SAN DIEGO – Guesswork is a part of any budget. In San Diego, it's a big part.
Mayor Jerry Sanders cut personnel costs nearly $50 million in his budget proposal for next year by estimating that's what the city would save because of vacancies, employee departures and lower salaries for new hires.
It's the second straight year he has freed up tens of millions of dollars so speculatively, allowing him to direct revenues elsewhere, and the technique is again under scrutiny from Andrea Tevlin, the City Council's budget analyst.
There is general agreement the practice is sound, but Tevlin has questioned Sanders' application in a few areas where the savings seem too high. For their part, council members have barely dwelled on the issue in budget talks.
At a Budget Committee meeting in February, fully eight months into the current fiscal year, committee chairwoman Toni Atkins told Sanders' top financial aide about the practice: “That one has still got me stumped, so I'll let you try to explain that to me three or four more times in the next year.”
Since then, however, Chief Financial Officer Jay Goldstone has fielded few questions about the budgeting tool that is so new to San Diego. In the six weeks since Sanders began unveiling his $2.88 billion budget proposal for fiscal 2008, the issue has come up at council meetings only in passing.
Goldstone attributes that to the administration's generally accurate vacancy savings estimates in the current year. He said the council was forced to readjust its budget and raise salaries in only the Fire-Rescue Department.
The council initially approved an $11.4 million vacancy savings for that department in the current budget, but earlier this year officials acknowledged they would be short about $3.6 million for fire salaries and benefits.
For next year, Sanders has reduced the department's vacancy savings to $8 million. The Police Department's vacancy savings, on the other hand, is being increased about $3.6 million because of many vacancies and hiring delays.
The risk with vacancy savings is that high projections could force the city to cut programs or services later to cover salary costs. The benefit is that it frees up funds as the budget year begins without tying it up in salaries.
Large cities have embraced the concept for years, but lawmakers in Anchorage, Alaska, and Pittsburgh and Allentown, Pa., have recently clashed with management over redirecting vacancy savings to pay for ongoing expenses.
Most cities proceed more cautiously by applying salary savings at year's end to reserve accounts or using the money in the following year's budget.
Chula Vista builds vacancy savings into its budgets, for example, but Escondido does not, in large part because people who leave are often owed vacation time that can negate hiring lags or lower replacement salaries.
Tevlin, the council's budget analyst, raised concerns a year ago that the council, by approving Sanders' use of vacancy savings, could be spending money it might need later for salaries if the estimates were off.
In an interview Friday, she signaled greater support, stressing, “It's important not to tie up that money.”
Last month, in a 127-page assessment of Sanders' budget proposal, she urged the council to carefully monitor the mayor's vacancy savings estimates all year long so as not to be caught off guard by inaccurate projections.
She also cautioned that the street and storm water pollution prevention divisions of the General Services Department have projected savings next year that are so high they essentially impose hiring freezes.
And she questioned the wisdom of making the Metropolitan Wastewater Department an anomaly by building its budget with no vacancy savings at all.
“There's really no reason not to include at least a small vacancy rate,” budget analyst Tom Haynes, a Tevlin aide, told the council this month. “There should be a budget policy that applies across the board to all departments.”
In an interview Thursday, Goldstone said building budgets around vacancy savings will always be practical because turnover is inevitable. He said the sewer department is unique this year because it recently eliminated many employees and has a list of candidates for the remaining vacancies.
He said any skepticism about the practice should disappear once the city establishes a history of successful vacancy savings estimates over time.
“Given all the issues in San Diego any time you try to introduce a new concept, the suspicious ears perk up, and people may just try to conclude that there may be some ulterior motive here versus good financial management.”
Even then, Goldstone said it will boil down to a “best guess” each year.
“You're assuming the past history will predict the future,” he said. “Well, it's clearly a guide, but it needs to be monitored.”
Matthew Hall: (619) 542-4599; matthew.hall@uniontrib.com
