As Fullerton slowly emerges from a pandemic that saw businesses and facilities close, City staff laid off, and a reduction in sales tax revenues, Fullerton City Council is set to officially adopt the budget for fiscal year 2021/22 on June 1. In advance of this, Council held a budget study session on May 4, during which councilmembers gave their input.
Though Fullerton is facing an overall deficit of around $2.4 million for the next fiscal year, the City is set to receive nearly $35 million in federal relief over the next two years from the American Rescue Plan Act, which President Biden signed this year. The Department of Treasury has not yet released detailed guidance on how cities can and cannot use these funds, so these specific details have not yet been factored into next year’s budget projections.
At the May 4 study session, Fullerton’s Director of Administrative Services Ellis Chang and budget analyst Steven Avalos gave an overview of the City’s projected budget for the next fiscal year and then asked for Council to give direction for how to balance the budget.
The City’s total budget is comprised of the General Fund as well as other special/dedicated funds such as the Water Fund and Capital Improvement Fund (for infrastructure). Fullerton’s total “all funds” proposed budget is $213.8 million with a total projected deficit of $2.4 million.
The General Fund expenditures, which include City employee’s salaries as well as maintenance and operations, is projected to be $110.8 million. The staff report shows a nearly $10 million deficit for the General Fund, although when combined with all City revenues, the overall deficit is shown to be $2.4 million.
About 70% of the General Fund revenue comes from property and sales tax. Over 70% of General Fund expenditures go to the police and fire departments. Here is a breakdown of projected General Fund expenditures:
Nearly a quarter of the total General Fund goes to employee retirement costs (through the State retirement program calPERS), or $26.8 million for the next fiscal year.
Budget Balancing Options
After the presentation, Councilmembers gave their ideas for how to balance the budget. They all agreed with a staff recommendation to leave vacant 44 full-time positions that are currently unstaffed.
Councilmember Fred Jung said he would be interested in “across the board” cuts of 2%, 5%, and 10% from General Fund expenditures.
Chang said that she can do that, but because 70% of the General Fund budget is labor, any cuts would have to be negotiated, and could not be immediately imposed.
Mayor Pro Tem Nick Dunlap agreed with Jung’s idea for across the board cuts.
Councilmember Ahmad Zahra said that, while cuts may be inevitable, “I do want to make sure that we not compromise our services.” He suggested that cuts will require more precision and fine tuning.
Chang said that cuts across the board would impact service levels.
Mayor Whitaker said pay freezes and use of attrition are also options.
There was disagreement among Councilmembers about whether or not to use “contingency reserve” funding, and there is also uncertainty about how the federal stimulus funds may be used.
Given these unknowns and the need to adopt a budget by June 1, Council agreed to hold another study session on May 18 to give final input prior to budget adoption.
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