Ballooning deficits may mean pink slips for many city employees

David Garrick

Apr. 8, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- ESCONDIDO -- City officials said Tuesday that a large number of employee layoffs probably will be required to close a $6.3 million budget deficit projected for the fiscal year that begins June 30.

Layoffs were not part of $3 million in emergency budget cuts the City Council approved this winter, but city officials said more extreme measures are becoming necessary as revenue from sales tax and property tax continues to drop sharply.

Annual city revenue has fallen from $88 million to less than $79 million in less than two years, and revenue is projected to dip below $75 million next year if the recession continues.

The savings from layoffs would be roughly $3.7 million, said Gil Rojas, the city's finance chief. The rest of the $6.3 million deficit would be covered by $1.6 million from the city's reserves, and nearly $1 million in savings from requiring virtually all city employees to begin paying half their state pension contributions, he said.

The number of layoffs among the city's roughly 800 full-time employees could approach 60 if the council declines to cut any firefighters or police officers, which has typically been its approach.

The city would save about $1 million for every eight firefighters or police officers laid off, and only about $500,000 for every eight employees laid off in other city departments, Rojas said.

Councilman Dick Daniels said Tuesday that city officials still hope to spare some of the jobs by finding creative ways to save money, but he was not optimistic.

"Some level of layoffs is inevitable, but it would be premature to use numbers," Daniels said. "Our problem is that two-thirds of our budget is devoted to employee compensation, so we don't have much wiggle room."

Mayor Lori Holt Pfeiler, who sits with Daniels on the council's two-member budget subcommittee, has told city officials that cutting employee compensation must become a priority.

She said last week that Escondido's libraries cannot absorb any more than the $600,000 in annual cuts they took this winter, and that other city services also have been cut far enough.

The plan to use $1.6 million in city reserves to help balance the budget would decrease the reserve fund from $3.6 million to $2 million. The fund was more than $14 million less than three years ago.

However, the city has an additional $17 million in its economic incentive fund that could be used to balance the budget.

Requiring employees to pay half their state pension contributions would save about $996,000 in fiscal 2009-10, but Rojas said the savings would climb past $1.5 million in subsequent years after city officials negotiate new contracts with firefighters and police officers.

Rojas said labor unions representing city employees will also be given a chance to propose alternatives to the pension contribution proposal, such as increasing how much employees pay for medical coverage.

Ralph Ginese, vice president of the 187-member Escondido City Employees Association, said Tuesday that the city's proposals do not "sit very well" with his members because most of them took 5 percent pay cuts this winter. Ginese estimated that the pension contributions would cost employees more than $100 per month.

Ginese suggested the city should use some of its $17 million economic development reserve to soften any proposals for layoffs or compensation cuts.

Mike Diaz, president of the Escondido Firefighters Association, said Tuesday he would not comment on the city's most recent budget proposals for "about a month" because union officials want to carefully study them.

Leaders of the city's other employee unions could not be reached Tuesday.

Rojas said city department heads have been asked to submit proposals for 10 percent budget cuts, but he suggested that cuts of roughly 5 percent per department would be more likely when the council adopts a final budget in late June. He said many of the proposals include a list of positions that could be eliminated.

City finance officials are slated on April 21 to present the budget subcommittee with a detailed plan to cover the $6.3 million deficit, Rojas said. If the subcommittee approves the document, it will be presented to the full, five-member council on May 6, he said.

Newstex ID: KRTB-0059-34042607