San Diego Facing a $25-Million Revenue Shortfall

A recession-induced cutback in spending by consumers and businesses has reduced revenue to the city of San Diego far below projections, producing a $25-million shortfall in the $1.1-billion budget, top city officials said Wednesday.

Though not entirely unanticipated, the budget gap leaves the City Council and City Manager Jack McGrory with the unpleasant task of needing to make potentially deeper cuts in various programs and services already underfunded because of the city’s severe economic constraints.

McGrory, who recently briefed council members on the budget problem, is scheduled to release a memo today that outlines a strategy for achieving the necessary reductions without layoffs of city workers.

Under McGrory’s proposal, department heads will be asked to develop plans by Friday reducing their individual budgets by 10%, numerous open positions will not be filled, and a policy allowing workers to accept pay in lieu of vacation time may be eliminated, according to officials familiar with the recommendations.

“None of these (cuts) discussed so far is horrible, but they’re definitely going to have an impact on service to the public,” said one department chief who asked not to be identified.

The budget shortfall, which city financial analysts began predicting months ago as a logical outgrowth of the deepening recession, stems largely from the reduced spending attributable to the nationwide economic downturn. That reduced spending has lowered sales tax receipts and revenue from various other fees and permits.

In addition, the city is receiving lower-than-projected interest rates on its investments, and the revenue from fines and forfeitures is dramatically below the estimated amounts used in calculating last summer’s budget, city officials explained.

“The problem’s pretty simple,” one council member said. “Everyone’s spending less, and that means the city has less to spend, too.”