenses, and position allocations
Programs include expenses and position allocations
33 Budget and Performance Measures: City Service Area
34 53%
0%
20%
40%
60%
80%
100%
Initial Police Unit Responses within 6 Minutes of
Priority 1 Calls for Service (Life Threatening)
43%
0%
20%
40%
60%
80%
100%
Initial Police Unit Responses within 11 Minutes of
Priority 2 Calls for Service (Crime in Progress or Just Occurred)
73%
0%
20%
40%
60%
80%
100%
Initial Fire Unit Responses within 8 Minutes of
Priority 1 Calls for Service (Life Threatening)
93%
0%
20%
40%
60%
80%
100%
Initial Fire Unit Response within 13 Minutes Priority 2 Calls for Service (No Lights and Sirens)
Note: In 2018-19, SJPD revised their reporting of police response times to be based on how incidents are initially coded into their system. In prior years, SJPD had measured response times based on updated coding of incidents as determined throughout the response, which could change the priorities of incidents and incorrectly affect response times.
Public Safety CSA 2021-2022 Adopted Budget
• $824 million across all funds
• $818 million in the General Fund, or 52%
of the General Fund budget
Budget and Performance Measures: Core Service
35 Budget and Performance Measures: Core Service & Program 36 Core Service: Respond to Calls for Service
and Patrol Support
• $316 million budget for 2021-2022
• 38% of the Public Safety CSA budget
Program: Field Patrol
• $226 million budget for 2021-2022
• 72% of the “Respond to Calls for Service
and Patrol Support” Core Service budget
• 27% of the Public Safety CSA budget
Budget and Performance Measures: City Service Area
37 Neighborhood Services CSA
2021-2022 Adopted Operating Budget:
• $241 million across all funds
• $172 million in the General Fund, or
11% of the General Fund budget
0%
20%
40%
60%
80%
100%
Percent of Customers Rating Library Services as Good or Better (Point of Service)
2020-21 Target: 50%
83%
0%
20%
40%
60%
80%
100%
Percent of Community Center Participants
Rating City Efforts at Providing Recreational
Opportunities as "Good" or "Excellent" (Point
of Service)
2020-21 Target: 90%
89%
0%
20%
40%
60%
80%
100%
Animal Care Center Live Release Rate
2020-21 Target: 92%
3.3 3.4 3.3 3.3 3.4 3.5
0 1
2 3
4 5
0%
20%
40%
60%
80%
100%
'15-'16 '16-'17 '17-'18 '18-'19 '19-'20 '20-'21
Percent of Park Acres by Park Condition Assessment
(PCA) Score
1 or less 1 to 2 2 to 3
3 to 4 4 to 5 Avg. PCA Score
Source: Internal survey conducted by the Library.
Note: This survey was not administered in Fall 2020 or Fall 2021 due to COVID.
Note: Condition scores range from 1 (unacceptable) to 5 (new or like new). PRNS is in the process of revising the methodology for this measure.
Budget and Performance Measures: Core Service & Program 38 Core Service: Parks Maintenance and Operations
• $50 million budget for 2021-2022
• 38% of the Neighborhood Services CSA
budget
Program: Neighborhood Parks and Regional Parks
• $30 million budget for 2021-2022
• 60% of the “Parks Maintenance and Operations”
Core Service budget
• 12% of the Neighborhood Services CSA budget
Budget and Performance Measures:
Core Service & Program
39 Core Service: Community Services
• $25 million budget for 2021-2022
• 10% of the Neighborhood Services CSA budget
Program: Youth Gang Prevention and Intervention
• $10 million budget for 2021-2022
• 44% of the “Community Services” Core Service budget
• 5% of the Neighborhood Services CSA budget
Performance Measures and the Budget:
Challenges in Making Big Performance Gains
The continued evaluation of service delivery effectiveness is an integral part of the budget process, but the City’s fiscal past has impacted our ability to drive significant change Due to a high-cost burden and relatively low revenue per capita, the City had to eliminate or scale back many services in the aftermath of the “Dot-Com Bust” and “Great Recession” The reduction in service level can be seen in our performance measures; reversing this trend will take time, even with an improved General Fund forecast
From 2012-2013 through 2019-2020 (pre-pandemic), the City has focused on stabilizing service delivery and very limited restorations with the guidance and direction of City Council-approved March and June Budget messages
Many of the budget additions addressed gaps or corrected problems – the lack of ongoing funding makes large-scale service restoration very difficult, especially when considering potential trade-offs 40 Performance Measures and the Budget:
Challenges in Making Big Performance Gains (cont’d)
Police Department data provides a good example of the impact of potential trade-offs to achieve improved performance
41 Police Department 2007-2008 2020-2021 % Change
# of Emergency Calls Received 403,983 612,453 52%
Average Response Time for Priority One Calls (min) 5.91 7.12 20% Budgeted Sworn Field Patrol FTE 750.0 686.0 (9%)
Calls per Budgeted Sworn Field Patrol FTE 539 893 65%
Total Budgeted Sworn FTE 1,370.0 1,159.0 (15%)
