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HomeMy WebLinkAbout06/30/1992, 3 - STATE BUDGET GRAB MEETING DATE: ������i�i►IIUIIIIIIIIP� �IIIIIII city of san LUIS OBISPO �---3V - yz COUNCIL AGENDA REPORT MUrme TEM NUMBER: FROM: John Dunn, City Administrative Officelz::��_ Prepared by: William C. Statler, Director of Finance( ` ;f SUBJECT: STATE BUDGET GRAB iI;r� ,z ; 199 CAO RECOMMENDATION CI rr CLERK SAN LUIS oereoo. A Approve an action plan for responding to a probable City fiscal emergency resulting from proposed State revenue reductions for California cities. OVERVIEW Summary of the Problem The State of California is facing an unprecedented fiscal crisis as it prepares its budget for 1992-93. In addressing an estimated $11 billion budget shortfall, a legislative "working group" has identified 68 options in an effort to target at least $1 billion in revenue reductions from California cities. Although the amount and type of revenue cuts to cities changes daily, it is almost certain that cities will be called upon to share in the State's fiscal problems at some level. Of the proposals currently being considered, revenue cuts to the City of San Luis Obispo could range from $1 to $2 million annually. These revenue reductions by the State come at a time when cities are also facing difficult fiscal decisions as a result of the recession. For the City of San Luis Obispo, this has meant General Fund expenditure reductions of $3.1 million during the 1991-93 Financial Plan period as well as tough revenue decisions, including fee increases for planning, building, engineering, water, and sewer services, and increases in our business and transient occupancy taxes. I Sales tax revenues for 1991-92 underscore the difficulties facing the City even without State budget reductions. Compared with a revised projection of $6.1 million for 1991-92 (reflecting a downward revision from original conservative projections of $6.7 million), actual sales tax revenues for 1991-92 are only $5.85 million. This is their lowest level since 1986-87, and reflects our seventh consecutive quarter of declining sales tax revenues. In summary, as discussed in-depth during our budget process, we would be facing a very difficult financial future even without the proposed budget grab by the State; with it, we will have to fundamentally re-evaluate the basic day-today services we provide our community as well as our longer-term public facility goals. However, based on the initial action plan discussed below, it is our intent to implement this process in a rational and caring manner while retaining our commitment to fiscal responsibility and our employees. RECOMMENDED ACTION PLAN Overview As outlined in Exhibit A, the recommended plan for responding to the State's budget grab consists of three key steps: 3—I �������►�ii��il►1111111i�j��llll City of San Luis OBISpo COUNCIL AGENDA REPORT I. Emergency Cost Reduction Decisions and Response Plan. The purpose of this step is to take immediate action to effectively position the City in responding to the fiscal emergency that will exist in the City if the State approves the level of revenue cuts currently under discussion. Therefore, cost cutting measures are being recommended for immediate Council action. This will provide us with the time necessary to begin implementing a permanent reduction in ongoing operations that will "rightsize" us for the level of revenue reductions being forced upon us by the State. Even if the State's 1992-93 budget grab ends up being less than the recommended reductions, these immediate cuts will assist the City in adjusting to what will undoubtedly be a lower level of General Fund revenues for the foreseeable future. II. Intermediate Budget Balancing Decisions. With a target date for Council action of j September 22, 1992, the next step will be to analyze the actions necessary to balance the City's budget on an ongoing basis. In other words, while Step I serves to immediately bring the 1992-93 budget back into balance, Step H provides the City with the time needed for more deliberate and long-term service level decisions. As identified in Exhibit B, an important element of this step is to prepare a five year revenue and expenditure forecast that will provide us with the background information necessary in identifying required service level reductions. III. Long-Term Financial Health Decisions Step III is the 1993-95 Financial Plan preparation process during which we will address our long-term financial needs based on the State's budget decisions as well as local economic conditions and related revenue forecasts. i Description of Step I Actions The following provides a further description of the recommended actions for immediate Council approval under Step I of the proposed plan: 1. Implement Immediate Hiring Freeze Until the budget balancing actions proposed for review on September 22, 1992 are approved - or information is available that leads us to believe that the impact of the State's budget shortfall on the City will be significantly less than currently anticipated - no regular City positions that become vacant will be filled. During this period, it is anticipated that recruitments for key positions will continue to be conducted. Although it is generally intended that no regular City positions will be filled until "Step II" decisions are made in September, the CAO recommends an exception to this freeze to allow for the appointment of two vacant department head positions: City Clerk and Public Works Director. 