Oakland faces huge shortfall

Finance leader’s report says ‘severe fiscal stress’ is at hand because of a projected $62 million budget gap

OAKLAND >> Mostly because of police overtime spending and a decline in tax revenue, Oakland is facing a $62 million budget shortfall that its interim finance director said “puts the city at risk for severe fiscal stress if not addressed.”

In a report shared at the council finance committee meeting Monday, Oakland’s interim finance director, Margaret O’Brien, wrote that the city’s 2019-20 fiscal year, which ended June 30, had a $30 million budget gap. And the situation is expected to worsen.

“If no fiscal corrective action is taken,” the report states, the projected gap for the fiscal year is $32 million, which would bring the total shortfall to $62 million.

Oakland’s 2019-20 general fund budget was $655.89 million, and is $644.09 million for fiscal year 2020-21 budget.

The COVID-19 pandemic has contributed to the revenue shortfall, as business operations have been severely restricted in the region in an effort to slow the spread of the virus, the report notes.

The city lost $20.6 million in revenue during the last fiscal year, when spending on hotels, restaurants and other businesses decreased during the shutdowns. Of that, hotel taxes made up the largest share, with a loss of $8.2 million, along with $4.4 million in sales tax revenue and $1.6 million in business tax revenue.

As hundreds of local businesses have closed, the unemployment rate spiked from 3.2% in October 2019 to 10% in October 2020, the report noted. And with the county again under restrictions on dining, hotel stays and other businesses, employment and tax revenue are expected to take a hit.

But expenditures by the police department represents a significant chunk of the budget gap, according to O’Brien’s report.

The police department exceeded its budget last fiscal year by $32 million, including $19 million of unbudgeted overtime. The department’s budget for the last fiscal budget was $288 million. The report projects the police department to go $29 million over budget for the current fiscal year.

In a memo sent to the City Council, Interim Police Chief Su

san Manheimer noted several reasons why the department spent beyond its budget, writing that a “dramatic” increase in homicides and assaults “have resulted in substantial overtime use for pro- active crime reduction activities as well as investigative overtime.”

The city saw its 100th murder this week, a 63% increase over last year.

She also noted that crowd management for several protests during the year, and filling in shifts for vacant positions had led to the overtime spending. Vacancies have resulted from officers leaving the force, as well as extended leaves of absence and COVID-19, which had infected a total of 41 people in the department by mid-November.

While the department’s overtime spending reached its highest in the 2019-20 fiscal year, the Oakland Police Department has overspent its overtime pay budget every year since at least the 2011-12 fiscal year, according to the police department memo.

Manheimer and other leaders in the city’s administration have framed the

problem as the City Council consistently not budgeting an appropriate amount for overtime pay.

The overspending has been “due to the performance of critical police operations,” Manheimer wrote in her memo. “In spite of these increases, City Council has budgeted less than 50 percent of the annual expenditure.” Others see it differently. At- large City Councilmember Rebecca Kaplan pointed to a directive adopted by the City Council that directs the city administration to put aside $8 million of police overtime money until a review is conducted to account for and track the spending.

“We have not received the information yet about what the administration is doing to track expenditures, and to make sure they are in line with the adopted budget,” Kaplan said in a written statement, urging the city administration to provide that now, as the police department’s spending “threatens the fiscal situation of our entire city, and has continued to get worse this year.”

A presentation Monday from city administrator Ed Reiskin offered several potential actions the city could take, including deferring raises among

city employees or reducing their wages — which would require negotiations with union bargaining units. Other potential moves could be reducing services ranging from recreation to senior services to the city’s animal shelter, as well as closing City Hall during holiday weeks or one day per week, and reducing vegetation management in fire zones.

Reducing police spending would result in cutting some services, which could lead to longer 911 response times, Reiskin warned in the presentation.

Manheimer’s memo also noted that certain federal mandates for the police department, including a rule that a patrol sergeant cannot supervise more than eight officers and that the department cannot use acting sergeants in patrol, have placed additional burdens on spending.

But Kaplan and others have urged the focus to be on police spending and have spoken out against austerity measures that would cut other city services drastically.

“Leaving trash on the streets, and failing to fulfill other funded needs endangers public health, while using austerity methods that cut jobs in times of economic hardship will only make the situation worse,” she said.

Union leaders who represent city workers have called on Oakland to focus on police overspending instead of other departments, many of which operated under budget, according to the finance director’s report.

“Oakland police departments are Oakland’s repeat offenders, every year they have ignored the City Council’s legal limit on their overtime, every year they simply take what was not authorized, every year they get yelled at, and every year they do it again,” Liz Ortega, executive secretary-treasurer for the Alameda Labor Council, told city officials.

“So I have a suggestion today: Rather than looking at cutting the jobs that keep this city moving, you should adopt a policy that reduces pay for every responsible administrator and fiscal officer by the same percentage as the police overtime is overspent,” she said.

The full City Council will receive the report at its Dec. 15 meeting, and discussions on how to address the shortfall will continue early next year.