Money Troubles

Mayor, City Council can’t play dumb on deficit

By Jeff Harris
April 2024

Is the $66 million deficit a surprise to Mayor Darrell Steinberg and the City Council? Absolutely not.

For years, City Manager Howard Chan and his financial team warned the mayor and council they were sailing toward fiscal disaster. Economic forecasts in the annual budget told the story.

Despite flashing yellow lights, the city’s elected leaders pressed hard on the gas pedal.

In conversations with neighbors, I’m often asked, “Isn’t this the city manager’s fault? Didn’t he cause this?”

The answer in two words: Absolutely not.

Every year, Chan and his team propose a balanced budget to the City Council. The proposal includes recommendations on staffing, maintenance and projects.

From there, the mayor and council decide where the money goes. They allocate one-time expenditures, ongoing needs, or new pet projects and initiatives. Chan can’t hire a single new employee without City Council approval.

Once the mayor and council approve the budget, Chan follows directions. He carries out funding orders.

Typically, the finance team presents the City Council with a midyear fiscal health report. Recent years included a carryover—surplus dollars.

Prudent fiscal management treats this money as a cushion against unexpected bills. Every homeowner knows why cushions are important.

In recent years, Chan recommended returning the carryover to the general fund. He wanted to offset projected deficits.
If Steinberg and the council followed Chan’s advice, today’s deficit would not exist.

But the mayor took another approach. He distributed a “budget memo” to councilmembers, listing his ideas about how surplus dollars should be spent. Then Steinberg convinced the council to endorse his memo.

Almost every extra dollar was spent.

Things got so bad Chan suspended the midyear negotiation. He tried to reign in City Council spending sprees. Without Chan’s efforts, the financial crisis would be worse.

Chan displayed courage standing up to Steinberg. That’s how a city manager is supposed to act. Holding firm on principles and serving as a fiscal steward for residents is how Chan earns his big salary.

It’s ironic that the council made Chan the highest-paid city manager in California, then ignored his advice on keeping the city financially sound.

At a recent “priority setting” session, City Council members gave Chan directions on their concerns and objectives. Most cited homelessness and housing as priorities. Only one councilmember mentioned fiscal sustainability. No wonder the city faces severe budget cuts.

This May, Chan will give Steinberg and the council a budget with cuts needed to achieve fiscal sustainability. It will be painful. The choices are stark. Raise revenues. Cut programs, staff and constituent services. Or all of the above.
Raising revenues means higher service fees. There’s no time to put a tax measure on the ballot. Polls suggest voters would reject a new tax anyway.

Cutting staff is another possibility. Layoffs mean degraded parks and roads, a reduction in homelessness responses and more—or worse.

Residents should pay attention to May’s budget hearings. Please participate and let the mayor and City Council know what you think of their fiscal leadership.

Jeff Harris represented District 3 on the City Council from 2014 to 2022. He can be reached at Follow us on Facebook and Instagram: @insidesacramento.

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