City council hears proposed plan to fix $18.5 million budget gap

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long beach budget shortfallToday the Long Beach City Management proposed multi-faceted approach to eliminate a projected $18.5 million structural deficit in Fiscal Year 2011 brought about by the lingering impacts of the recession and increasing labor costs.

While the recession appears to have bottomed out, Long Beach is still suffering from the lingering impacts of the economic downturn. The financial markets and real estate, the two sectors hardest hit by the recession are still struggling to recover. With losses to property taxes, sales tax, and other revenue streams, the financial challenges faced are considerable.

“I am confident that with a multi-faceted approach to balance this budget we will eliminate this shortfall as we have in the past,” said City Manager Pat West. “Long Beach has a proven track record of making the difficult choices to balance its budget.  All parties must be committed to the delivery of core services and participate in the solutions.”

The plan outlines various options for the City Council to consider in eliminating the budget shortfall. Adding to the three-pronged strategy used last year to balance the $38.5 million shortfall in FY 2010, City management also highlights the need for pension and governmental reform. While General Fund revenue grows at a rate of less than 2 percent each year on average, pension costs are increasing almost 9 percent annually. In addition, health insurance and employee salaries are also steadily increasing.

The multi-faceted approach to balance the budget released by City management includes a variety of tools ranging from: pension reform, government reform, employee contributions, new revenue solutions, and department cuts.

An additional tactic to balance the budget was also proposed which would maintain each department’s proportionate share of General Fund spending in the current year, FY 10.

City management will present these options at tonight’s City Council Special Meeting on the Budget to assist in the development of the Fiscal Year 2011 Proposed Budget that will be released to the Mayor and City Council on July 3, 2010.

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