City Leaders Address Stark Financial Reality

Date Posted: December 18th, 2020 @ 4:59 PM
Last Updated: December 18th, 2020 @ 5:02 PM

Oakland, CA – On Thursday, Mayor Libby Schaaf and City Administrator Ed Reiskin shared with City of Oakland employees the stark financial reality the City faces due to extreme revenue losses caused by the COVID-19 pandemic. Like all cities and local governments — and barring significant federal relief — Oakland must consider immediate measures to address a $62 million (and growing) shortfall.

The email sent from the Mayor and City Administrator (see below) highlighted the following actions:

  • Leadership staff directed to take 10 unpaid days off and defer any raises or wage increases for the next six months. This direction only applies to employees who are not represented by labor unions.
  • Immediate hiring freeze.
  • Reduction of overtime and discretionary spending.
  • Curtail use of temporary employees.
  • Department proposals for 10-20 percent budget cuts this fiscal year.
  • Moratorium on virtual and in-person external conferences and trainings. (City-wide training programs will continue).

To clarify:

If the General Purpose Fund becomes insolvent—which it would absent corrective action—it will not impact bond payments. All the City’s bond payments (debt service) will be paid as scheduled and in accordance with the respective bond covenants.

The Administration is presenting additional cost-cutting measures to the Oakland City Council on Wednesday, December 23 at 11 am: https://oakland.legistar.com/calendar.aspx

To read the announcement to employees in its entirety, please see below:

Dear City Staff,

2020 has been an incredibly difficult year for the residents we serve and for our colleagues. The COVID-19 pandemic has upended our lives, dramatically changed how we deliver City services, decimated our national and local economy, and created a massive $62 million hole in our City budget. The recent surge in cases and hospitalizations have resulted in another stay-home order and business contraction, making the problem worse.

Through it all, you have shown resilience and sacrifice to continue serving the needs of our community, which are greater than ever under uncertain and daunting conditions. We are deeply appreciative of your hard work, dedication, and creativity in rising to meet these unprecedented challenges. Though its painful to write this message, we are committed to being candid and transparent with you: Our financial outlook faces significant challenges.

To be direct, absent immediate and significant expenditure reductions, the General Purpose Fund will be insolvent before the end of the fiscal year. The City will not be able to fund essential services or respond to emergencies like an earthquake or natural disaster. Even the City’s emergency reserve will be completely exhausted. Although Oakland is not alone in this crisis, this situation represents one of the most serious financial challenges the City of Oakland has ever faced. The impacts on City services are unavoidable and will be significant.

We are determined to face these challenges now to lessen the long-term and most devastating impacts. If we wait until next fiscal year to address the shortfall, the cuts would be catastrophically deep, and we will be forced to make cuts that could be avoided by acting now. To provide some context, a $62 million shortfall is equivalent to about 400 full-time positions—that’s about 40% of the non-sworn positions funded in the General Purpose Fund.

Leadership Commitment

To immediately reduce expenses, both of us regretfully informed the City’s department directors and other unrepresented City leaders that we must do our part in service of the broader goal to curb expenses without delay. Effective immediately, all unrepresented workers will:

  • Take 10 unpaid days off between now and June 30, 2021, the end of the fiscal year,
  • Defer the upcoming 1% pay increase in January, and
  • Defer any anniversary date salary increases that they might otherwise have been due.

Other Immediate Cost Reductions

At the department level, we have directed the following measures to curtail a broad range of expenses right away, including:

  • An immediate hiring freeze, including all vacant, non-sworn positions. Note that positions funded by certain restricted funds, grants or cost-covered positions may be considered on a case-by-case basis.
  • Reduction of discretionary spending, overtime (including significant Police and Fire expenditure reductions), auto allowance, and other premiums under our authority.
  • A Citywide curtailment on use of temporary employees. Departments will release most TCSEs, and ELDEs by January 9, 2021 and carefully evaluate other temporary part-time positions.
  • Preparation of 10-20% all-fund budget cuts that we can consider making this fiscal year.
  • A citywide moratorium on all virtual and in-person professional training and conferences (unless paid for with personal professional development funds)

Partnering with Labor Groups

These actions alone will not be enough to solve the magnitude of this challenge. We have also reached out to labor groups requesting that we join in a spirit of full transparency and partnership to address this extraordinary challenge. Our City negotiators are ready to engage in discussions and hear ideas from our labor partners about how to reduce costs. The more quickly we act, the smaller the growing shortfall will be. Of course in the event that City finances change for the positive or the Federal Government sends aid, which as of this week looks less likely in the near term, we are committed to prioritizing the restoration of positions and wage losses first and foremost.

None of this is easy. We recognize that this news comes at a time when people are already worn thin by the pandemic and in the midst of the holiday season. We know this is painful and scary news to hear. But if we work together, we will get through this extraordinary challenge. Our pledge to you is that we will be candid, forthcoming, and transparent as the situation unfolds so that you have the information you need. Starting in early January, we will be engaging employees throughout the City to hear your ideas about how we can find solutions related to effective, efficient, and equitable service delivery. Stay tuned for more details on that.

In the meantime, stay safe, stay healthy, and thank you for your commitment to our resilient city.

Mayor Libby Schaaf and City Administrator Ed Reiskin

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Media Contact

Karen Boyd

Communications Director

KBoyd@oaklandca.gov

(510) 449-4401