Government Budgeting 101

Bob Brownstein has a rich past in public sector budget analysis, including an eight year stint as the Budget and Policy Director under San Jose Mayor Susan Hammer. On Wednesday, he shared his vast knowledge with about a dozen San Jose residents, among them Councilmember Rose Herrera, in a two hour presentation badged as Government Budgeting 101.

The animated Mr. Brownstein deftly took the audience through the various revenue sources of the city, including a brief explanation of fund accounting. He provided insight into methods for applying RDA dollars to general fund expenses. He philosophized on the validity of city management’s general opposition on the use of “one time” money to help close budget gaps, noting that city budget projections tend to be cautiously conservative. In general, as one might expect of an employee of Working Partnerships USA, his basic focus was on examining ways to increase general fund tax revenues for the city. Yet he came at it not from the perspective of “taxpayers need to pay more,” but from a more interesting perspective of “there’s a lot of money hiding in the city’s budget. Let’s go find it.”

Bob noted up front that San Jose’s chronic budget gap is driven by a weak tax base, citing a litany of tax metrics, virtually all of which place San Jose at or near the bottom of per capita tax revenues. He blamed the shortfall problem on “unwise land use planning between 1955 and 1975,” a period where San Jose unflinchingly converted raw land to sprawling residential developments. This suburbanization of San Jose, combined with the reduced property tax revenues driven by Proposition 13, has left San Jose starved for tax revenue.

He spent very little time talking about expenses. The presentation covered revenues and fund accounting for about an hour and a half, expenses (mainly explaining encumbrances, contingency reserves, and earmark reserves) for about fifteen minutes, RDA for ten minutes, and closed with five minutes or so of Q&A.

While positing a cause for our city’s chronic budget mess, Bob offered no explicit solutions for closing our $116 million budget gap. Rather, I think, he had been hoping that the city would grow out of it, and noted that residential property values had almost reached the point where the city would be OK, until the current housing crash surprised him. He did state that he would be comfortable using one-time revenue as one bucket to dip into, although did not project a sizing. I suspect that Mr. Brownstein would support moving the tobacco money currently squirreled away in the Healthy Neighborhoods Venture Fund (used for senior nutrition and homework centers, among other things) into the General Fund (where most cities have put it), providing nearly $10M of additional General Fund monies. But I suspect that he would struggle to find enough revenue to close the gap without resorting to employee givebacks or service cuts.

That shortcoming notwithstanding, even this old dog learned some new tricks by spending a couple of hours with Mr. Brownstein. I highly recommend that you take advantage of any opportunity you might come across to listen to him explain the intricacies of governmental accounting. It will be time well spent.