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Oakland Mayor Releases $4.2B Budget Amid Historic Shortfall

Mayor Sheng Thao hopes that her proposed two-year budget will help fund the programs she promised to voters during her campaign while also merging city departments to eliminate redundancy and reduce overhead.

(TNS) — Oakland, Calif., Mayor Sheng Thao released a two-year budget proposal Monday, May 1, that aims to avoid layoffs by cutting vacant positions — a road map for how she plans to tackle the largest budget shortfall in the city's history.

Thao's nearly $4.2 billion plan reorganizes the city by merging some government departments as she attempts to deliver and fund the programs she promised to voters during the campaign. Some of the cutbacks will fall on the police and fire departments, including a reduction in the number of sworn officers compared with earlier hiring plans, despite a rise in the overall police budget.

Her draft proposal, which the City Council will amend and approve in June, establishes a plan for the city's near future.

Some members of the City Council, including the council president, applauded Thao for her efforts to rein in spending, but the police union criticized the plan, saying it caps the department's ranks at a time when the city is grappling with violent crime.

Thao, who vowed a hiring blitz at City Hall to fill vacancies, was forced to contend with a gaping $360 million two-year shortfall in the city's general purpose fund, which pays for police, fire and other city services.

The gap raised concerns about layoffs within the city and how the new mayor would handle them. During her election campaign, she won support from major labor unions and building trades in Oakland. But last month, Thao instituted a hiring freeze across all city departments and said Monday that the move would save the city about $133 million over the next two years.

Only last week, the city Finance Department had reported its most recent revenue and spending estimates concerning the two-year shortfall in the general purpose fund. For fiscal year 2023-24, the projected budget gap is $175 million. For fiscal year 2024-25, the general fund could see a $170 million deficit, the report said.

Thao asked all city departments that receive money from the general purpose fund to come up with plans for 20 percent cuts to their operating costs. In the end, such draconian measures weren't imposed, but city staff said the outlines helped inform Thao's final budget. She has required across-the-board cuts from all city departments — resulting in the elimination of some unfilled jobs.

If Thao hadn't addressed the deficit, it could have increased to more than $750 million by 2028, according to the city's estimates. The shortfall is a result of inflation and rising employment costs, coupled with decreased tax revenues. In addition, the city no longer has access to federal COVID relief to fill budget gaps.

"We inherited the largest deficit in Oakland's history," Thao said in a statement. "But thanks to the ingenuity and hard work of our City staff, we have found a way to not only close that gap, but actually lay the foundation for Oakland to be stronger in the future."

Some of her council colleagues praised her proposal, saying she used a thoughtful approach to maintain city services and avoid layoffs.

"Unlike past budget deficits, there are no federal bailouts this time," said Council Member Kevin Jenkins, who represents part of East Oakland and is the chair of the city's finance committee. "I appreciate that the mayor used every possible tool to close the deficit and maintain current city of Oakland employees — from the hiring slowdown announced in March to freezing vacancies and attrition."

To address the deficit, Thao is proposing to merge several city departments to eliminate redundancy and reduce administrative overhead. She wants to combine the homelessness and housing departments; fold parks into a new children, youth and family department that also includes services from the city's existing Human Services Department; and combine planning and building into the Economic & Workforce Development Department. Merging these organizations should save the city about $2 million over the next two years.

Thao envisions some cutbacks to the Fire Department, including terminating the use of one fire engine and delaying the launch of another, for a savings of $20 million over two years. Zac Unger, a firefighter and president of the union representing firefighters, said taking a fire engine out of service can have major impacts because units will have to respond to 911 calls from stations that could be farther away. Firefighters have criticized the city for taking fire engines out of service in previous years.

"We do want to restore them as quick as possible and we also understand the budget is what it is and all departments will have to take cuts," Unger said.

Some new city programs, for example, Democracy Dollars, a voter-approved initiative that requires the city to send every adult resident four $25 vouchers every two years to be donated to political candidates, will be delayed.

Aside from the cuts, Thao is making some investments. She aims to pour an additional $10 million into Oakland's IT department after a ransomware attack disrupted city services for two months and caused the personal data of some residents and staff to be leaked. She also wants to shift about $100,000 into job training programs with local high schools and community colleges, a campaign promise.

Thao proposes spending $160 million, mostly from other sources of revenue than the general purpose fund, to upgrade parks, libraries and recreational centers, clean storm drains and for other non-road infrastructure. She also allocates $87 million to repave roads, $9.1 million to traffic-calming efforts and $3.2 million for bike and pedestrian plans.

The mayor's first budget since taking office comes amid increased pressure from residents to tackle major problems, including homelessness and public safety. A city survey done earlier this year to help inform Oakland's priorities revealed that homelessness is the top concern for residents, cited by more than 35 percent of residents as the city's most urgent problem. The number of unhoused people has increased by 131 percent since 2015, and grew 22 percent from 2019 to 2022.

Around 20 percent of the 1,270 residents surveyed said crime and violence was Oakland's most urgent problem, while 14 percent said housing costs and affordability were their top concern. The new budget spends spends nearly $200 million on affordable housing — in part thanks to the passage of Measure U, a bond that the city can use for affordable housing and infrastructure projects. Thao also proposes allocating $108.5 million in local, state and federal funds to provide shelter and housing for 4,000 people.

The most contested part of Thao's budget concerns law enforcement. The Police Department, which has struggled to retain and recruit staff, currently has 706 officers — short of the 726 previously budgeted. Thao's proposal pays for six police academies during the next two years and budgets $722 million over that period, an increase from the $680 million earlier allocated, for a total of 710 officers. The head count is less than previously envisioned because salaries have increased, city staff said.

Thao also proposes cutting vacant sworn positions in criminal investigations, crime reduction and community resources. The Police Department, which has often gone over its spending plan due to overtime, will face a 15 percent cut in its overtime budget.

Barry Donelan, the president of the police union, took exception. "We don't have enough police officers now just to deal with the calls for service that we have," he said. "It's not a recipe for success in a city that has the call volume and violence we're experiencing."

Some police reform advocates countered that the mayor's proposal doesn't cut spending enough. "Most if not all other city departments have already been stretched as much as possible over the years due to the enormous size of our police budget," said James Burch, the policy director of advocacy group the Anti Police-Terror Project. "While we acknowledge that it will take time to set things straight, we think that the current budget crisis necessitates more drastic action when it comes to addressing our bloated OPD budget."

Thao proposes trimming the city's Department of Violence Prevention budget from about $48 million to $41 million, including a $3 million reduction in contracts with community organizations and freezing a full-time public information position. She also aims to move internal affairs investigations out of the Police Department, a significant change after a report detailed the department's mishandling of officer misconduct cases, resulting in the firing of the police chief.

Police reform advocates applauded the plan to move internal affairs, saying Oakland could become the first city to have civilians overseeing internal misconduct cases.

Some city positions were moved out of the general fund and into other special funds that weren't facing a deficit, city staff said. Thao is also tapping into a $12 million city savings rainy-day fund to help offset the budget shortfall.

The city is also expecting a boost of $20 million in revenue after implementing a progressive business tax, which voters approved last November, as well as new revenue from installation of parking meters at Lake Merritt.

(c)2023 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.
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