SAN DIEGO — San Diego's chief operating officer has ordered all city departments to "submit operational efficiencies totaling two percent" of each department's budget as the city faces a projected shortfall of $171.9 million for this coming fiscal year — a number that is expected to grow throughout the next five years.
In a Dec. 4 memo obtained by CBS 8, Chief Operating Officer Eric Dargan told all departments to "suspend all [General Fund] non-essential expenditures in Fiscal Year 2024, effective immediately."
Dargan also requested that all city departments identify two percent worth of operational efficiencies with the hope of protecting core services while creating savings.
The potential cuts from city departments would only amount to approximately $41.7 million in savings, meaning the city could still face a more than $130 million shortfall.
Dargan's request echoes concerns raised by San Diego's Independent Budget Analyst who, in a Dec. 5 report, noted the looming structural deficit that the city and its taxpayers will soon face.
"Without a new major ongoing revenue source, significant budget cuts to programs and services will be needed to address the City’s structural budget deficit," said the Independent Budget Analyst.
Why the shortfalls?
The city began seeing declines in revenue in the last quarter of FY 23, likely due to consumers spending less amid high inflation, the budget analyst report states. The city's largest sources of revenue are property and sales taxes.
In addition, for Fiscal Year (FY) 25, the city will no longer have access to one-time COVID relief funds it relied on over the past three years to balance its budget.
"Our Office has continually noted that those resources were projected to be exhausted in FY 2024, and that the City would face significant budget deficits beginning in FY 2025 if the budget’s structural imbalance was not addressed," the report said.
San Diego had a baseline shortfall of $106.8 million in FY 24, which was then balanced by a combination of one-time funding and excess equity. The independent budget analyst expects shortfalls to reach $160.3 million in FY 28 and $141.3 million in FY 29 to maintain the city's current service levels.
For future budgets that include expenditures beyond the baseline, the city could see shortfalls over $200 million per year in FY 26 through FY 29, the IBA report warns. With additional priorities, the deficit is projected to hit $258 million in FY 28 and $227 million in FY 29.
"The City will have to seek a major source of new revenue in the immediate future, or plan for significant cuts and restructures that will result in lower service-levels and fewer City run programs, beginning as early as FY 2025," according to the report.
Possible public safety funding cuts
The police department was asked to identify operational efficiencies of $12.5 million, and the fire rescue department was asked to find $7 million in savings.
CBS 8 reached out to the city, police department and police union for comment. The city's communication office directed the request to the police department, which did not respond. San Diego Police Officers Association President Jared Wilson said it's hard to know how the department will be affected until they know what's getting cut.
San Diego's police and fire departments both surpassed their overtime budgets for 2022-23, paying firefighters more than $52 million and police officers $43.1 million. Each department has struggled with attrition rates.
In addition to increased overtime pay, ongoing staffing challenges at the police department have also led to longer response times. A budget report last year said police wouldn't reach full staffing for four to five years. In March, the department was down about 200 officers, bringing the force to its lowest numbers since 1988.
Roads, parks, economic development
Additional notable requests for 2% operational efficiencies include:
- $2 million from transportation
-$880,000 from Homeless Strategies and Solutions
-$1.4 million from libraries
- $3.6 million from parks & recreation
- $2 million from economic development
When will next year's city budget be public?
Mayor Todd Gloria is scheduled to release his FY 25 budget proposal on April 12, according to a budget process overview document Dargan sent department directors and deputy chief operating officers.
Departments had from Dec. 11 to Jan. 5 to submit operational efficiencies. The "proposals should not impact the City’s ability to provide core services or programs," Dargan wrote in his memo. Any additions to FY 24 budgets should be limited to new buildings expected to open next fiscal year, he said.
"This is a difficult task to undertake in a short period of time, and I appreciate the effort and work of all departments to produce a solution to the current projected deficit," Dargan wrote.
WATCH RELATED: San Diego Police, Fire Department to surpass overtime budgets by millions of dollars (Feb. 27, 2023)