2. Eliminate Selected CIP Projects In immediately responding to the fiscal emergency that may be forced upon us by the State, eliminating or deferring capital projects gives us the most flexibility in reducing costs with the least initial impact on the community. Accordingly, the CIP Coordinating Committee and the Management Team have comprehensively reviewed the status of all General Fund CIP projects ��III��►�►►i���lllilllli�' lllllll city of San _.4Is OBISpo COUNCIL AGENDA REPORT that have not yet been initiated, and classified them into three basic groups as detailed in Exhibit B: a. Projects recommended for immediate deferral as of June 30, 1992. b. Projects that should be considered for deferral based on further review and Council direction when the scope of the fiscal emergency is better defined. C. Projects that should continue to go forward even during this time of financial difficulty and uncertainty based on six major criteria: public health and safety; outside sources of funding;design substantially underway; long-standing policy or contractual commitments;significant operating savings;or requirements for I proper maintenance of existing facilities. i Projects recommended for immediate or � potential deferral total $3.1 million summarized as follows: Immediate Potential Deferral Deferral Total Public Safety $ 65,000 $ 220,000 $ 285,000 Transportation 429,000 930,000 1,359,000 Leisure, Cultural & Social Services 439,000 766,900 1,205,900 General Government 159.000 80.000 239.000 TOTAL $1,092,000 $1,996,900 $3,088,900 Any projects approved for deferral must be reintroduced through the 1993-95 Financial Plan preparation process in order to be considered for future funding. 3. Eliminate Undesignated Operating Carry-Over. Under existing Financial Plan policies regarding our two-year budget approach, operating program appropriations not spent during the first fiscal year may be carried over for specific purposes into the second fiscal year with the approval of the CAO (1991-93 Financial Plan, page B-3). In light of the current fiscal situation, carry-over into 1992-93 of undesignated operating budget balances from 1991-92 will not be allowed. 4. Determine Non-Profit Agency Funding Levels for 1992-93. Under our two-year budgeting approach, funding levels have previously been established for 1992-93 in supporting grants-in-aid to a wide range of private, non-profit agencies and community groups that provide social welfare and cultural services to our community. Based on this policy commitment, the review by the HRC and PCC has gone forward, and recommendations for Council consideration have already been made. In addition to the HRC and PCC grants-in-aid process, multi-year commitments have also been made to La Fiesta, ECOSLO, Chamber of Commerce, VCB, and the homeless shelter program. In fairness to these groups that have made plans for 1992-93 based on the City's prior budget commitments, it is recommended that the City continue to fund contributions to them based on currently approved 1992-93 levels: we should not put these agencies - who provide important services to our community on very limited budgets - into the same kind of fiscal chaos that the State has forced upon cities. However, in honoring our commitments for 1992-93, it needs -3 . o�rl�l►�►►►IV11111111II���°��IIIIIN city of San 1%.46 OBISPO i COUNCIL AGENDA REPORT to be made clear to these agencies that the City's continued support for these programs at a similar level in future years cannot be relied upon. The priority of these programs and the related level of funding to be provided to them will be an integral part of the budget balancing decisions to be made by the Council during Steps II and III of the action plan. 5. Evaluate Operating Cost/Service Level Reductions In preparing for the Step II decisions to be made by the Council in September of 1992, the CAO has already directed every department to identify and evaluate further operating cost and service level reductions. As reflected in Exhibit.C, this direction includes preparing options reflecting 5% and 10% reductions from current operating levels, including