Mayor's Message

FY 2021-23 Proposed Policy Budget

ONE FRANK H. OGAWA PLAZA • 3RD FLOOR • OAKLAND, CA. 94612


Office of the Mayor (510) 238-3141

Honorable Libby Schaaf FAX (510) 238-4731

Mayor


Office of the City Administrator (510) 238-3141

Edward D. Reiskin FAX (510) 238-4731

City Administrator



May 2021


THE CITY OF OAKLAND FISCAL YEAR 2021-23 PROPOSED POLICY BUDGET


HONORABLE CITY COUNCIL & OAKLAND RESIDENTS:

We present the Fiscal Year (“FY”) 2021-23 Proposed Policy Budget, a just recovery spending plan that totals more than $3.85 billion over the next two years. As the City begins to recover from the devastating impact of the COVID-19 pandemic, this budget meets our obligations and reflects our shared priorities and values.  


As shown in Table 1  below, the FY 2021-23 Proposed Budget totals nearly $2.0 billion in FY 2021-22 and $1.85 billion in FY 2022-22, across all funds, including restricted funds and capital funds.     

Table 1. Revenues, Expenditures & Full-Time Equivalent Positions

For the first time, the budget is being presented on an accessible on-line platform to make it easy to dig into the details. We also introduced a Racial Equity Analysis tool that was used to assess how any proposed service changes would either benefit or not disproportionately impact low-income Black, Indigenous, and other communities of color.


Oakland’s budget is very complex. It contains more than 300 special funds – each with its own set of spending rules. Just 10 percent of budget dollars are fully discretionary . We did our best within these complex set of rules to address not only the most pressing demands of the day -- like homelessness, housing, streets, and public safety -- but also our future liabilities that place unacceptable strain on the City’s fiscal health. We must honor the promises we have made to past and current employees to pay for their pensions and healthcare when they retire. These obligations are significantly unfunded – greater than $2 billion at present – so it was important to resume paying down these liabilities per our Council-adopted policy, so that eventually we will be able to meet them.


Addressing our current and future needs would not have been possible this year without the one-time infusion of $192 million Oakland was granted from the Federal American Rescue Plan Act (“ARPA”). In April, the City Council allocated $58.5 million of these one-time funds for use in the current fiscal year. This budget allocates the remaining $133.5 million as part of the solution to close the $274 million baseline budget shortfall.


Setting Guiding Principles & Priorities for the Two-Year Budget

We developed this budget according to Oakland’s Consolidated Fiscal Policy, beginning with a statistically valid community survey representing the full diversity of Oakland’s adult population, with questions developed in conjunction with the City’s Budget Advisory Commission.

Some top findings from that poll were:

  • 59% rated the quality of life in Oakland as “excellent” or “good” – down 5 points since 2018 and 11 points since 2017; and only 41% approve of the City’s job providing services.
  • 50% ranked homelessness or housing costs as the top issue they would like to see prioritized in the City’s budget.
  • Views of funding for police are complex. While 23% ranked making cuts to police services as their first choice of 8 options for addressing budget shortfalls, 78% want the same or more police patrolling neighborhoods and responding to 911 calls. One area of agreement is 58% would prioritize police no longer having to respond to nonviolent situations with those suffering from mental illness.

When we began the process of developing budget proposals last fall, we used the following Guiding Principles:


  • Advance racial equity by ensuring service impacts create a net benefit for historically under-invested, low-income communities of color.
  • Preserve services and staffing by minimizing service reductions, restoring vacancies, and preventing layoffs.
  • Protect the City’s long-term financial health by addressing unfunded retirement liabilities and deferred maintenance, maintaining positive credit ratings, and not adding new ongoing liabilities without new ongoing revenues.

More recently, the City Council approved four policy and budget priorities based on the values of equity, transparency, and effectiveness:


  • Affordable housing and homelessness solutions
  • Public safety and violence prevention
  • Good jobs and vibrant economy
  • Clean, healthy, sustainable neighborhoods

Individual Councilmember priorities are contained in more detail within the budget document.


