At Tuesday’s City Council meeting, Berkeley’s city manager presented a balanced budget forecast for fiscal year 2015, with a caveat that the city may experience deficits in the next couple of years.
In June, the city adopted a biennial budget for fiscal years 2014 and 2015 that addressed deficits at the time by controlling costs and resources — efforts that have resulted in the reported balanced budget for 2015. The presented update to the general fund — the portion of the budget comprising half of the city’s overall budget — remains balanced due to a growth in revenues, which offsets increased spending.
“Our proposed fiscal year 2015 budget is balanced and requires no balancing measures in the form of expenditure reductions,” said City Budget Manager Teresa Berkeley-Simmons. “However, escalating costs have resulted in future projected general-fund structural deficits.”
The previously adopted revenues to the general fund — which receives the majority of its resources from taxes, fees and fines — were originally projected at $153.1 million for fiscal year 2015. But the update predicts a roughly $800,000 increase in revenues, bringing the 2015 revenue total to $153.9 million. According to Berkeley-Simmons, the jump is primarily due to projected increases in real property taxes and property-transfer taxes, which are predicted to be $1.1 million and $1 million, respectively.
General-fund spending was also higher than previously predicted, with a change of about $700,000 from the earlier projected spending of $153.2 million, totaling $153.9 million for fiscal year 2015. Despite the increase, projected expenditures do not exceed revenues, according to city documents.
Although prospects for 2015 are balanced, the general-fund forecast estimates an increase in deficits for years 2016 through 2018. The main source of the projected deficits is primarily linked to increasing rates in the California Public Employees’ Retirement System.
“The impact of these costs are not limited to the general fund but also affect special funds,” Berkeley-Simmons said. “These funds are facing significant challenges in fiscal year 2015 and beyond.”
Special funds make up approximately half of the city’s budget and are allocated for special purposes, such as camps, parks and the marina — all three of which are facing structural deficits, according to Scott Ferris, interim director of parks, recreation and waterfront.
According to city documents, the projections in the 2015 proposed budget assume that revenues will continue to increase by an annual average of at least 2 percent, that there are no additional federal or state funding cuts and that cost-of-living salary will not increase through fiscal year 2018.
The proposed budget update will receive a public hearing May 20, followed by two more sessions in June for council feedback. The council plans to adopt the proposal by June 24.
Jeff Landa covers city news. Contact him at jlanda@dailycal.org and follow him on Twitter @JeffLanda.