Realistic City of Oakland Budget Cut: 10%

City must trim its budget… to FY2000 levels…soon.

[The short version: FY08-09 budget $1.066 Billion. 10% cut needed — a $106.6 Million cut for FY09-10.]

A favorite blogger of mine, Karl Denninger, spends a good amount of his time calling out the lies put forth as truth by our “Federal” Reserve, Congress, White House and corporate media.

Indeed… Who respects authority figures these days? Americans are lied to by everyone–from politicians to CEOs to AC Transit directors to City of Oakland administrators to realtors…. it’s a loooong list! That many Americans don’t vote actually shows how smart we are.

In this Tuesday’s post, Denninger (surely on the White House enemies list) suggests that municipal budgets should be quickly reduced to FY 2000 levels. The rationale being that everyone and every organization in America grew their outlays and expenses during our massive cockroach and fraud-ridden debt bubble, days to which we will never return in our liftimes. You’ll find plenty of fresh supporting evidence around you or online here.

Excerpt from Denninger’s column:

Gee, this is a green shoot….

NEW YORK, Oct. 27 /PRNewswire/ — The Conference Board Consumer Confidence Index®, which had declined in September, deteriorated further in October. The Index now stands at 47.7 (1985=100), down from 53.4 in September. The Present Situation Index decreased to 20.7 from 23.0 last month. The Expectations Index declined to 65.7 from 73.7 in September.

The kicker….

In fact, the Present Situation Index is now at its lowest reading in 26 years (Index 17.5, Feb. 1983). The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead. Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays.”

Let me guess – Citibank’s decision to jack rates to 29.9% didn’t have anything to do with that?

Neither does the gross and outrageous under-reporting of jobless rates by the government?

Neither does the incessant attempts to jack up taxes by state and local governments (instead of cutting spending back to, for example, year 2000 levels)?

So that’s the source of my cutting city budget by 10% idea.  I’m just passing along a sound idea here.

You know what debt is –– money we borrowed — money we would have spent-in-the-future (via debt instruments) in order to live high on the hog today. Through July ’07 or October ’08 anyway, depending on your particular layoff date and or mortgage notice of default date.

Recap: Oakland must trim its budget from 2008 levels to at least 2000 levels. We are in triage mode!

What would this mean for Oakland?

See budgets below. Acronym alert. MCABS = “‘midcycle amended budget summary” (ie, our financial forecasting sucks and OPD overtime always overextends and cuts everyone else’s budget, except finance, because finance has to re-do the budget to clean up after OPD, and the museum, which over-spends slightly for who knows what reason.)

FY 2000-01 budget. Income: $1,027,066,055 — Expenses: $987,124,275

FY 2001-02 budget. Income: $1,199,844,225 — Expenses: $1,120,384,471

FY 2004-05 MCABS Income: $856,370,784 — Expenses: $900,981,567 (post dotcom/enron fraud debt bubble, blown by alan greenspan of the “federal” reserve aka the nation’s biggest private banks)

Above: Mayor Jerry Brown’s era. Below: Mayor Ron Dellums’ era. Note: I believe that choice of mayor is not primary reason for city’s revenue (income) increase or decrease in any particular year.

FY 2006-07 MCABS Income: $1,064,787,471 — Expenses: $1,088,405,271

FY 2008-09 MCABS Income: $1,071,993,253 — Expenses: $1,066,328,235

FY 2009-10 proposed policy budget: Income: $50.8 million GPF revenue decrease— expenses: $32 million increase vs 2008-09 revised budget. 2010-11 budget looks just as bad. There are no final figures that I could find quickly but assuming simple add and subtract from 2008-09, we’d have:

Income: $1,021,193,253 (5% decrease YOY)

Expenses: $1,098,328,235 (3% increase YOY)

According to my simple math above, we have a 3% increase in expenses for FY 2009-10 vs FY 2008-09.

Following Karl Denninger’s logic, we need a 10.1% decrease in expenses from FY2000-01 budget.

If Oakland cut its budget by 10% next year, we’d be sitting relatively pretty. We’d be following Cleveland’s example — the city which cut staff and expenses quite a lot in 2006, sensing that trouble was ahead. Cleveland is better off in 2009 than they would have been, had they not planned ahead.

It will be one budget crisis after another in Oakland, as we face national collapse. The only thing saving us is suburbanites moving back to the city.

Not to dismiss Great Depression II, but oddly enough, city’s own documents from 2004 argue that chronic over-spending of budget has always been Oakland’s primary budget problem – not prevailing economic conditions. See below, from this 2004 City Council report, pdf:

Expenditure Discipline in Oakland
Prepared by the Oakland Budget Advisory Committee
May 29, 2003

“This is a plan for hard times that requires tough choices” reads the headline regarding the FY2003-05 Proposed Policy Budget. Statements similar to these lead one to believe that a loss of
revenue due to the ailing economy is what has caused the recent and proposed cuts in services.

In fact, in most budget communications, the focus has been on revenue shortfalls. However, upon closer examination, the surprising reality is that expenditure overruns and structural cost increases are a much larger issue than revenue shortfalls. This examination of General Purpose Fund (GPF) expenditures in the FY 2001-03 City of Oakland budget by the Oakland Budget
Advisory Committee (BAC), a city-appointed citizen advisory group, analyzes how trends from this period car
evaluation examines both revenue appropriations — where funds come from — and expenditure appropriations — where they are spent. This document does not yet represent our complete
review and analysis of the FY 2003-05 Proposed Policy Budget — a large and complex document we received quite recently. However, we hope that our observations and recommendations will help prevent future budget crises.
Budget gaps have happened frequently throughout the City of Oakland’s history, but have been absorbed by surpluses in recent years.
The City of Oakland has frequently overspent its GPF budget. In the past, however, the GPF had enough revenues to make up for these over-expenditures. The result has been lax spending discipline since overspending would always be covered. Recently, there have been two major adjustments to the budget in response to projected gaps between expenditures and
revenues for the fiscal year ending June 30, 2003. The first was termed a mid-cycle adjustment in May-June of 2002; the second took place in January-February of 2003. We will examine
these more closely. Our analysis will focus on the General Purpose Fund.

So there you have it. Humans are no smarter than yeast.

FY 2000 budget: $

One response to “Realistic City of Oakland Budget Cut: 10%

  1. Many cities are in this same bind, we need to also look to see what they’ve done. The 12/26 WSJ has a good article on that, far too much content to put into a comment here, but I listed some excerpts on this post:

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