Pin It
Favorite

SLO jiggles its financial forecast 

San Luis Obispo staffers have recalculated the city’s five-year fiscal forecast, declaring that the financial outlook is better than was previously thought. The city’s new estimates are based, however, on the presumption that inflation will remain low, city workers’ wages won’t increase, and the city won’t have any new capital projects.

City officials released the more optimistic forecast two months ahead of schedule, presenting it during the last City Council meeting before the November election.

The updated forecast projects a budget gap of about $2.2 million in the 2011-12 fiscal year, growing to $3 million the following year. That gap is expected to grow to $3.5 million per year in 2013-14 because of rising pension payments. The forecast presumes the economy will come to the rescue and begin reducing the gap by 2014-15, but if Measure Y (the half-cent sales tax increase) isn’t renewed, the budget gap will jump to $7.5 million.

These are more optimistic numbers than the last forecast. The results of the Interim Forecast, which was presented to the council in May, showed that the city was facing an annual deficit of about $3 million in 2011-13, $5 million in 2013-15, and $11 million in 2015-16 if Measure Y doesn’t pass.

Why the change? The city financial staff made some interesting assumptions.

“This updated assumption is based on the very low inflation environment currently in place and the downward pressures on salaries from the loose labor market,” according to the forecast. “Any increase in compensation would result in a commensurate increase in the budget gap. For example, each 1 percent in additional wages and benefits for General Fund employees adds about $400,000 to the ongoing budget gap.”

If the City Council’s history is any indication of future behavior, many of the forecast’s underlying assumptions could be very rosy. Previous councils have lavished the city with high salaries and, until recently, frequent pay raises. Even if future councils want to hold down personnel costs, binding arbitration could bring higher salaries for safety employees. The City Council also has a history of spending big on big projects. For example, the City Council approved a $640,000 downtown rehabilitation project.

Even some of the council members, who are usually loath to disagree with staff reports, seemed to doubt some aspects of the report.

“Some of our expenditures have been guided by public demand,” said outgoing Councilman Allen K. Settle. “We tend to be populists and give people what they want.”

Pin It
Favorite

Comments

Subscribe to this thread:

Add a comment

Search, Find, Enjoy

Submit an event

Trending Now

© 2017 New Times San Luis Obispo
Powered by Foundation