Friday, December 26 , 2014, 12:49 am | Fair 51.0º




Complexities of Santa Barbara’s Budget Process Keep Numbers on the Move

As estimates collide with actuals, staff continuously adjusts — right up to deadline for approval

By Giana Magnoli, Noozhawk Staff Writer | @magnoli |

[Noozhawk’s note: This is one in a series of articles on Noozhawk’s Santa Barbara Challenge, our public-engagement project on the city of Santa Barbara’s budget. Related links are below.]

The city of Santa Barbara’s power to give or take away funding is wielded by a handful of city staff, who create an acceptable yearly budget, and the City Council, which makes the final decisions and can overrule staff recommendations.

Once again, Santa Barbara must make severe spending cuts to make up the multimillion-dollar shortfalls.

It’s a game of uncertainties when estimating its upcoming revenues and expenses. The annual June 30 deadline comes before cash-strapped California finalizes its own budget, and unsteady tax revenues make projections difficult.

                  Santa Barbara Challenge Survey  |  Complete Series Index  |

“There are always priority issues — everyone would like to have more money than they have,” said City Administrator Jim Armstrong. “Even in the good times, there are never enough resources to do what we would like to do as an organization.”

STEP ONE: Finance Department employees make revenue estimates for the next year

When surprises come with million-dollar consequences, it’s prudent to make conservative revenue estimates, said Bob Samario, the city’s finance director. The estimates haven’t been pessimistic enough in recent years, which has led to drastic midyear cuts.

Sixty-five percent of tax dollars go to the General Fund, while business-type funds, such as from the Santa Barbara Airport and waterfront, have fee-driven revenues.

Santa Barbara is mandated to create a Comprehensive Annual Financial Report, or CAFR, that shows “everything I own, everything I owe,” as Samario puts it.

Basically, it’s a detailed bank account statement for the city, and it has been used to compile most of the information included in Noozhawk’s Santa Barbara Challenge project. It includes all assets and liabilities beyond individual departments, like investments and pension information, and compares trends over time.

STEP TWO: Prioritize spending so the city doesn’t spend more than it brings in

After the Finance Department has made its revenue estimates, department heads begin to develop a next-fiscal-year budget as early as fall.

From January to March, Armstrong, who presents a balanced budget to the City Council, meets with each department to analyze their spending priorities and give input.

He has a great amount of discretionary decision-making power in the process, although he noted that it’s rare that he overrules department heads.

The Finance Department helps quarterback the process through the system and puts together a proposed budget to present to the City Council and the public.

A budget is a financial-planning tool, after all, and basic accounting principles apply. The granddaddy of all finance common sense is not to use one-time revenues for ongoing costs, Samario said.

However, the city has been using one-time fixes to help balance the last few years’ budgets, including budgetary reserves. Even though reserves are meant for leveling-out volatility in the economy, it’s usually a decline of 2 percent to 3 percent, not a 20 percent dive with a slow recovery, Samario said.

When revenues drop, staff levels are cut through attrition and some reserves may be used, but not in such large amounts and not as a long-term fix.

“We’ve allowed our costs to go above what our ongoing revenues have been,” Samario said.

The unprecedented situation of cutting $10 million for two years in a row — fiscal years 2009 and 2010 — has been countered with both ongoing cuts and one-time reductions so far, he said.

STEP THREE: Present staff recommendations to the public and the City Council, make adjustments and get City Council adoption by June 30

City staff members lead budget workshops for the City Council in spring, which is generally the public’s first glimpse of the plans for the upcoming year.

While it’s a staff responsibility to produce a budget, the council has the final decision-making power on individual items.

“(Staff) isn’t shy to say ‘These are the potential implications’ and they’ll lay it all out, but it’s really up to, at least the majority, of the council,” Mayor Helene Schneider said.

Council members defer to staff recommendations in many cases, as they rely on staff as professionals to provide them with the necessary information, Samario said.

“We don’t have the detailed information of how every little thing works,” Schneider noted. “We’re not expected to know that, and we expect them to tell us.”

Public participation has an impact, as well, shown last year by the decision to keep Fire Station No. 3 on East Sola Street open after neighbors protested against its potential closure.

STEP FOUR: Implement budget and monitor finances for needed adjustments

After a budget is adopted by the City Council, it’s a legal directive for staff to spend that money as allocated. While the council makes policy, staff carries it out, so most day-to-day city operations are done behind the scenes.

Throughout the year, finance department employees are monitoring the city’s revenues and expenditures to see if midyear adjustments must be made.

                  Santa Barbara Challenge Survey  |  Complete Series Index  |

Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews. Become a fan of Noozhawk on Facebook.




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