Arroyo Grande employees are being asked to pay more to bridge nearly half of an estimated $760,000 deficit in next year’s budget.
The City Council on Tuesday approved a $13.4 million general fund budget for the fiscal year starting Friday, with an overall operating budget of $22.9 million. Councilman Joe Costello was absent.
About $410,000 is what the city estimated will be saved by increasing the amount employees contribute to their pensions and by requiring all staff except public safety employees to take three nonpaid furlough days from Dec. 27 to 29. (Public safety employees would pay a slightly higher pension contribution.)
“It’s tough on any employees to have their pay go down,” City Manager Steve Adams said. “It was a difficult negotiation ... but we have great employees, and they’re willing to make a sacrifice for the organization.”
The rest of the shortfall would be covered by $350,000 in reserve funds.
The city has faced budget deficits in the past several years, though the upcoming year’s shortfall is smaller. During the past four years, city administrators have closed $1 million to $2 million shortfalls in part by eliminating 12 full-time and six part-time positions.
An additional $703,000 budget deficit is anticipated in the 2012-13 fiscal year’s $13.8 general fund budget, about half of which is also proposed to be filled with reserves. However, staff will bring back the second half of the two-year budget for council approval once strategies to fill the remaining $353,000 shortfall are identified, said Angela Kraetsch, director of administrative services.
The city currently has 73 full-time positions, including three vacancies. While employees just received pay increases ranging from 4 percent to 5.5 percent — some of which were delayed three years — the cuts included in the budget would reduce their net pay by about 1.5 percent, Adams said.
Rising pension costs would have cost the city an additional $300,000 this next year, had changes with employee groups not been negotiated.
City officials are still negotiating with the Arroyo Grande Police Officers’ Association on the increased cost of retirement benefits and a two-tiered retirement system. Adams said talks are continuing this week.
The City Council also approved a new two-tier CalPERS retirement system for newly hired management-level employees and new hires represented by the Service Employees International Union Local 620.
The city could be faced with additional cuts if the state Legislature dissolves redevelopment agencies. Doing so would eliminate Arroyo Grande’s economic development plans, cut funding for low-income housing projects and shift about $328,000 in related costs to the general fund, city officials said.