• Police Department service demands have substantially increased over time, while budgeted sworn staff has decreased
• For reference it would cost approximately $49 million to add back 211 sworn staff positions (a mix of officers, sergeants, and lieutenants) in 2022-2023, and even that level would be a proportionately lower historical staffing level given the growth in city-wide service demand Performance Measures and the Budget:
Challenges in Making Big Performance Gains (cont’d)
Finding an offset to add $49 million of resources to one part of the budget would result in service reductions elsewhere
A sampling of 2021-2022 Core Service budgets in the General Fund:
• Parks Maintenance and Operations: $47 million (PRNS) • Access to Information, Library Materials and Digital Resources: $30 million (Library) • Recreation Services: $29 million (PRNS)
• Traffic Maintenance: $14 million (Transportation)
• Technology Infrastructure Operations: $9 million (Information Technology) • Revenue Management: $6 million (Finance)
• Code Enforcement: $5 million (PBCE, excludes Multiple Housing and Solid Waste Fee programs) For an organization that has managed through years of difficult budget years, there is no room for significant cost cutting without service impacts
For this reason, the 2021-2022 Adopted Budget used significant one-time resources to achieve a balanced budget; the alternative would have been to reduce key services during the pandemic 42 Priorities for Improvements According to Resident Survey 43 Source: Community Survey, City Auditor’s Annual
Report on City Services 2020-21
Top four resident priorities for
improvement align with recent
significant investments by the City,
for example:
• Measure B (2016), sales tax
increase that helped stabilize
Police Department staffing and
added 47 sworn positions
• Measure E (2020), real property
transfer tax that is allocated to
homelessness prevention and
affordable housing
• BeautifySJ Programs
(2017-2022) funded in both the
General Fund and American
Rescue Plan Fund
Priorities for Improvements According to Resident Survey (cont’d)
Many of the resident priorities align with the 2021-2022 City Roadmap 44 The City Roadmap should
continue to drive
investment priorities for
change initiatives
Once Roadmap item
objectives are completed,
the resulting service
levels/policy changes are
incorporated into the City
base budget and service
delivery expectation, as
appropriate
Multi-Year Project to Update Performance Measures
The Administration is in year one of an anticipated three-year re-evaluation and update of performance measures that will also include a more explicit focus on equity
Though we have an internal annual process to review and adjust CSA and Core Service performance and activity measures, there has not been a comprehensive overhaul since their initial establishment
Most measures do not contain disaggregated data, which limits the City’s ability to assess service impacts and community outcomes by race
• Critical information to more fully understand budgetary trade- offs Currently piloting an effort with several departments to more closely link community-level indicators with service delivery outcomes and activity levels within a selected Core Service • Seeking better understanding of community indicators at a disaggregated level • Manager’s Budget Addendum will review the results and lessons learned from the pilot • Expand the program to all CSAs and Core Services over the following next two years 45 Inputs and Direction to Develop a Balanced Budget
46 Goals and Priorities for Changes
in Community Outcomes and
Service Levels
City Roadmap
Budget
Development
CSA and Core
Service Outcomes
and Performance
Targets
City Council-Approved Mayor’s
March Budget Message Day-to-Day Services
and Needs
Community input via direct contact
with Mayor & City Council,
surveys, meetings & public
hearings
6. Considerations for the 2022-2023
Budget Development Process
Considerations for the 2022-2023 Budget Development
Process: City Manager’s Direction to Departments
City Council’s approval of the Mayor’s March Budget Message for Fiscal Year 2022- 2023 will provide formal budget direction and any significant policy or service delivery changes
In preparation for the 2022-2023 budget process, the City Manager issued a memorandum to department directors in December giving preliminary direction on budget submittals with a focus on the following:
• Evaluate and recommend the continuation, where appropriate, of high-priority programs funded on a one-time time basis in 2021-2022 in the General Fund, with the expectation that a significant portion will be recommended for funding on an ongoing basis beginning in 2022-2023 ($20 million allocated in 2021-2022) • Evaluate and recommend, where appropriate, the continuation of community and economic workstreams currently budgeted in the American Rescue Plan Fund, with the expectation that some workstreams will be recommended for ongoing funding in the General Fund, and some will be recommended to be again one-time funded within the American Rescue Plan Fund ($105 million allocated in 2021-2022) • Address a very small number of new initiatives to resolve limited gaps for City Roadmap items, and focus on a small handful of key policy priority areas, including public safety • The restructuring and shifting of existing resources to better meet the City’s ongoing service level objectives 48 Considerations for the 2022-2023 Budget Development
