Upcoming Santa Monica City Budget Tackles Pension Costs, Forces 'Difficult' Choices

By Jorge Casuso

June 11, 2018 -- The City of Santa Monica's upcoming fiscal budget is in large part driven by looming pension costs that will force difficult spending choices the community will help make, according to the staff report for Tuesday's budget hearing.

The City has made voluntary advance pension payments totaling $76 million over the past seven years -- including $45 million last year -- but still faces a projected $461 million in unfunded long-term pension obligations, according to staff.

The proposed $734.1 million budget for fiscal year 2018-19 attempts to match resources with programs, services and projects that" help achieve community-focused outcomes, staff said.

It also shifts resources "to the activities that most effectively help meet the community’s highest priorities."

But flattening revenues and rising pension costs pose a challenge in balancing future budgets, which will "need to enact significant cost-savings, efficiencies, restructuring and trade-offs," staff said.

These measures will help "pay down our liabilities to protect our vital services and sustain long-term fiscal health," staff wrote in its report.

"The community will play a key role in these choices, since they inevitably involve more difficult budget trade-offs than Santa Monica has needed to make in recent years."

The restructuring in the proposed 2018-19 budget includes changes to 69 positions to "realign operations" that will result in a net cost of $50,000, staff said.

The proposed budget also adds seven new full-time positions, including three to to ensure "safe jail operations," according to staff.

The other new positions "enhance tenant protection work, seek local control of the Airport, support the City’s growing technology infrastructure, further implement performance management of all departments and implement the Shared Mobility Pilot Program."

The new positions are mostly offset by eliminating eight full-time positions in the Airport and the Community Broadband funds and other funding sources and budget reductions, staff said.

The City will build on the work of the City Council Audit Subcommittee and the audit firm Moss Adams, which recently completed a compensation study, staff wrote.

Staff also "will be bringing forward additional options for public participation in FY 2019-21 budget discussions and decision-making," according to the staff report.

Community participation in budget decisions has once again become a hot topic after the City disbanded the Citizens’ Fiscal Sustainability Committee last month.

Two of its members wrote a letter to top city officials asking that the group to be retained and expanded ("LETTERS: Citizens’ Fiscal Sustainability Committee Members Sound Alarm, Want to Continue Work," May 30, 2018).

City Manager Rick Cole, who initially called for the group's formation, said community input was needed but did not commit to retaining the committee ("LETTERS -- City Manager Rick Cole Responds," May 30, 2018).

The revamped budget process will include developing and implementing "an enhanced community outreach program on budget priorities" for the 2019-21 fiscal budget.

The "new approach" to the next biennial budget will "confront the very real threat facing virtually every local public agency in California, the statewide underfunding of pension costs," staff said.

"Our emphasis in this budget cycle has been to live within our means by holding down the growth of expenses and holding the line on staffing levels," staff wrote.

"In the next budget cycle, we need to make significant progress on restructuring our expenditures to forestall projected operating budget shortfalls in future years and to reduce the long-term burden of unfunded pension liabilities."