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San Bernardino begins painful budget-cutting process

July 24, 2012 |  9:30 pm

The San Bernardino City Council on Tuesday voted to suspend debt payments and freeze staff vacancies, saving $5.4 million in July alone, so the city will have enough money to make payroll until it files for bankruptcy protection.

The decision, passed unanimously, was the easiest step in what’s expected to be a budgetary bloodletting in the months ahead.

Interim City Manager Andrea Travis-Miller told the council that it must cut $45.8 million from the budget -- 30% of the current spending plan – to ensure they city remains solvent in the current fiscal year. Crafting the austerity plan will be required as part of the Chapter 9 municipal bankruptcy process.

The cuts will almost assuredly lead to widespread layoffs or cuts to employee compensation, and the city’s police and fire departments will not be immune. Public safety accounts for close to 75% of the city’s general fund budget.

“By any definition, a 30% budget cut in a single fiscal year is a severe haircut. Indeed, you might even call it a scalping," said Mayor Patrick Morris.

Before the vote, residents and city employees unloaded on the council members, some berating them for leading the city into financial ruin and others pleading for them to set their political infighting aside.

Steve Rouchleau, who has worked for the city parks and recreation department, told the council that their decisions would not only affect the jobs of city workers, but the livelihoods and well-being of their families, many of whom are longtime residents.

"Please, play your cards carefully, because our lives are in your hands,'' he said. 

San Bernardino became the third California city to declare insolvency this year, joining the Central Valley city of Stockton and Mammoth Lakes in the Eastern Sierra Nevada.

The action came after Travis-Miller told the council that San Bernardino would probably not have the money to make payroll in August. At one point in recent weeks, the city of 211,000 had just $150,000 in its bank accounts.

Since the council’s vote to file bankruptcy, 63 city employees have filed for retirement – which will lighten the city payroll but also add to the financial burden when the city has to cash out their unused vacation and sick time.

Both the U.S. Department of Housing and Urban Development and state Department of Finance have indicated they will launch special audits of the city’s finances after San Bernardino officials acknowledged that the city had improperly borrowed from restricted accounts to help keep the city afloat.

Tuesday’s vote will give San Bernardino enough financial “breathing room” to continue providing services to city residents until it can file a petition in federal bankruptcy court, which is expected in approximately in a month, Travis-Miller said.

In the meantime, the council must whittle the current $166-million spending plan down to $120 million, the estimated revenue expected to flow into its general fund. San Bernardino will have to live on that austerity budget during the bankruptcy process, when the courts will require the city to craft a long-term financial plan to ensure San Bernardino remains solvent.

--Phil Willon in San Bernardino