On paper, the city of Sacramento's budget for the fiscal year beginning July 1 looks a lot rosier than in recent years. The $8.9 million deficit is the smallest budget gap the city has faced in the current economic downturn and, for the first time since 2008, no layoffs are being proposed.
But it isn't just this year that is worrying city officials.
City Manager John Shirey told the City Council on Tuesday night that the city is facing its own "fiscal cliff" in six years, when an increase in the sales tax rate expires and the city's required contributions to the state pension fund are expected to spike by as much as $17 million.
What's more, Shirey said the city faces an unfunded liability in retiree medical costs of $440 million, a number that is increasing by the day.
The city has already addressed cumulative deficits of more than $240 million over the past seven years, said Leyne Milstein, city finance director.
Those deficits are projected to continue, as the city grapples with increasing employee costs and modest increases in key revenue streams such as property and sales tax.
"For the first time in many years, we're actually showing revenue growth," Shirey said. "The bad news is that our growth is a lot slower and a lot less than our neighbors'."
There was some good news provided in the budget.
City voters overwhelmingly passed Measure U in November, permitting a one-half of one percentage point increase in the sales tax for the next six years.
Under Shirey's proposed budget, the $27 million in revenue the tax increase will generate would pay for large restorations to public safety, parks maintenance and libraries.
Shirey has proposed hiring 58 uniformed police officers over the next 18 months but only if the union representing city officers agrees to pay the employee share of their pension contributions.
The city police union is the largest at City Hall to not pick up the employee share; the city also funds an employer share.
The Measure U funds would also fund 80 positions in the Fire Department, including two paramedic units.
Another 75 jobs would be added to the parks department, which has seen its budget cut by more than half since the start of the recession.
Those jobs would allow the city to open 11 swimming pools and five wading pools, extend hours at community centers and beef up maintenance and repairs.
Finally, Measure U funding would pay for an animal control officer and contribute $506,000 to the Sacramento Public Library Authority.
The council is expected to adopt the budget in mid-June.
Councilman Jay Schenirer said the city needs to focus on economic development to reverse the tide of deficits.
"If we don't grow our city and grow our economic base, we're never going to get out of this mess," he said.
"We're going to have to take some risk, but I think we can be strategic about where that risk is."