The Great Recession has taken a toll on every community in the U.S., and Santa Cruz is no exception. The City’s budget has been trimmed eleven times in recent years, services have been cut, and the city workforce has been downsized from more than 900 to 780 employees.
The good news is that our region’s economy appears to be recovering, and no additional city programs are on the chopping block in this year’s budget. However, while the city’s short-term financial situation has stabilized, the City’s challenge in 2011-12
is to shrink the gap between its steadily-increasing healthcare and retirement benefit costs and a slow-growing economic outlook.
“Looking forward to the coming years, we saw our structural deficit getting larger and larger over time,” said Santa Cruz City Manager Martin Bernal. “We recognize that we are not going to recover until we make permanent, on-going structural changes to balance expenses and revenues.”
City administrators, city employees, and city voters have all made financial concessions to help
stabilize future budgets.
A boost in Santa Cruz’s utility tax, approved by voters in November, is expected to eliminate $1.6 million of the budget shortfall. Police and firefighters’ unions have agreed to a ten percent total compensation cut this year, an eight percent on-going cut in compensation, and a two-tier retirement system for new employees. City administrators and department heads have taken an on-going pay cut of more than ten percent. And the city is now in negotiations with its remaining employee unions, seeking similar reductions.
When salary negotiations are complete, Bernal expects the budget gap will be reduced and additional expenditure reductions will be made later this year. A growing economy, including new local businesses and local construction projects, will expand the tax base and will improve our budget situation.
“The City Council has really worked at increasing the tax base
,” Bernal said. “They’re trying hard to retain and recruit new businesses and jobs, and they’ve approved several new hotels in the city.
“Some of the hotel projects are on hold because of financing, but as the economy improves we expect to see them contribute to the revenue side,” Bernal said. While the always-unpredictable state budget process could complicate local projections, city leaders are hopeful that this last round of cutbacks will leave Santa Cruz poised to grow along with the economic recovery.