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Emergency Budget Development

As a result of the COVID-19 pandemic, the City was forced to shift its focus from the FY 2020-2022 Biennial Budget development process and reassess the drastic change in the financial landscape. The COVID-19 emergency prompted the State to issue a stay-at-home order requiring the City to temporarily suspend public meetings to comply with State and County directives. In addition to the interruption in the traditional budget development process, the COVID-19 emergency presented significant, albeit unquantifiable, challenges to City finances. It was immediately apparent that the stay-at-home order, the temporary shutdown of many City businesses, the closure of City facilities, and the suspension of some City services would significantly impact City revenue sources. What was unknown during the emergency budget process and after the adoption of the budget has been how long the shut-down will last and what the economic recovery would look like.

As a result of these challenges, the City instituted an emergency budget process that is compliant with the City Charter. Staff, working in conjunction with the City’s various boards and commissions, will recommend intracycle budget updates to the adopted FY 2020-2021 emergency budget as more data becomes available during the fiscal year.

FY 2020-2021 Emergency Budget

On June 16, 2020, the City Council adopted a one-year $1.2 billion emergency budget, inclusive of a $110 million capital project budget. The adopted General Fund budget is $271.4 million, a decrease of $7.7 million as compared to the FY 2019-2020 amended budget adopted by the City Council on June 18, 2019. In response to COVID-19, General Fund projected revenues were reduced by 10% ($28.1 million), and multiple balancing measures were incorporated, including: $15.7 million targeted vacancy savings; $7 million savings in pension costs resulting from the issuance of a Pension Obligation Bond; sustained Measure Z support levels and use of unspent contingency funds; and the use of Section 115 Trust funds to pay a portion of the annual required CALPERS UAL payment.

COVID-19 Response and Next Steps

Immediately upon the declaration of the local emergency, the City restricted all spending to emergency and essential needs and suspended personnel recruitment. The City continues to seek all available state and federal funding to help the City government, local businesses, and residents with the impacts of the pandemic. Periodic fiscal updates will be provided to the City’s applicable boards and commissions and to City Council as more information becomes available. Adjustments to the adopted emergency budget will be recommended as the fiscal impact of the COVID-19 emergency on City finances becomes more apparent. The City is also taking immediate action to pursue a new budgeting methodology referred to as Priority Based Budgeting. This methodology will allow the City to be more nimble in response to fiscal emergencies. Additionally, the methodology facilitates the alignment of monetary and personnel resources to services and programs that align with the City’s strategic goals. This is the next important step in fiscal transparency and public engagement in the budget process.