their impact on services to the community. Additionally, departments have been directed to fundamentally reexamine basic departmental missions as well as services that i should rely more on user fees and less on General Fund support. i 6. Designate Employee Working Group. It is recommended that an "Employee Working Group" be formed in order to provide for involvement by a wide-range of employees in identifying solutions to our impending fiscal emergency. Consisting of employee association presidents and department fiscal officers, the purpose of this group is to advise the CAO on cost saving ideas, especially in the area of lay-off mitigation and employee retention measures that the City should consider in light of the magnitude of the fiscal problems currently facing us. An informal first meeting of this group has already taken place on June 26, 1992. What External Actions Have Been Taken to Date? The City has taken a leadership role in informing the community about the State's budget grab from cities and in trying to convince the Governor and the Legislature that this approach is simply wrong, and as such, should not be pursued. A summary of our external efforts to date is provided in Exhibit D, and a Fact Sheet summarizing the State's proposals and their impact on the City is provided in Exhibit E. I What's Next? It is difficult to prepare and implement plans in responding to a problem that has yet to be defined. Nonetheless, we must take appropriate action based on the best information currently available that balances the need for responsibly positioning us for the tough decisions and outcomes that are undoubtedly ahead of us, with retaining our commitment to acting in a deliberate manner that considers priority services and employee impacts. We believe that the proposed action plan accomplishes this balance. To provide the Council and community with an update on the State's fiscal decision-making and its impact on the City, a briefing on the status of these issues has also been scheduled for the July 7, 1992 Council meeting. 3- ��++ia�bH►�►Illlll�l�ii ���lll city of San __AS OBISp0 COUNCIL AGENDA REPORT EXHIBITS A Preliminary plan responding to State revenue .reductions to the City B. Capital Improvement Plan project deferral recommendations 1. Projects recommended for immediate or potential deferral 2. Projects which should continue to go forward C. CAO direction to Department Heads regarding permanent long-term cost savings D. Summary of the City's external responses to the budget crisis E. Fact sheet regarding the State's prospective budget actions and their impact on the City I i i i 92-93BUDGETWABRPRT.WP I i 3-� Action Plan Responding to State Budget Grab EA1 it — p 9 9 STEP I Emergency Cost Reduction Decisions and Response Plat (June 30, 1992) A. Council meeting to describe situation, solicit ideas, and prioritize actions B. Initial recommended actions 1. Implement immediate hiring freeze 2. Eliminate selected CIP projects 3. Eliminate undesignated operating carryover 4. Determine policy for funding private, non-profit agencies for 1992-93 5. Direct departments to identify and evaluate further operating cost and service level reductions 6. Designate "Employee Working Group" to advise the CAO on cost saving ideas, especially in the area of layoff mitigation/employee retention measures STEP H Intamediate Budget Balancing Decisions (June 30, 1992 through September 22, 1992) A. Prepare five-year revenue and expenditure forecast B. Recommend operating cost and service level reductions as necessary 1. Across-the-board 2. Targeted C. Identify further capital project deferrals D. Reconsider hiring freeze/identify key positions that should go forward E. Re-examine indirect cost allocations F. Develop layoff mitigation/employee retention plan G. Consider possible new revenue measures 1. Examine non-resident fees 2. Consider new fees as well as increases in existing fees 3. Evaluate other revenue measures H. Consider use of General Fund balances below 20% policy levels STEP III Long-Term Financial Health Decisions (1993-95 Financial Plan Preparation Process) A. Start in early January with strong Council policy guidance B. Prepare realistic revenue projections and consider revenue options C. Consider further operating cost/service level reductions D. Consider eliminating and deferring further capital projects 92-93BUDGET\RESPDND.WP Exhibit&_Z General Fund Capin Project Deferrals PROJECTS RECOMMENDED FOR IMMEDIATE DEFERRAL Public Safety Fire Station No. 2 Storage $ 65,000 Transportation Bikeway Projects 99,000 ' Offsetting grant from State ($40,000) ' Higuera - South to Madonna ($19,000) * Orcutt - Broad to Bullock ($40,000) Murray/Broad Circulation Improvements 107,000 Other Neighborhood Traffic Improvements 100,000 Grand Avenue Medians 123,000 Leisure, Cultural& Social