San Diego Citizens' Budget Project

previous reform | next reform

Jump to: 1 2 3 4 5 6 7 8 9 10

$342 Million
Difference between the City's current spending and the so-called Tax Appropriations Limit set by the Gann spending cap in the California Constitution ($925 million is the so-called spending limit that the City has currently set for itself)

9.6 Percent
Total percent increase in spending under the FY 2005 General Fund budget

3.7 Percent
Annual increase in consumer price index for 2003

68 Percent
Total increase in City spending since 1995

$98 Million
Total amount in surplus the City of San Diego would have today had it limited its spending increases to population and inflation rates (4 percent) since 1995

NOTE ON FOOTNOTES:
The San Diego Citizens' Budget Project is committed to presenting accurate, methodical research. The Citizens' Budget Plan contains more than 100 footnotes, all of which can be found in the print and full PDF versions.

QUOTABLE:
"In San Diego, the comparable bureaucratic gambit should be called the Public Library Syndrome. Whenever budgets are tight, the city manager proposes to close highly popular neighborhood libraries. He cut the library system's annual budget for purchasing books and other materials by nearly a third, to a paltry $2.5 million."
- San Diego Union Tribune, May 23, 2004

Contrary to assertions that San Diego's budget crisis is the result of a collapse in revenues as some have argued, the real culprit has been uncontrolled spending. This is the same scenario that was uncovered during the California Citizens' Budget Project, where we documented a 36 percent increase in state spending over four years despite population and inflation growth of just 21 percent and state revenue increases of 28 percent during the same period of time.

Since FY 1995, the City's General Fund spending has grown by 68.26 percent. This year alone – during what the City describes as a tough and painful budget year – the City is increasing General Fund spending by a whopping 9.6 percent.

Is there any way to control unsustainable spending by the City? Ironically, two initiatives already exist that reflects the people's support for limitations on spending. Passed by voters in 1979, Proposition 4 (known as the Gann Limit) stipulated that the City must compute an annual appropriations limit which places a ceiling on the total amount of tax revenues the City can appropriate each fiscal year.

Unfortunately, the Gann Limit has since been gutted and weakened by various legislative and electoral initiatives. As the table below indicates, the City's budget is completely unconstrained at the moment by a Tax Appropriation Limit:

(table coming soon)

The City of San Diego has its own Appropriations Limit set in Article VII, Section 71 of the City Charter-as adopted in the 1970s. Unfortunately, the City has not referenced this limitation in its budget nor has disclosed what spending level the limitation is currently valued at. Nevertheless, unless the City is operating in gross violation of the Charter at its current spending level, the Charter's own Appropriations Limit provides no restraint on spending.

The current financial crisis is a perfect justification for a re-imposition of a reasonable spending limit. During the hot economy of the late 1990s, the City (as was the case with the state) saw huge spikes in tax revenues. Everyone was spending freely during the dot-com craze. The state and the City increased their spending right up to the unsustainable level of the huge influx of new revenues. The state and the City both made deals with labor unions-sweetening employee compensation and pension packages. Yet when the bubble burst on the dot-com economy, revenues fell-and the state's budget crisis led to raids on local revenue streams. What is left is a higher "baseline" spending level that cannot be supported by the more reasonable levels of revenue being supported by a more rational economy. Moreover, the City faces billions in liabilities to the City pension fund and labor contracts it can ill afford.

Had a realistic appropriations limit been in place these unsustainable spending increases and deals with labor unions would have been in excess of the limit-preventing much of our current crisis.

• Re-Impose a Proper Spending Limit by Amending Article VII, Section
Just as efforts are now underway to restore the state of California’s “spending limit” the City of San Diego should restore its own spending limit. As such, the City Council should place before the voters in November 2004 a comprehensive and reasonable City appropriations limit based on the following principles:
· Baseline: The limit should take all FY 2005 General Fund expenditures as a baseline.
· Reasonable Increase: The limit would increase by the percentage increase in population and inflation in the City annually.
· Ratchet-Back: Should City revenues not meet the Appropriations Limit for a given year, the Appropriations Limit for the following year would be calculated using the actual level of expenditures.
· Reconciliation: The City would be required to reconcile all expenditures to conform to the Appropriations limit.
· Emergency Provisions: Any one-time expenditures resulting from a City emergency (defined as relating to natural disasters not economic downturns) would not be subject to the limit.
· Reserve Fund: Half of revenues collected in excess of the Appropriations Limit would be deposited into a special “Budget Rainy Day Fund” to offset revenue shortfalls during poor economic times and emergencies (as defined above).
· Debt Reduction: Half of revenues collected in excess of the Appropriations Limit would be allocated to the retirement of City debt early (none of these funds could be used to pay interest or service payments, just principal).
· Integrity of Limit: The Appropriations Limit would be adjusted when any expenditures are transferred from the General Fund to an Enterprise or Special Fund of the City.
· Trial Period: The Appropriations Limit would be in effect for only five years, after which period the voters could make this taxpayer protection permanent.