Summary Results

This Proposed Budget results in no layoffs, adds a net 34 and 29 total FTEs respectively over two years, and reinstates the City’s prudent fiscal policies of paying down unfunded liabilities and restoring our Rainy Day Fund and Reserves. In addition to stabilizing existing service levels, the Proposed Budget invests in the four City Council Priorities:



Affordable Housing & Homelessness Solutions:

  • Creates a new Homelessness Unit in the City Administrator’s Office to coordinate the City’s overall response to the homelessness epidemic and implement Oakland’s Encampment Management Policy.
  • Allocates an unprecedented $41 million to prevent homelessness, stabilize our unsheltered residents with hygiene supports and interim housing/shelter, and help move them to permanently affordable housing.
  • Creates Oakland’s first dedicated Encampment Cleaning Crews with new positions, overtime funding and equipment, which will double the number of encampments we will clean and service compared with pre-pandemic levels.
  • Creates a new Community Development & Engagement unit in the Housing & Community Development Department to improve and diversify landlord-tenant education and engagement, including on Fair Chance and Just Cause Eviction laws.


Public Safety & Violence Prevention

  • Creates and ramps up Mobile Assistance Community Responders of Oakland “MACRO” – a non-police response to mental health emergencies -- in the Oakland Fire Department.
  • Makes other operational changes recommended by the Reimagining Public Safety process: moves Special Activity Permits to the Economic & Workforce Development Department; moves certain vehicle enforcement activities to the Department of Transportation; and begins the analysis to shift officer misconduct investigations to the Police Commission.
  • Increases staffing for the community Police Commission to better investigate complaints of police officer misconduct.
  • Strategically preserves core OPD services while accurately budgeting expenditures at levels consistent with historical community demand for police response and services. OPD’s budget is 18% of this proposed budget, lower than in the past.
  • Creates a new Trust Unit in OPD, including dedicated Liaison Officers to Chinatown and Fruitvale.
  • Builds a realistic police budget by aligning the number of budgeted positions to the number of actual officers that will be available upon completion of budgeted academies.
  • As recommended by the City Auditor, corrects the past practice of underbudgeting police overtime by accurately funding expenditures required to maintain services.
  • Funds 6 Police Recruit Academies over two years to bring actual sworn staffing to previously authorized levels, which will provide for reduced overtime expenditures as those positions get filled.
  • Restores full staffing to units like Traffic Enforcement and Community Resource Officers over time as Academies graduate, and eventually doubles investigative capacity for violent crime and missing persons.
  • Expands Department of Violence Prevention coordination and case management, especially for families who are impacted by violence or sexual exploitation.


Good Jobs & Vibrant Economy

  • Increases staffing to improve the efficiency and transparency of the City’s permitting services.
  • Enhances staffing in the new Department of Workplace Standards to better monitor and enforce the City’s social equity policies, which benefit local workers, small local businesses, and disadvantage businesses.
  • Contributes to the newly formed Chinatown Business Improvement District and dedicates a specialist to lead economic development activities in East Oakland.


Clean, Healthy, Sustainable Neighborhoods

  • Increases capacity in the Head Start program for family support systems, increases programming at Oakland’s four Senior Centers, and expands in-home support services to 50 more low-income seniors.
  • Adds $1.6 million to curtail blight and pick up illegal dumping. Institutionalizes Free Dump Days (formerly the Bulky Block Party pilot), that allow Oaklanders to dispose of large, unwanted items for free on the last Saturday of every month.
  • Increases Department of Transportation staffing to deliver more infrastructure improvements to underserved areas and enhance traffic and pedestrian safety, especially in high-injury corridors.

The Service Impact section of the budget has a complete list of anticipated service level changes.



Respect for Labor and the Collective Bargaining Process

An important caveat to this budget proposal is that we are currently bargaining with our four civilian labor unions whose current contracts expire when the new budget takes effect on July 1, 2021. Because we do not have new collectively bargained agreements as of this date, pay increases for these workers are not yet reflected in this proposed budget. Raises for police and firefighters are reflected in this budget because they were previously bargained for and approved years ago, during a surging economy, and in agreements that also included extremely valuable concessions in retiree medical benefits. Those concessions from the Police Officer and Firefighter unions reduced Oakland’s unfunded liabilities by $240 million.


