Sacramento’s budget will be nearly $1 billion next fiscal year, according to the recently released proposal. What will that 10-figure spend mean for city residents? Here are four things you should know:
1. Millions in marijuana money likely will be used to pay for pensions.
The city long has been looking to pot as a major new source of revenue, and it’s starting to pay off. Taxes from medical marijuana dispensaries are expected to be $4.5 million next fiscal year, said the city’s new weed boss Joe Devlin.
Sacramento also plans on licensing cannabis manufacturing, growing and delivery businesses in the next few years, with each of those areas expected to bring in their own millions. Though the city is struggling to come up with solid projections because the marijuana industry in nascent and full of unknowns, Devlin said it could bring in upward of $15 million annually in tax revenue once all its branches are up and budding.
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That’s good news for the city because it owes that and more to the pension system.
Over the next five years, the city expects its pension costs to nearly double from about $67 million to $129 million.
“And it will grow beyond that,” said Leyne Milstein, director of the Department of Finance. “That’s not the end of it.”
2. City libraries will get some much-needed funding.
The city opened three new libraries in recent years but didn’t increase the overall budget for the system’s 11 locations, instead cutting its budget during the recession. The result has been depletion in reserves and a bleak outlook for bibliophiles.
This year’s proposal would increase the library’s general fund budget allotment by $1.25 million to $8.38 million, with a plan to keep increasing its budget over the next few years.
Libraries will also get $1.8 in Measure U funds for facility improvements and some money for switching to energy-efficient lighting. The investment highlights the importance that Measure U, a half-cent sales tax, plays in key city departments including libraries, police, parks and fire. The voter-approved tax pays for hundreds of public safety employees and services but will expire in 2019.
Mayor Darrell Steinberg recently filed paperwork to run a ballot campaign to extend it. If voters don’t approve that extension, services likely will be slashed and the budget will run more than $50 million in the red the first year without the funds.
Steinberg said re-upping Measure U is “crucial … to our city’s fiscal stability and our ability to provide the kinds of services that people rightfully expect.”
3. This is a fiscally conservative budget with almost no new spending despite the billion-dollar price tag.
Along with pensions and the possible demise of Measure U, new City Manager Howard Chan is facing upcoming unavoidable labor costs, including a new contract with police.
He made it clear to city staff he intends to be cautious with nonessential spending. He added only $3 million in ongoing costs to the general fund and paid for all but $422,000 of that with revenues or reimbursements.
The city’s current contract with police expires in June, and officers likely will receive a raise under any new deal. City police are paid significantly less than law enforcement in surrounding districts. The low pay coupled with low morale in the department following a controversial police shooting last year has led to many officers leaving for other departments. The city is under pressure to bring officers’ pay up to increase retention.
4. The budget process is far from finished.
The council hasn’t yet weighed in with its own financial wants. On May 23, that process will kick in and spending plans likely will change before a final version is adopted in June.
Steinberg said that while the long-term outlook is lean, the budget will have a surplus this year that may be used for one-time projects and ongoing investments that could boost the city’s economy. Steinberg said he’d like some of those spare dollars to go to projects in each district but also wants a significant investment in the city’s economic development department and arts budget to increase the city’s ability to compete in the “modern economy.”
“Investing in that area will return what we spend and much more,” Steinberg said.