Editorial: Even with sales tax boost, Sacramento City Council must take hard look at benefits

Published: Sunday, Jan. 13, 2013 - 12:00 am | Page 6E

If anyone thought that a sales tax increase would solve Sacramento's budget woes, the latest numbers establish that there's still much more work to do.

The new City Council has plenty of tough decisions ahead – and its stiffest tests will come in the upcoming round of negotiations with labor unions.

The half-cent hike passed in November kicks in April 1, raising the total sales tax in Sacramento to 8.5 percent (including the statewide quarter-cent increase, also approved Nov. 6, that took effect on Jan. 1). The city will get about $5 million more before the current fiscal year ends June 30 and an estimated $27 million a year after that.

Even with that windfall, there's still a general fund deficit projected at $9.5 million for 2013-14 and around $14 million each of the next four budgets. Those figures – outlined in a five-year financial forecast the council is set to receive Tuesday night – are based on current contracts with city employee unions and on expected increases in pension costs.

The city can take a big step to closing that budget gap with less generous, yet still fair, labor contracts. It could save more than $6 million a year, for instance, if all employees pay into their pensions and if overtime pay is modified. Those should be key points in negotiations with seven unions whose deals are up in June, including politically influential ones such as the Sacramento Police Officers Association and Local 39.

This report on projected budget deficits follows a sobering look at the city's unfunded liabilities over the next 30 years. Of the nearly $2 billion total, nearly half is in retirement costs.

The most worrisome is $440 million for retiree health benefits, which must be another key point in the labor talks. Under agreements from 20 years ago – another era as far as budgets go – most city retirees get a $300 monthly subsidy for medical costs and Fire Department retirees get $750 a month.

The debt report was the first of its kind presented to the council, adding up all the various kinds of long-term liabilities facing the city. City Manager John Shirey told the council he wanted to inform, not to alarm, but it should be a warning nonetheless.

While they weren't required to respond as they heard the debt report last week, it was disappointing that not a single council member said a word. No one tried to reassure taxpayers that they understand how serious the situation is and will deal with it responsibly.

One can only hope they have more to say on the deficit projections and on a set of principles for how to spend the sales tax money that council members are also to review Tuesday. The proposal generally follows what they promised voters – focus on public safety and do not create new programs or increase employee compensation.

The sales tax, however, won't come close to restoring all $234 million in spending cuts over the last six years. Those reductions caused real pain. Police, parks and other basic services were slashed. More than 1,200 jobs were eliminated. If not for volunteers and community groups stepping up, the damage would have been worse.

With a little more money coming in, the city will be able to provide some relief. But the pressure remains on the council to hold the line on spending to reach financial stability.

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