Fullerton city council members approved a new budget full of questions Tuesday night, leaving the possibilities of cuts for future discussion as funding gaps persist.
Council members have been discussing the budget for months in a series of public meetings where city staff warned them cuts would need to be made to avoid dipping into emergency funds.
Currently, the general fund budget approved by the council has a $10 million shortfall according to a city staff report.
The city is currently saving $4 million by putting a hiring freeze on all non essential positions, but council members haven’t decided how to bridge the remaining gap.
Right now, that shortfall will be funded from the city’s emergency reserve, dropping the city’s rainy day funds under the recommended 10% threshold.
To fix that, city staff were directed to return with scenarios cutting anywhere from two to five percent of the general fund’s expenditures.
“We need to take these austerity measures. I think they’re necessary to get our health back, fiscally,” said Councilman Fred Jung, who made the motion to approve the budget with plans for cuts. “Spending reserves on anything is tantamount to borrowing from your future.”
Councilman Jesus Silva disagreed, arguing the city should instead use some of its money from the American Rescue Plan Act, a new round of federal bailout money, to help offset the general fund imbalance.
According to a staff report, the city is expecting to get over $32 million in federal bailout money the next two years, and has already received over $16 million.
“I don’t believe this is a necessary cut, we could implement that funding and reduce any cuts. I’m not saying use this forever, I’m saying use it for what it’s meant for,” Silva said. “We have to tighten our belts … but I don’t believe this 5% cut is a must.”
The city budget doesn’t currently allocate the new stimulus funds anywhere because it’s still unclear what the money can be spent on, and cities across the county have held back on investing the funds until clearer guidelines are released by the U.S. Treasury Department.
Despite not having federal spending guidelines, Silva asked his fellow council members to move $3.5 million of the bailout money into the city’s general fund to offset the city’s tax revenue losses from last year, a move he said was allowed because the money was meant to respond to losses from the pandemic.
“We lost sales tax because of Covid. We lost (hotel) tax because of Covid. This is a very low conservative amount we will get and I’m just asking to put it in now so we can reduce our need to tap into our reserve funds,” Silva said.
His idea failed to get traction with his colleagues.
Meanwhile, city staff still have to figure out where those cuts would come from in the general fund.
During a presentation to council members last month, staff said the cuts could mean as many as 47 city employees get laid off.
The cuts also come while the city is trying to figure out how to fix crumbling infrastructure, especially its roads.
Fullerton’s discussion on budget woes has been a long coming.
The city has struggled financially since the 1980s, in what was described as a “roller-coaster approach to budgeting,” in a staff report prepared for a council meeting last September.
At the council’s May 18 meeting, city staff outlined how the proposed 5% cut would put the city back on track toward achieving a balanced budget with some contingency funds, but would cause “likely delays of/ reductions to essential services to community,” and potentially higher legal exposure for the city due to delayed maintenance.
If the council chose to cut down just 2% of their annual spending, they would still need to dip into their contingency funds to balance the budget, and the council could ultimately decide to make no cuts at their future meetings.
Acting City Manager Steve Danley said the discussion on what the council can do with the relief money will come back to the council at the same time as the proposed cuts, but it is unclear if those discussions will be at the council’s next meeting on June 15 or in the coming months.