Services Swim Center Improvements 99,000 • Multi Purpose Room Improvements ($85,000) • Landscaping ($14,000) Picnic Table Replacements - various park sites 19,000 Meadow Park Improvements (parking lot improvements, etc.) 28,000 Santa Rosa Park Improvements - Campfire Area 12,000 Sinsheimer Park Improvements 81,000 ' Park Fencing ($15,000) ' Outfield Drainage ($16,000) ' Backstop Renovation ($50,000) Laguna Lake Dredging Equipment 200,000 General Government Corporation Yard Bulk Storage & Composting Area 120,000 Radio Transmission Facilities (Phase II) 39.000 Total Immediate Deferrals $1,092,000 POTENTIAL PROJECT DEFERRALS Public Safety Fire Heavy Rescue Trailer $ 15,000 Fire Training Facility 205,000 Trmrsportation Street Reconstruction Program (1992-93) 700,000 Traffic Signal Upgrade Projects 100,000 * Madonna @ Oceanaire ($70,000) • Johnson @ Lizzie ($30,000) Laguna Lake Sediment Removal (Zone 9 flood control project) 130,000 Leisure, Cultural& Social Services Open Space Acquisition (from $1.5 million total budget) 600,000 Santa Rosa Park Softball Field Restrooms 53,000 Johnson Park Irrigation Project 49,000 Public Art Projects 64,900 General Goverment Corporation Yard Trash Transfer and Drainage Improvements 50,000 Corporation Yard Landscape 30.000 Total Potential Deferrals $1,996,900 92-93BUDGET\2DEFERALS.WP c J Exhibit g- — General Fund Capital Projects that Should Go Forward Criteriafor:Retaining the.Proiect. Longstanding Outside Design Contractural Significant Maint Public Funding Substantially or Policy Operating of Existing Safety Available Underwav Commitment Savings Facilities Public Safety Police station HVAC impry a a a x Fire station# 1 replacement x a Underground tank monitoring &removal X Transportation Orcutt road widening X. x:: % Traffic signal upgrades Monterey @ Santa Rosa x x a x Palm @ Santa Rosa x x x x Mill @ Santa Rosa x x x a Elk's lane bridge x x x Nipomo street bridge x x x Balance of Bikeway projects x x z Street reconstruction — 91/92 x x x x x Leisure, Cultural& Social Sery Recreation admin facility a x Playground improvements x x x x a French park— final phase x= X. Mission playlot a x x x Park sand&edging replcmnt a.: a. z x Parks irrigation telemetry sys x x Sinsheimer park energy impry Stadium lights x a: a .. x Tennis court lights a x x a Swim center filter replacement x x: x x Golf course irrigation project a x x x Balance of open space funding X. Performing arts center x x Mission plaza improvements x x General Government Energy imprvments—City bldgs x a: Seismic safety corrections x x x x City Hall fire alarm replacement x x x Information system impry x x x x Notes 1. It is recommended that CIPprojects funded through the enterprise and agency funds(water,sewer,parking, transit,and whale rock)also go forward based on their independent funding from the General Fund 2. Detail project descriptions as prepared during the budget review process are available upon request from the Department of Finance. 63 Exhibit c_ Illii���li�lilii�i Jill'i city of sAn luis oBispo II II II 990 Palm Street/Post Office Box 8100 • San Luis Obispo, CA 934038100 June 24 , 1992 MEMORANDUM TO: Department Heads FROM: John Du SUBJECT: Per nen ng-Term Cost Savings Following up our discussion on the morning of June 23rd, I am asking each of you to develop, by July 24th, a list of potential ongoing cost savings from your departmental operation. In the review process, please re-examine the basic mission and responsibilities of your department. Are there functions or programs that can be deleted, or significantly reduced? Please identify in all cases what the service level impact would be. I am also asking you to fundamentally re-examine the City revenues provided as a result of your departmental services . Please identify opportunities for new revenues and for increasing present revenues. Please keep in mind the impact of those fees on both the continuation of our services and on our citizens. Thete is no doubt our .revenues are going to be reduced because of the State budget situation and its fiscal impact on us and the recession with its associated drop in sales tax revenue. Therefore, please propose reductions at two levels, five and ten percent, of your total departmental operational costs . Please work . with your departmental personnel in developing your proposals. In addition, if you have ideas for cost savings/revenue opportunities in areas outside your department, those ideas should be forwarded as well . In order to develop the best possible approach to dealing with this challenge, I need cost saving options which are viable and real . I am depending upon the Management Team to exercise a considerable amount of leadership in this regard. I extend my thanks to you and the employees who assist you for a conscientious, quality response to this request. JD:mc