Oakland faces $ 62 million budget gap
Oakland faces a $ 62 million budget shortfall that the City Council must address to avoid an “unprecedented fiscal challenge,” the city’s interim finance director said.
The city ended its 201920 fiscal year in June with a $ 30 million budget gap. Now that’s grown by an additional $ 32 million.
“This significant shortfall puts the City at risk for severe fiscal stress if not addressed,” wrote Margaret O’Brien,
Oakland’s interim finance director, in a report. The report was presented Monday afternoon to several members of the City Council in a committee meeting.
O’Brien said that because Alameda County was sent back to the state’s purple tier on the system for tracking coronavirus cases, which hurts tax revenue as more businesses are shut down, more shortfalls are likely ahead.
The overspending came primarily from the Oakland Police Department exceeding its budget by $ 32 million over the last fiscal year, O’Brien wrote. That includes more than $ 19 million in overtime that was not budgeted.
The Oakland Police Department exceeded its budget due to an uptick in homicides, protests against police brutality and responding to sideshows, interim police Chief Susan Manheimer wrote in a letter to the City Council and mayor.
The department also had 35 sworn officers and 13 staff members on extended leave, as well as 41 confirmed cases of COVID19 that resulted in overspending, Manheimer said.
The department accounts for about $ 290 million of the city’s general fund, which is more than $ 650 million. It’s the largest budget of any city department.
City Auditor Courtney Ruby’s June 2019 audit concluded that the Police Department has averaged nearly $ 30 million in overtime costs over the previous four fiscal years. Ruby wrote that the city “still needs to take significant steps to better manage overtime and increase transparency on the true costs of overtime.”
Ed Reiskin, the city administrator, said he shared the frustration of the council and the public about how the city has budgeted for the Police Department.
“Folks at City Hall have been complicit in perpetuating a structural imbalance between what the public and the council expect in terms of the Police Department’s service and what the council and administration have budgeted for that service,” he said.
“We do need to have an honest conversation about the Police Department budget and ... overtime.”
The city administration suggested several possible fixes to deal with the shortfall, including instituting furloughs for City Hall workers and deferring wage increases and cutting pay for city staff — moves that would cause an uproar from labor. In June 2019, city workers staged protests and unions filed unfair labor practice complaints against Oakland during contract negotiations.
“Today, while I am heartened to hear that the administration wants to work with labor, I’m disappointed to hear about the way in which they want to go about it, including the cuts to many of the members that I represent,” said Liz Ortega, the executive secretary and treasurer of the Alameda Labor Council, which represents 135,000 workers.
In June, the City Council
approved a budget to deal with a looming financial crisis due to the pandemic that included more than $ 14 million in cuts to the Police Department. In addition, city leaders committed to ultimately slash the department’s budget in half, by about $ 150 million.
The city’s deficit is also attributed to a loss of $ 20.6 million in tax revenue largely due to the restrictions during the pandemic. Lost hotel taxes contributed the most at just over $ 8 million.
“The unprecedented disruption caused by COVID19 to the airline industry created a domino effect to the lodging industry, as airlines no longer need many hotel rooms for flight crews, impacting local hotels in close proximity to the airport,” O’Brien wrote.
The city also lost $ 4.4 million in sales tax revenue, mostly due to a decrease in gas and auto sales, as well as restaurant closures.
In 2019, Oakland passed a $ 3.2 billion twoyear budget that allocated millions for homelessness and affordable housing.
The full City Council will discuss the report on Dec. 15. The administration will present recommendations on how to deal with the shortfall in January.