SLO City Council approves budget that cuts millions

A split San Luis Obispo City Council on Tuesday adopted a two-year spending plan after months of debate on how to cut $4.4 million from its $99.9 million budget for the first year.

The cuts would eliminate some employee positions, reduce city services and have employees pay more for their health benefits and pension costs.

Councilwoman Kathy Smith and Councilman Dan Carpenter dissented in the 3-2 vote. Both said more should have been cut from employee compensation and did not agree with recently approved water and sewer rate increases.

City employees will be asked to accept a total of $4.5 million in pay and benefit cuts over the two-year period.

Those cuts are expected to save $1.5 million in fiscal year 2011-12 — which starts July 1 — and $3.1 million in fiscal year 2012-13.

However, those changes must still be negotiated with employee unions. Those talks are expected to begin in the fall.

If those talks fail, the city would need to find a way to increase revenue or cut more from the city’s operating costs to balance the budget.

The council also approved $2.7 million in operating cuts for the 2011-12 budget year and $3.3 million for the 2012-13 fiscal year.

A large portion of the savings would come from eliminating 13 positions, most of which are vacant or expected to be soon because of retirements or employees moving to other positions. Among them are two police officers; the Drug Abuse Resistance Education officer is to be reassigned to patrol.

Changes the council made to a preliminarily approved draft budget before final approval Tuesday night included:

Increasing the amount of employee compensation cuts to $2.6 million from the $2.1 million originally proposed by city staff.

The addition of two full-time positions and one part-time position for neighborhood services specialists at a cost of $156,200 in 2011-12 and $205,000 in 2012-13.

The addition of a capital improvement project to replace the steps leading into City Hall at a cost of $130,000.

On Tuesday night, several other changes were suggested but not approved by the council majority.

Smith asked that cuts to employee compensation be increased to $3 million, but only won Carpenter’s support.

Mayor Jan Marx, who opposed the idea, said she felt the $2.6 million being asked of city employees had gone “plenty far enough this budget cycle.”

The city expected its revenue would be $4.4 million short of the $54 million in projected spending for the fiscal year that begins July 1.

That shortfall is estimated to grow to $5 million in 2013-14 and is projected to be $4.7 million annually for each of the next five years.

“Is this budget responsible and sustainable? Maybe. I’m not convinced yet,” Carpenter said. “My concern is that the next council will look back and say shame on you for not addressing a contingency plan for some of the money that goes out.”

Reach AnnMarie Cornejo at 781-7939. Stay updated by following @a_cornejo on Twitter