Budget Crisis Costs $2.5 million Too Easily, Too Soon

The Long Beach City Council voted to borrow $1.7 million Wednesday to meet payroll for the month of December. This money is borrowed against expected tax revenues. This first shortfall is in the middle of the city’s fiscal year.

The council also voted to borrow $2.5 million to pay for resignations from the police department, two of which have not been submitted yet. We know that only one resignation has been submitted, Commissioner Sofield. It is anticipated to be $500,000. The remaining $2 million is in preparation for people who told City Manager Charles Theofan that they were planning to retire. Theofan said something about these resignations not being anticipated before the election.

There was banter about the budget with a frightful revelation that most of the people on the stage Wednesday night did not know much about the budget. If they did speak about the nuances of money spent and revenue shortfalls and expected manna from heaven, they did so with careful wording of deception where a simple “yes” or “no” should work.

If you remember the 0 percent tax hike, you remember that it had “been achieved by reduced spending and literally watching every penny,”  (Charles Theofan introduction to the budget, April 11, 2011). The City used 24.4 percent of its reserve fund ($930,000) to prevent a tax increase, leaving the fund with $2.87 million. I think I heard them say there is no more money in that reserve fund.

I was not prepared to speak before the council, but I did clumsily try to make a suggestion. If I prepared my remarks, I would have said:

Four career police officers are possibly retiring before the end of 2011. If they retire, they have sick day pay due them in the amount of $2 million at the same time that the city is “temporarily” out of money. These retiring folks are all lifelong residents of Long Beach. No one in the room disputed their entitlement (shocking as the amount is). 

The retiring detectives, being taxpayers, neighbors and public servants, should be approached for the good of the city, and offered the payment of their termination salaries over time. Council members Michael Fagen and John McLaughlin seemed to agree with me.

This is the kind of thinking that government has to adopt. Council members and the City Manager have to be creative. While retirement benefits are contractual obligations, they are not critical to the management of the city. It might have been good in 2003, but it is an awful idea in 2011 to pay retirees by floating bonds.

Prior to the emergency meeting City Council President Thomas Sofield Jr. called, only his father submitted his resignation. That amount is roughly $500,000. The current budget allows for $617,589 for termination salaries.  The council could have borrowed against potential tax revenues for Commissioner Sofield along with moneys for the December salary shortfall and operate within the 2011-2012 fiscal year budget

Then, if and when others decided to retire, the next administration can consider how it could be done in the context of a fragile budget and a new contract in uncharted waters. Change in government is going to require creative thinking and planning so everyone wins.

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