Sacramento’s budget problems are worse than the numbers suggest. How? | Opinion
Sacramento’s real budget problem for the coming fiscal year is a lot bigger than what is advertised — unless city employees are never going to get raises again. But they are, and it makes sense to plan for that sooner rather than later.
That’s not how Sacramento has long managed budgets under the dubious hands of former City Manager Howard Chan and now his protege, Interim City Manager Leyne Milstein. Officially, the city is assuming not a penny of raises for the coming year as it forecasts a deficit of an estimated $44 million that the city council must close.
A compensation adjustment somewhere in the realm of inflation, however, would skyrocket the budget deficit by about a third. If the council proves as generous to staff later this year as they were in 2023, they would be basically doubling their budget problem over two years.
As sure as the Sacramento sun, higher employee costs are coming. The only question is how the council manages this — or doesn’t.
Sacramento Finance Director Pete Coletto, a straight-shooter, has a pretty simple metric to follow this fiscal challenge. Every time city council members raise city salaries by 1%, they have added about $4.8 million in costs to the city’s general fund.
“We have many contracts that end in 2025 so this is a major pending factor that we will continue to highlight to council and the public during the budget process,” Coletto said via email.
But the worst thing the council can do is continue Chan’s style of separating the council’s single most expensive new spending decision — city raises — from the budget process entirely. Under Milstein, however, that is precisely what is happening.
How the council approves ‘unaffordable’ raises
The last time the council handed out raises was in the least transparent way: In a late-night December meeting in 2023 when most of a tired public had already left. On this night, Chan had packed the regular agenda with contentious proposals — the death of a dog park in Curtis Park and a proposal to add a youth representative to the council and city commissions — which occupied the council for nearly four hours.
The regular meeting was adjourned and the public headed home. Then, the “special” meeting happened. With basically nobody watching, Chan proposed that the council approve raises of more than 10% over two years to the city staff. The council approved the raises unanimously. It took all of 16 minutes.
This special meeting proved to be Chan’s undoing. It was at this meeting that he also sought his own raise and another six weeks of extra vacation that he could convert into cash. Although a divided council voted yes, the decision violated California’s open meeting law that prevents management raises from being so hastily put on an agenda. Chan resigned in December after a year of unsuccessfully seeking more pay and a longer contract.
Barely a month after the council approved all these raises under Chan’s recommendation, the city manager suddenly started to talk apocalyptically about what the council had done. He labeled the raises as “not sustainable,” as the city now faced double the budget deficit.
“What we approved, what you all approved and what we have been discussing over the last several months, we cannot afford,” Chan said. City staffers by and large got their last across-the-board raises last summer.
A majority of the city council clearly wanted Milstein to temporarily run the city to maintain some continuity as members look for a permanent replacement. But this practice of separating the single largest discretionary spending decision — staff raises — from budgeting is not serving the council or the public at large.
Plan for raises or don’t give them
It makes all the sense in the world for the council, starting with its budget workshop Tuesday, to direct Milstein to assume that city employees have not seen their last raise in human history. It’s time to get into the habit of setting aside a reasonable amount of money in the proposed budget for raises as negotiations continue with police, fire and the various bargaining units.
If the council’s solution is to reduce staff positions or investments in pedestrian safety or parks in order to absorb these higher salaries, it’s a transparent decision that is a political balancing of the trade-offs. Milstein is already predicting lay-offs. Managing the city’s true budget problem is far smarter than pretending that the cost of the city bureaucracy isn’t about to go up.