Process: City Manager’s Direction to Departments (cont’d) The City Manager’s preliminary direction to departments regarding one-time funded initiatives in the General Fund and American Rescue Plan funded workstreams is consistent with past City Council direction in two important ways:
1. Prioritizes returning the City to a structurally balanced General Fund budget • When considering that both the one-time and American Rescue Fund community-serving programs are priorities for the City Council, community, and Administration, and that their elimination would cause negative service impacts that no one would want for our city, the City’s budget effectively has a structural shortfall – not enough ongoing resources to pay for ongoing services
• We may need to again leverage one-time resources as a bridging strategy to achieve a balanced budget over a two to three-year period
• Continued focus and implementation of strategies to reduce vacancies so that we have a more accurate picture of the City’s workload capacity prior to adding other new programs
2. Prioritizes our most vulnerable communities
• Many of the one-time and American Rescue Plan Fund programs, and those included in the City Roadmap, are aimed at assisting communities disproportionately impacted by COVID-19 or otherwise a vulnerable population • The City continues its efforts to explicitly embed equity in the budget development process 49 Considerations for the 2022-2023 Budget Development
Process: Consideration of Equity
The development process of the 2022-2023 Proposed Budget attempts to allow for a more in-depth analysis of equity implications at the department and Core Service level
50 Budgeting for Equity Worksheet (Year 2)
• Departments to evaluate how specific proposals and resource allocation impedes or advances equity of a community-serving Core Service
• Allows for a more focused approach to help develop equity analysis skills Pilot Program to Revise a Department’s Core Service Performance Measures • DOT, ESD, HR, Library, Housing, Police, PRNS, and OEDCA • Revise metrics to better understand community outcomes at a disaggregated level Results and lessons learned will be published in a Manager’s Budget Addendum Considerations for the 2022-2023 Budget Development
Process: Consideration of Equity (cont’d)
Equity considerations also guide development of the final proposal package that the City Manager’s Office will present to the City Council as the Proposed Budget
51 Overall budget development direction will be provided by City Council’s approval of the Mayor’s March Budget Message for Fiscal Year 2022-2023
In addition to the March Budget Message direction, the Administration will explicitly consider who benefits and who is burdened by the recommended budget proposal package • Including the consideration of recommending lower cost-recovery levels for targeting community- serving fee programs and/or those impacting the most vulnerable, as appropriate • Informed by the Budgeting for Equity worksheets
Unless directed to do so by City Council’s approval of the March Budget Message, the Administration does not anticipate reallocating significant existing resources from one area of the City’s budget to another • Service shortfalls and gaps exist throughout the organization due to repeated historical General Fund challenges; City Council direction would be needed to consider substantial service impacts • Focusing on integrating the one-time funded and American Rescue Plan funded programs is consistent with the City’s focus on our most vulnerable communities Considerations for the 2022-2023 Budget Development
Process: Next Steps
52 2022-2023 City Manager’s Budget Request / 2023-2027 Five-Year Forecast and Revenue Projections (end of February)
City Council review and approval of the Mayor’s March Budget Message for Fiscal Year 2022-2023 (March 15)
Release of City Manager’s Proposed Budgets (early May)
• 2022-2023 Proposed Capital Budget and 2023-2027 Capital Improvement Program • 2022-2023 Proposed Operating Budget
• 2022-2023 Fees and Charges Report
Refine alignment of budget proposals with performance outcomes • Within the Proposed Operating Budget document and budget study sessions, include additional analysis and discussion on how the recommended package impacts performance outcomes 2022-2023 Preliminary General Fund
Forecast and Budget
January 14, 2022
Jim Shannon, Budget Director
Bonny Duong, Assistant Budget Director
Claudia Chang, Deputy Budget Director
City Council Study Session