Yes to an emergency fund
The city’s financial troubles are daunting enough, but they could get worse. Imagine how much deeper the budget hole would be if the city suffered a major earthquake, a terrorist strike on the scale of the Sept. 11 attacks or an epidemic. That’s why the City Council should set aside a portion of the taxes it collects for needs that cannot be anticipated, above and beyond the demands of the inevitable economic downturns. The experience of the current fiscal crisis demonstrates that the council’s existing emergency fund, which can be tapped by a simple majority vote, may not be secure enough to prevent city leaders from acting imprudently. The Times urges a vote for Measure P, which would create an emergency reserve account more likely to be reserved for actual emergencies.
The city’s administrative code already calls for an emergency reserve account of 2.75% of the general fund, which amounts to a little more than $118 million in the current fiscal year. Measure P would write that requirement into the City Charter. It also would require a two-thirds vote of the council to draw funds from the account and, if the mayor were to veto the council’s decision, a three-fourths vote to override it.
The reserve fund envisioned by Measure P would hardly meet Al Gore’s definition of a “lock box.” It could only be tapped if the council declared there was an “urgent economic necessity,” but if two-thirds of the council and the mayor agreed, any circumstance could fit the bill. The mandate to refill the reserve fund the following year could also be suspended by a two-thirds vote.
In addition to the emergency fund, the proposal also creates a “budget stabilization fund” of unspecified size to hold excess revenue collected when the economy is booming. But nothing in the measure would require the council to put a specific amount of money in or to save that money for a rainy day.
Nevertheless, the measure would make it generally harder for the council to drain its emergency reserves simply to avert layoffs or furloughs, as some members have advocated during the current crisis. The measure’s sponsor, Councilwoman Jan Perry, also argues that it would bring more public scrutiny and accountability to such decisions, forcing council members to make tough choices during a budget crunch instead of politically expedient ones. And perhaps most important, it would give investors and credit ratings agencies more assurance that the city has cushioned itself financially against a disaster.
The city shouldn’t need to amend its charter to require elected officials to set aside money for emergencies. Nor is it sound fiscal policy to load up the charter with budget mandates, which reduce the city’s ability to adjust priorities in response to changing times. Recent events have shown, however, that the temptation to spend even the city’s emergency reserves can be overwhelming during a sharp economic downturn. Sadly, the city will surely experience more of those, just as it will endure more events like the Northridge earthquake.
To help prepare for those days, vote yes on Measure P.
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