Long Beach will be facing staffing shortages and service reductions as it works to close a projected $41 million budget deficit due to the economic fallout of the COVID-19 pandemic.
To close the gap the city is looking at a hiring freeze, suspending non-critical construction projects, canceling summer activities and the possible deferment of upcoming police and fire academies.
It could also save money by not filling open positions, using attrition to cut payroll.
These options were laid out for the City Council Tuesday night as it held a study session about the city’s current financial standing and how future budgets could be impacted by a protracted virus-related shutdown.
City Manger Tom Modica said that this year’s general fund budget, which was balanced when it was adopted last September, now is projected to be about $25 million to $41 million short. Next year’s budget could be $30 million short, in addition to projected shortfalls in the 2022 fiscal year ($13 million) and 2023 ($22million).
Those figures are not assuming a general recession or a second wave of the virus, which many experts believe is likely in the fall.
Much of this year’s deficit is attributed to the virus itself and the impact it’s had on travel and local sales tax revenue as businesses have been forced closed since mid-March. However, nearly $16 million has been spent on the city’s response to the pandemic, not all of which will be reimbursed by the federal government.
Modica said that the city narrowly missed out on federal funding to help municipalities through the crisis because Long Beach’s population is about 480,000 people, about 20,000 shy of the 500,000 required residents to receive funding. If Long Beach were at the 500,000 mark, it would have received roughly $80 million directly from the federal government.
While state funding could still be on the way to help Long Beach, Modica said the city is tens of millions in deficit and operating in an uncertain economy. He added that the expected recovery was originally projected to be “V” shaped, marked by a steep decline but also a quick recovery. Now that model is looking more like a gradual recovery.
Getting to a balanced budget, a legal requirement for cities, will take steep cuts. Modica tried to put that into context Tuesday night.
Cutting 10 police officers would only amount to a few million dollars in savings. One less fire truck would save about $3 million. Closing one library could save $500,000. Then there would still be about $35 million more in cuts and reductions needed to balance this year’s budget.
“Carving $30 million out of this budget is going to be difficult,” Modica said.
The council won’t have to adopt a new budget for the next fiscal year until September, and typically that would include a months-long process in which committee meetings analyzing individual departmental budgets would be scrutinized before undergoing a similar process at the council level.
However, this year could see a much more compact process with the full budget not being made public until after it’s adopted by the council.
Grace Yoon, a budget manager with the city, said the modified process with less time for in-depth analysis was necessary to ensure that the city’s budget office could complete the document by the Oct. 1 deadline.
Depending on how much state funding pours into the city and the rate at which the local economy begins to operate at a level somewhere closer to normal, could dictate what services and departments face the largest cuts.
Modica said that each department has been given a goal for cuts that it must present prior to budget season. Non-public safety departments are being asked to propose up to 12% in cuts and public safety departments have been given a range of 0-3.5%.
The city’s police and fire departments account for nearly 70% of general fund allocations.
Modica stressed that a balanced approach to cuts be taken by the council because all of the city’s services are so interconnected. Parks and library hours help reduce crime and homelessness and poor infrastructure drives calls to police and fire, he said.
Mayor Robert Garcia called the budget projections and the remedies to balance them a “moment of shared sacrifice” and called on every member of the city staff to step up to take on the tough challenge that awaits it in the coming months and years.
“This will be a difficult budget process, it’s going to require all of us to come together and focus on those core services,” Garcia said. “This will force us to make some difficult decisions and prioritize.”
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