Compensation increases for our valued frontline workers who have worked so hard and sacrificed so much, particularly during this unprecedented year, is a worthy investment that is likely to be approved prior to this budget’s final adoption. Once the cost of that agreement is known, we will work with the City Council to make the necessary adjustments.


Key Challenges & Risks

Like most cities in California, Oakland’s finances face an uncertain future. Prior to the Covid pandemic, the City was already pressured by rapidly increasing fixed costs that outpace growth in revenues. The cost of the City’s insurance premiums for healthcare, general liability, property, and workers’ compensation are increasing at an unsustainable pace, drawing available resources from other areas of the budget. Finally, Oakland has long struggled to adopt a structurally balanced budget, where one-time revenues are not used to pay for on-going expenses like personnel costs. With our reliance on the one-time Federal bailout from ARPA, our structural imbalance in this proposed budget is significant.


Like every year, the demands from our stakeholders and our passion to serve our residents – especially our most vulnerable – exceed our resources. And this year is especially gut-wrenching, as the well-being of so many families and beloved small businesses have been decimated by the impacts of Covid. Unfortunately, so has our budget. Despite exhausting the full $31 million from our Rainy Day Fund and suspending liability payments, when we began this budget process, we faced a projected $274 million deficit.


The American Rescue “ARPA” funds are welcome relief, but this one-time bailout will not completely close our $274 million deficit and will exacerbate our structural deficit.


Just a decade ago, Oakland had to lay off one-quarter of its workers, seek deep worker concessions from those who remained, and decimate public services for our residents who needed them most. It was devastating. We are so thankful that the $31 million we had put aside in the Rainy Day Fund established the very first year of this Administration enabled us to get through this last financially catastrophic year without laying off any permanent workers. And now ARPA funds will allow us to largely maintain service levels.


But now that our Rainy Day and ARPA funds are exhausted and our fiscal recovery is so uncertain, we must exercise caution, or we risk the catastrophic consequences that Oakland suffered during the Great Recession. We cannot repeat mistakes of the past.


It is critical we reinstate our prudent fiscal practices and resist creating new, on-going obligations in this budget. Not doing so creates unacceptable risk, because we:

  • have no Rainy Day funds to fall back on;
  • have no clear idea how quickly or to what extent Oakland’s revenues will recover post-Covid;
  • will not have federal American Rescue Plan Act funds available for our next budget; and
  • Sill face $2.7 billion in unfunded retirement liabilities, $1.5 billion in unfunded deferred maintenance and needed capital improvements, and unsustainable growth in fixed costs like healthcare and insurance.


Conclusion

The ARPA funds and our Rainy Day policy have shielded Oakland from experiencing massive service cuts in order to balance its budget, however, they are stop-gap measures that require judicious investment. Even with the ARPA funds, our City financial resources may face additional challenges in the near future, given that the structural operating budget deficits Oakland has experienced in the past remain. This budget reflects Oakland values to take care of our most vulnerable residents immediately AND it builds towards a stronger future for all Oaklanders.

If there is one thing we have learned over the last year, we must be prepared for unexpected crises to arise that could put us in financially untenable positions long term. To accommodate the demand to restore services and protect City jobs, this budget does not replenish the City’s Rainy Day fund or fully fund basic services with on-going funds; the City therefore remains in a precarious financial position as it enters into this recovery period. Our structurally constrained resources require that we invest carefully in what we know works and what our already stretched-thin organization can reasonably absorb, while also keeping an eye on the overall spending so that the City does not endanger its own climb out of this crisis.

We are proud of the hard work our committed, talented, and courageous public servants did this past year to respond to the extraordinary circumstances of the pandemic. We owe it to them to keep focused on the core responsibilities of city government, work within our organizational and financial capabilities, all the while safeguarding the long-term future health of the beautiful city, we are so proud to serve – Oakland, California.

We look forward to presenting this FY 2021-23 Proposed Policy Budget to the City Council on May 10, 2021, and a robust schedule of community forums and City Council hearings prior to final adoption by June 30, 2021.