ESCONDIDO — Despite having a balanced budget for the upcoming fiscal year, the city expects to make deep service cuts in the next few years to address its ongoing structural deficit unless additional revenue streams are found.
The City Council approved a balanced budget at its June 21 meeting after city financial staff worked to eliminate an impending $11.3 million deficit for the upcoming 2023-2024 fiscal year.
Financial Services Director Christina Holmes broke down how staff was able to balance the budget by using $1.5 million in reserve funds from the city’s Section 115 Pension Trust, which is used to pay the city’s pension obligations; $3 million from the general liability reserve funds; $3.6 million from the vehicle replacement reserve funds and another $1.1 million by deferring other city vehicle replacements; $1.4 million in one-time revenue from the American Rescue Plan Act funds the city received in response to the COVID-19 pandemic; and $600,000 from the city’s historical cost savings reduction calculations.
While the staff was able to balance next year’s budget, Holmes cautioned that something must be done to address the city’s expected long-term deficit over the next two decades as expenditures continue to outpace revenue.
“Those reserve funds will not be available without a new, ongoing source of revenue,” Holmes said.
The city expects a $10 million average deficit over the next five years and an $18 million average deficit over the next 20 years. In June, Holmes said the city’s $59.6 million reserve funds would be depleted by 2030 if nothing changes.
Staff warned the council that conversations over the ongoing structural deficit, first identified in the city in 2017, need to continue, and deep cuts may need to happen.
Possible scenarios include cutting funds from the Escondido Police and Fire departments, which comprise 68% of the general fund budget, with police receiving 42% and fire 26%. Police could see a $4.1 million funding reduction and fire a $2.6 million reduction, which would dramatically impact public safety service levels in the city across the board.
The already understaffed police department would lose 10 police officers, three dispatchers, two customer service representatives and five parking enforcement positions. The city would also lose one fire station and an ambulance, which would mean further loss of revenue for the city.
“I can’t overestimate how devastating and demoralizing these cuts would be,” said Fire Chief Rick Vogt, who has since retired, on June 7 during a budget workshop.
Other scenarios avoid cutting police and fire by reducing other city services, including eliminating the Public Works and Development Services departments. This scenario would cut 45 positions, severely limit sanitation and maintenance at city parks and facilities and reduce cleanup of homeless encampments, pothole repairs, graffiti cleanup and response to code compliance issues.
A third scenario could cut community services and communications, including cuts to recreation programs, special events, libraries, older adult and senior nutrition services, communications and digital media services and the closing of the California Center for the Arts.
Staff is reviewing potential additional revenue streams, including a general sales tax, a utility users’ tax, increased transient occupancy tax rates, a parks district and a cannabis program.
Last year, voters rejected a ¾-cent sales tax measure.
“We’re not on good financial footing,” said Councilmember Consuelo Martinez at the June 21 meeting. “We have a structural deficit issue, so it’s really important (for residents) to stay engaged with us as we make hard decisions in the next fiscal year.”
