June 30, 2010: Salaries and Benefits Drive Growing City Budget

By Carolyn Schuk

By now anyone who hasn't been in a coma knows that Santa Clara's budget is headed for record deficits for the foreseeable future. In fact this percentage hasn't changed significantly in the last five years – and it isn't projected to change much over the next five.

But although salaries and benefits make up close to 80 percent of Santa Clara's operating budget, this alone isn't what's driving the City's financial woes. The City has a systemic deficit tax revenue isn't growing in tandem with expenses.

Negotiated salaries and pensions drive Santa Clara's budget, 

while the largest share of the City revenue comes from sales 

and hotel taxes – both of which depend on the local economy. 

Revenues declined steadily between 2006 and 2010. While last year saw modest growth, another drop is expected in the coming year, followed by slow growth in subsequent years. However, salaries and benefits have grown every year – except for the current one (2010-2011) during which a significant number of vacant jobs have been eliminated. 

City salaries and benefits are negotiated by a variety of unions – employee bargaining units. Made in very different economic times, the City's current negotiated agreements  – Memorandums of Understanding, MOUs – will increase City salaries come January by about four percent. In addition, the City's required contribution to the CalPERS pension fund will grow significantly over the coming five years.

City Manager Jennifer Sparacino told the City Council earlier this month that she has met with some of the city employee groups who "have indicated that they are willing" to discuss salaries for 2011.

Barring a near-miraculous increase in sales and hotel tax revenue (which fund most of the City's operating budget), the only way to address the City's systemic deficit is by reducing salaries and benefits or reducing services.

With the median pay for workers in the public sector already almost $6,000 higher than that for workers in the private sector, according to U.S. census data quoted by the New York Times  recently – $45,124 vs. $39,877 – some say that further salary increases are indefensible.

"In light of the City Manager's projected deficit of $20 million, of which $5 million is still unaccounted for, it is imprudent to give these increases when there is no guarantee that the $5 million can be made up given the current economic climate," City resident Brian Lowery told the City Council at the June 15 meeting.

"If the city persists in going ahead with these [salary] increases, I see a collision with economic reality…and the reality will be that the City will be forced to make painful, unintended layoffs," Lowery continued. "In time, realized tax revenues from the stadium will alleviate pressure on the General Fund, but …gains…will not occur until 2014-2015.

"It is unfair of the city to ask for volunteer efforts on the part of its citizens," Lowery concluded, "when it is unwilling to make the financial choices it needs to keep our city solvent."

For more information about Santa Clara's budget, visit the City website. The Central City library also has copies of the 500+ page City budget.