C. City Council Division Heads Departmental Budget Officers h/budgcO �- 9 Exhibit Ii1110111 I�IIIIII������i��111111 I�IIIII Illil III IIII City o san hues oaspo 990 Palm Street/Post Office Box 8100 • San Luis Obispo, CA 93403.8100 MEMORANDUM JUNE 19,1992 TO: CITY COUNCIL FROM: JOHN DUNN, CITY ADMINISTRATIVE OFFICER SUBJECT: BUDGET CRISIS EXTERNAL RESPONSE I thought it would be helpful to the Council to have a summary of actions taken by our City and our neighbors to provide an external response to the state budget crisis and the financial emergency that it has created for all California cities. Although it is still not clear what specific action will be taken by State budget writers, it became apparent by June 10 to the League of California cities and to our staff that proposals then being seriously discussed in Sacramento had a high probability of being adopted and would have a devastating effect on city finances. The League took a number of actions in a leadership role to generate pressure both in Sacramento and on the Central Coast. On June 11, Richard Kirkwood, the current president of the Central Coast City Managers, was named Area Manager by the League to direct our response. David Gray from our staff was asked by the League to serve as a public information officer to assist our cities in developing a media event and coordinating a response to the State. The City of Santa Barbara had a news conference that day to call attention to the effect on fire services. (You will recall that Councilmember Hal Conklin of Santa Barbara is the current president of the League.) A joint letter from the mayors of San Luis Obispo County was- quickly prepared and original signatures obtained and forwarded to Senator Hart in his capacity as member of the state Budget Conference Committee. The City of Santa Maria scheduled a meeting with Assemblywoman Seastrand for June 19. Our City scheduled a strategy session with area city managers for June 15. Members of the Council were notified of this meeting and Councilmember Roalman attended. Contact was made with the editor of the Telegram- Tribune to provide a briefing and seek their understanding and support. In accordance with the League recommendation, on June 15 an urgency meeting of area managers was held at San Luis Obispo City Hall. Reports were received and plans made for developing a county-wide strategy. It was decided at that meeting that communications would be sent to the Governor and again to the area legislators opposing the revenue loss. Cities would adopt resolutions and a rally would be held in San Luis Obispo to focus the public's attention on this crisis. On June 16 a letter was sent by our Mayor to the Governor and legislators opposing the proposed cuts. A news release was sent announcing a rally on the steps of City Hall for the following day. A fact sheet was produced by our Finance Director, Bill Statler, describing the crisis. A resolution was prepared and adopted by the Council at 3-Id its regular meeting that evening. Leaders of city employee organizations were notified of our responses to the crisis and their support was enlisted. Plans were begun for a trip to Sacramento, if needed, to dramatize the cities' response. Despite a conflict with a chemical leak on the Cuesta Grade, a rally was held as a media/public education event on the steps of San Luis Obispo City Hall on June 17. Representatives from all cities in the county were present and comments made by four .mayors and a number of councilmembers. News coverage was provided by television, radio and newspaper. More than 100 people were in attendance including many city employees in uniform to illustrate the potential loss of essential city services. Signs were provided to the crowd with slogans that said "Save Our City Services" and "Stop State Raid on Cities'. The staff was helped by having inside information provided by Assemblywoman Seastrand's office and Senator Maddy's office on the latest news from Sacramento. A letter following up a previous conversation with Assembly Member Sam Farr was sent along with copies of our city news release, fact sheet and table showing the magnitude of the proposed cuts to cities on June 18. (Sam is a personal friend from my Monterey days, chairs the Assembly Local Government Committee, and has been a strong advocate for cities before the Local Government Working Group of legislators formed to advise the Budget Conference Committee.) Plans were continued for a trip to Sacramento as early as June 19 or the following week. A memo was sent to Senator Maddy's office in Sacramento seeking their assistance in facilitating a Sacramento meeting with the Senator, other key legislators and members of the Wilson Administration. Word was received this morning via Paso Robles City Manager Rich Ramirez based on a conversation with