The City is closer to beefing up its budget reserve to better prepare itself for dark economic times such as the current recession.
Establishing a so-called budget stabilization reserve fund is meant to “better absorb revenue shortfalls,” according to City Controller Benjamin Rosenfield, who is recommending the structural change.
The establishment of the fund was approved Wednesday by the Board of Supervisors Budget and Finance Committee, and now must receive at least eight votes by the full board to go into effect. If the fund had been set up in 2004, The City would have had $93 million in it today.
“As a city, I think we are very good at spending revenues during good times and we are not very good at saving some of those revenues for rainy days,” said Board of Supervisors President David Chiu, who supported the recommendation.
Each of the past 10 years, The City had a budget deficit that needed closing, midyear cuts were required during four of the last 10 years, labor contracts had to be renegotiated in seven of the past 10 years and in eight of the past 10 years, voters were asked to approve tax increases, according to Rosenfield.
The recommendation was made as a result of Proposition A, which voters approved in November, requiring the controller to come up with budget improvement policies each year that go into effect if approved by two-thirds of the board and the mayor.
The City must close a deficit of $483 million for the fiscal year that begins July 1, and is looking at even larger deficits in subsequent years. The stabilization reserve fund would receive money from certain revenues when they come in higher than the five-year annual average. It would be an addition to a nearly depleted rainy day reserve and a general fund reserve.
“A consistent finding about the city from rating agencies and those that grade cities on their financial practices is that San Francisco maintains very light reserves, and that’s one of the downward pressures on our rating,” Rosenfield said.