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With Mayor Tom Bates scheduled to unveil a financial recovery plan today, the city’s latest budget projections show Berkeley falling further into the red. 

The city is now facing a projected shortfall of $7.5 million for fiscal year 2006—$1.5 million higher than projected in June, said Tracy Vesely, the city’s budget director. 

The main culprit, she said, is higher than expected contribution rates charged by the California Public Employees Retirement System (CALPERS) that will cost the city an extra $1 million next year. Vesely said rising health care costs have also contributed to the additional shortfall. 

Current projections for future years appear rosier, or at least less bleak, she said, with a deficit between $3 to $3.4 million in fiscal year 2007 and about $2.4 million in 2008 and 2009. 

Cisco DeVries, the mayor’s chief of staff, wouldn’t reveal details of the mayor’s plan, but said Bates, along with councilmembers Miriam Hawley and Linda Maio, would call for the city to plug deficits projected through 2009 with spending cuts rather than additional tax hikes. 

The City Council has placed four tax measures on the November ballot that would raise a combined $8 million dollars if passed. Already, DeVries said, the city has cut a total of $14.3 million in spending since it started facing deficits in fiscal year 2003. 

The fiscal recovery plan is non-binding and will not have to go before the City Council, prompting some tax hikes opponents to charge that the plan’s release less than two months before the election sounds like nothing more than a ploy to boost support for the tax measures. 

“I think it’s a total lie,” Bob Migdal of Berkeley Budget Watch said of the mayor’s pledge not to raise taxes further. “They’re going to need more money every year; how else are they going to try to get it?” 

DeVries said that Bates had promised at his state of the city address earlier this year to release a plan by the end of the summer. 

Like many California cities, Berkeley’s pension costs have skyrocketed thanks to CALPERS’ poor stock market returns when the tech bubble burst four ago. The city’s labor expenses have also risen due to employee pension increases negotiated into current labor contracts. 

For fiscal year 2005 pension costs in the city accounted about $6 million of the $10 million general fund budget deficit. 

The revised CALPERS pension rates for fiscal year 2006 require the city, on top of regular salary outlays, to pay 39 percent of the salary for every police officer, 29 percent for firefighters and 17 percent non-uniformed employees. 

In 2000, when CALPERS was reaping double-digit returns, the city paid 2.5 percent for non-uniformed employees and 3.63 percent for police and fire in pension benefits 

That same year the state passed a law allowing cities to boost employee retirement benefits. Over the next two years, Berkeley signed long term deals with its biggest unions granting them raises and improved retirement benefits, which for police and firefighters meant they could now retire at age 50 with a pension that equaled three percent of their salary multiplied by their years of service.  

For instance, an officer who retired at age 50 after 25 years on the force would receive 75 percent of his or her highest salary annually for life. 

In 2002, 22 police officers—more than 10 percent of the force—retired and last year the city lost 72 employees to retirement. 

DeVries said the mayor’s plan would not address pension concerns or propose specific cuts. 

“It will be more of a budget overview. People want to see the big picture,” he said. 

The city’s budget problems could ease starting in fiscal year 2007 assuming two deals Gov. Arnold Schwarzenegger made with California cities materialize. Under their agreement the state will stop withholding local tax revenue and refund money lost by cities from last year’s repeal of the Vehicle License Fee. If the governor is true to his word, Berkeley stands to recoup $3.8 million in 2007, but Vesely warned that still won’t be enough to balance the city’s books. 

“We have a structural deficit,” she said. “Our expenses are greater than our revenue.”›