Oakland City Council hears report on dire state of municipal budget
The city of Oakland is facing millions of dollars in potential service cuts as part of its ongoing structural budget deficit, with some cost-cutting measures already underway, according to a report presented to the city council on Tuesday.
During a presentation on the preliminary state of the city's budget, councilmembers were told that the city is dealing with a roughly $80 million operational deficit and that difficult decisions are looming on the horizon.
"Our revenues came in less than what we expected and our expenditures came in less than we expected, but combined there was still the operating deficit," said Oakland director of finance Erin Roseman.
Any spending adjustments will happen after Nov. 19, when final financial numbers are available, but meanwhile the city is operating on a so-called "contingency budget" that kicked in after payments for Oakland's $125 million sale of the Coliseum were rescheduled.
When the city council passed a budget in July, it was partly based on a September deadline for initial payments from the African American Sports and Entertainment Group, which were to be spent on services.
When those payments were rescheduled, the city administrator initiated several contingency cuts, including a hiring freeze and business travel prohibitions. Department heads were also asked to move any eligible expenses out of the general fund and to look for alternative sources of funding.
Those adjustments, however, even when combined with the city's $93 million general fund balance from last year, weren't enough to overcome the ongoing structural budget shortfall.
"This means at best case we will end this fiscal year underwater by $16.5 million. That's the best case," said city budget administrator Brad Johnson, adding that while that number will likely increase, the city has yet to reach the criteria for triggering a fiscal emergency.
Johnson said that preliminary spending data for the first quarter of fiscal year 2024-2025 shows the city's fire and police departments -- which together account for about 75 percent of the budget -- have so far combined to overspend general purpose funds by about $30 million, with the largest share of that, $26 million, coming from police.
He said that even if the city is able to balance its current budget, it's still staring down the barrel of massive deficits in the next two-year budget cycle.
"As we look toward the biennial (budget cycle), regardless of where we ended last year or this year, we are projecting an ongoing $120 million structural deficit in the general purpose fund," Johnson said.
"We need to figure out what we can give up, what we live without. And again, I expect that to come in November," he said.
While the budget choices seem grim, there were a few potential bright spots mentioned during Tuesday's discussion, in addition to the anticipated one-time revenue from the Coliseum sale.
For example, there are two measures on Oaklanders' ballots on Nov. 5 -- Measure NN and Measure MM -- that if approved would raise tens of millions of dollars in additional revenue annually for police and fire services.
Also, the city is still expecting $10 million from the sale of the old Oakland Raiders training facility, which could help offset some difficult spending choices.