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With the national, state, and local economies continuing to tank and the California State Legislature and Gov. Arnold Schwarzenegger stalled on how  

to close a $42 billion budget deficit—though with the certainty that some of that money will be drawn from local government agencies—East Bay governments are struggling this month with how to ride out the tough economic times. 

Berkeley survived the first round of state financial cutbacks for the 2008–09 fiscal year by earlier setting aside $1.8 million in the city budget for such a contingency, but that contingency fund has now been used up. During a Jan. 13 budget update given to the Berkeley City Council, Berkeley city staff said that the city may be looking at as much as $8.5 million in state takeaways for the current fiscal year, including $5.3 million in boating and waterways loans, $1.6 million a piece in parks bond grants and Proposition 1B street monies, and $1 million in parking fine monies. 

After earlier dips in projected revenues from local sources, the city’s local revenue stream has—for the time being—stabilized. 

“On Dec. 8, we projected major [local] decreases in the property tax and in sales tax from projections,” City Manager Phil Kamlarz told the council. “We got one more month’s receipts and those seem to be on track.” 

Staff is proposing a number of immediate actions to tighten up Berkeley’s city budget in anticipation of state legislative action, among them a hiring freeze for non-essential positions, cuts to the city’s health and mental health departments, limiting overtime for non-emergency and non-essential city services, deferment of capital projects, limiting city travel and non-essential expenses, and a moratorium on the creation of new programs. 

With no ability to raise taxes in the short run to fill in for the loss of state revenue, the city will also be looking at a combination of revenue enhancements and speed-ups in the next weeks, including increasing fees and collection times, cost-cutting measures in existing programs, and the possible elimination of some city programs. 

Meanwhile, Berkeley must move forward with the development of its next two-year budget, scheduled for implementation beginning in July, with a series of workshops scheduled this winter and spring, culminating in the presentation of the first draft of the preliminary budget to the City Council on May 5. 

As daunting as they seem, however, Berkeley’s budget problems are miniscule compared to neighboring Oakland’s. 

Oakland faces the same situation as Berkeley, with a current fiscal year's budget that is projected to end balanced, but which will almost certainly go immediately out of balance once the state legislature and the governor agree on their local takebacks. And City of Oakland Mayor Ron Dellums, who has placed himself in the point position in the city on budget matters, told Oakland City Councilmembers at a January 12 special all-day five year budget workshop that that the city is facing escalating structural budget deficits over the next several years, from a projected $50 million shortfall in FY 2010 (beginning July, 2009) to a $58 million shortfall the following year, peaking at a whopping $114 million projected deficit in FY 2012 when increased city payments into the state employees retirement fund (PERS) are expected to begin. Oakland city budget officials expect the local economy to bottom out in 2012, and are projecting a return to rising city revenues thereafter. 

Berkeley faces the same rise in PERS costs beginning in 2012. 

Oakland must also decide whether, and how, it will maintain the authorized strength of 803 police officers. Dellums told councilmembers it costs $10 million annually to run the three training academies necessary to keep the police department at full strength, but only $4.5 million has been set aside in the current budget. To make matters worse, the money from Oakland’s violence prevention Measure Y “will become insufficient in 2010 to maintain the current staffing level of 63 PSOs (problem solving officers),” according to Dellums, so that the money to maintain the PSOs must also be found in the general fund. 

In addition, the mayor said that “no discretionary funds” remain in the city’s capital (building) fund, and an additional $3 million in funding per year must be found to finance the city’s ongoing capital pro-jects. 

Oakland City Council Finance Committee Chair Jean Quan called it “a very tough year.” 

With the possibility that Gov. Schwarz-enegger will authorize a special election in November to put on measures to shore up the state’s sagging budget, the Oakland City Council is considering several ballot measures of its own. Quan said that a committee composed of herself and councilmembers Larry Reid and Pat Kernighan have been meeting with representatives of the Kids First! committee—sponsors of last November’s Oakland Measure OO—to try to work out language of a new compromise ballot measure to make modifications to OO, which increased mandatory percentage set-asides in the Oakland city budget for youth programs.  

“If we can’t work out a compromise, we’ll go for complete repeal” of Measure OO, Quan said. 

Quan also said that the council may “perhaps go for a small parcel tax” on the possible special election ballot this fall in order to make up for deficits in the city’s Landscape and Lighting Assessment District (LLAD). But some councilmembers said that after last November’s defeat of a parcel tax ballot measure to increase revenues for the Oakland Police Department, the council may wait before putting another police tax measure on the ballot. 

While Oakland and Berkeley’s employee retirement funding increases will be put off until 2012, Alameda County’s retirement funding troubles are immediate. Unlike the cities, whose employees belong to the state employees retirement system (PERS), Alameda County operates its own system, the 20,000 member Alameda County Employees Retirement Association (ACERA). And like so many institutions and entities heavily invested in the stock market, ACERA is facing financial difficulties. 

In a special meeting of ACERA Board members and Alameda County Supervisors held late last year, ACERA officials said that the fund lost $1.7 billion in stock market investment value between 2007 and 2008 ($5.6 billion to $3.9 billion), with a $600 million one month drop between September and October of 2008 alone. 

Chuck Conrad, ACERA chief executive officer, said that because ACERA officials had projected an 8 percent fund increase this year, the total one year loss for the fund from the expected balance will be 40 percent. 

While Conrad said that he believed “many stocks are being undervalued in the present market” and expected that the value of ACERA’s investments will rise, ACERA is looking at the possibility that it will have to ask Alameda County to put money into the fund in the short run to keep it solvent. Conrad said that a decision on such funding will not have to be made until March or early April. 

Supervisor Keith Carson, who sits on the ACERA board and called for the special joint meeting, said the “implications” of ACERA’s funding problems and pending request for county funds were “quite sobering,” considering that the county is facing tight budget problems itself.