OAKLAND — Oakland, which was already facing a number of serious longterm financial challenges, now must “move the needle quickly” to avert a fiscal crisis brought on by the coronavirus pandemic, according to Oakland City Auditor Courtney Ruby.
Ruby released a report Thursday on Oakland’s financial condition for fiscal years 2012-13 through 2018-19. The report highlighted challenges, including escalating unfunded pension and liabilities, and unmet infrastructure needs. The city also faces the need to address a five-year budget plan — released in March 2019 — that projected expenses to outpace revenues.
Ruby’s report does not address the economic impact of the pandemic, but provides “a baseline for assessing the impact of the pandemic on the city’s future financial condition,” the auditor stated.
Ruby noted that the city was singled out this past October by California State Auditor Elaine Howle as the state’s No. 13 city facing fiscal challenges.
“The COVID-19 pandemic will likely dramatically compound these issues,” Ruby stated in her letter with the report. “Consequently, the city will need to rethink its fiscal strategies.”
She said that before the pandemic, Oakland’s financial health was relatively stable. Revenues had increased, debt was down, the city had a balanced annual budget, and the city’s liquidity and credit ratings were strong.
“This is a critical time for our city, and this report will hopefully serve as a baseline for assessing the financial impacts of the COVID-19 pandemic,” Ruby stated. “It is my sincere hope that we seize this moment as an opportunity to engage with stakeholders and innovators at every level of government. We must ask more thought-provoking questions and harness our collective will to seek novel solutions to transform the city’s financial future.”
Ruby cited the U.S. Government Accountability Office’s fiscal outlook on state and local governments in December 2018, which she said concluded that the public sector’s financial challenges were not cyclical and that “few public employers will grow their way out of such pressures.”
She said the GAO predicted that “closing the structural fiscal gap would require action equivalent to a long-term 15 percent cut in state and local government spending. And, this was before the COVID-19 pandemic hit.
“Consequently, state and local governments will need to rethink their fiscal strategies to survive,” Ruby continued. “I believe city leaders must pause and reflect on two questions: 1) how will cityofficials move the needle quickly enough to place Oakland’s financial future on solid footingin the midst of COVID-19, and 2) what are the opportunities COVID-19 affords us to workdifferently, more efficiently, and become more focused on the core government services ourresidents rely upon.”
Ruby made the following recommendations in her report:
- The City Council should form a retirement advisory group to find a solution to address Oakland’s unfunded pension and liabilities.
- The city’s Finance Department should provide the City Council with an annual analysis on how to strengthen the city’s longterm finances.
- There should be a centralized report of fixed (infrastructure) assets to monitor their condition and evaluate the cost of maintenance and repairs.
- Oakland should develop a reserve policy in line with Government Finance Officers Association (GFOA) recommendations for a general fund reserve balance of no less than two months of general fund expenses.
