[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.]
Aside from Santa Barbara’s budget issues, looking beyond the city limits provides some insight at how other jurisdictions have fared financially. The city of Ventura, for instance, has taken a different, more aggressive approach toward many of the same budget problems. Noozhawk recently caught up with Ventura chief financial officer Jay Panzica to see how his city has weathered the fiscal storm.
Ventura has seen its General Fund revenues drop to $80 million from $96 million in the past two years, Panzica said. In March 2008, he added, he began to notice the effects of the economy at the local level.
“Our revenues were dropping off dramatically,” he said, and in almost every single category.
Sales tax has been the biggest loss of revenue for the city, but property taxes and revenue from the transient-occupancy tax are down, too. With that kind of pinch, Panzica said he was faced with two choices.
“You can either borrow money to get through the year by taking a loan or taking from reserves, or cut your costs to match your revenues,” he said. “Neither one is right or wrong. But we made (the latter) recommendation to the City Council ... and we have not dipped into reserves.”
As a result, Ventura has decreased staffing with every budget passed since then. And that’s meant big cuts; the city has cut about 80 positions, which Panzica admits has been a significant reduction in the city of 110,000 residents.
To get all parties involved in such sweeping cuts, Panzica says Ventura has used a process called budgeting for outcomes, a fancy way of saying city staff and the community weigh in on what the core services are, and agree that the rest will have to experience serious cuts.
“It’s been difficult and painful,” he said. “The council has made really hard decisions.”
But even after defining core services, like public safety, the services weren’t exempted from significant cuts. Public safety is Ventura’s single biggest expense, as it is in most cities, and Panzica said the city made the tough decision to close a fire station last July, which will save more than $1 million in 2011. That’s a reversible decision, and the station may be restored when the city’s financial situation improves. Although the city fielded complaints about the closure, Panzica said the money to keep the station operating just wasn’t there.
In addition to defining Ventura’s priorities, every municipal department took a pay cut last year, ranging between 5 percent and 10 percent. The across-the-board salary reductions were “critical,” according to Panzica.
“We had to have it,” he said.
Getting there was difficult, however. Panzica said he’s tried to educate city employees throughout the process, often going “line by line” through the city’s finances so they understand the shortfalls.
And Ventura is going even further than just pay cuts. The city is in the process of renegotiating memoranda of understandings, or MOUs, from all nine of the city’s labor groups. Throughout that process, Panzica said the city will be looking at increasing employee contributions to retirement plans as well as implementing a two-tier retirement system.
“That’s been our approach (to reducing costs), and I still think it was the right way to go,” he said.
Panzica compares taking operating costs out of city reserves “to spending your children’s college fund and buying a flat-screen TV.”
“But not all cities believe that,” he said. “They say ‘we think its going to come back ... I hope they’re right.”
In San Luis Obispo County, meanwhile, Mike Manchak, president and CEO of the San Luis Obispo-based Economic Vitality Corporation, has some thoughts on how his area has weathered financial hardship. The EVC is a countywide body that works to build strategies to improve economic conditions between public and private entities; it works closely with county government.
Manchak said San Luis Obispo County is actually looking at having a small budget surplus in the coming years. The county has laid off 2,000 people through attrition, Manchak said, and that took some gutsy moves from elected officials.
“County supervisors have made some hard decisions to be fiscally responsible,” he said.
And, inevitably, Manchak said there’s been plenty of pushback from the decision.
“You’re always going to have an argument for not making cuts,” he said. “It really does come down to leadership. You’ve got to live within your means.”
Manchak said San Luis Obispo County is heavily dependent on government jobs, so when California does poorly, the county does as well — leaving the area exposed to risk.
“We need to get away from this idea that businesses are lucky to be here, because they will leave,” he said.
Back in Ventura, Panzica has some advice for Santa Barbara officials muddling through budget woes.
“Explain to (staff) your real position, and show them where them where the money is coming from,” he said. “Sell them on the philosophy that we don’t want to borrow money for ongoing operations.”
Panzica said there was a lot of open debate on whether to take reserves, and he urged that Santa Barbara take a similar approach.
Then, Panzica said, find out what priorities are most important to people. A turning point for Ventura came when Panzica said they had one person doing payroll for the entire city. Out of necessity, that department couldn’t be cut further.
“If it’s down to cutting that payroll person or a police officer, it’s going to be the police officer,” he said.
Acting quickly is key, as well, and Panzica said he went to the council sometimes more than once a month for budget-related issues.
“It wasnt easy, and it wasn’t fun,” Panzica said of the cuts. “I’m an employee, as well ... But I realize it’s a new world.”