League Manager Don Benninghoven that the cities' mobilization to Sacramento should be postponed until a clearer budget picture emerges. Apparently the Democrats and Republicans have resumed their political posturing over the solution to the budget crisis. Schools and the teachers' unions have been asked to "share the pain" and this has prompted another outpouring of advocacy by other budget interest groups. The Bank of America has announced that it will honor the state fiscal warrants that were to be issued in lieu of direct payments. This has had the effect of relieving the pressure to meet the July 1 fiscal year deadline that had been the focus of legislators. Speculation now is that some legal mechanism will be found to keep the State operating for an extended period of time without a formal budget agreement and adoption. This may buy additional time for cities but planning must continue for some eventual revenue loss. Our latest information is that Assemblywoman Seastrand still intends to meet with city representatives this afternoon in her office in San Luis Obispo to provide her perspective and the latest news on legislative action. Our City and our staff have been pleased to take a leadership role in this effort by committing the necessary time and resources to oppose any unfair distribution of the State's financial burden onto cities. Staff appreciates the interest, support and cooperation provided by the Council in this continuing effort. C. League of California Cities City Managers in San Luis Obispo County Management Team Deb Hossli David Gray EXTRESP 3711 Exhibit.= jli i� city of San US OBISp0 FACT SHEET THE STATE CONTINUES ITS BUDGET GRAB FROM CITIES Robbing Peter to Pay Paul BACKGROUND - THE STATE'S BUDGET CRISIS To assist in identifying solutions to the State's $11 billion budget gap, Legislative "working groups" have been formed, including one on how local government can help solve the State's fiscal crisis. This working group has developed 68 options in an effort to target $1 billion in budget cuts and grabs from California cities. The most significant of these is shifting away from cities two traditional sources of their revenues - vehicle license fees and a portion of property taxes - in order to provide funding for State programs and service responsibilities. This approach to funding the State's budget shortfall is wrong. Cities have also been hard- hit by the recession, and have already made tough revenue and expenditure decisions. These proposed budget grabs simply pass the buck for the State's fiscal problems to cities, who are neither responsible for the State's revenue shortfall, nor responsible for providing State services or programs. WHAT IS BEING PROPOSED? The most serious of the State's budget grabs would shift vehicle license fees and a portion of property taxes away from cities and allocate them to programs and services that are State responsibilities. This proposal would cost the City of San Luis Obispo $2 million annually. HOW WILL THIS AFFECT THE CITY? Two options are available to us in addressing this major shortfall: increasing local revenues .or reducing service levels. The City has already made very tough decisions in both of these areas over the past several years, including fee increases for planning, engineering, building, water, and sewer services, increases in our business and transient occupancy taxes, and $3.1 million in expenditure reductions during our 1991-93 budget process. Additionally, the City is committed to a program of productivity improvements that has already resulted in a reduction of 7 positions. Contrary to the State's handling of its fiscal affairs, the City has addressed its financial needs in a responsible and forthright manner, and it is being punished by the State because of it. Service impacts. On the expenditure side,.this budget grab represents almost 10%'0 of our General Fund operating expenditures. This level of expenditure cuts - coming on top of reductions already made -would significantly impact our ability to provide essential services to our citizens. It is not possible at this time to say what specific programs would be affected or by how much - this is a decision that would be made by the Council during an open public hearing process (an approach that the State itself does not use); however, it should be noted that police and fire protection services account for almost 50% of General Fund operating programs; and other key programs financed by the General Fund include street maintenance, parks & recreation (including child care), and financial support for many cultural and social service activities such as La Fiesta, the Mozart Festival, Farmer's Market, and the homeless shelter. Examples of possible service reductions Offsetting this shortfall solely through expenditure cuts would require the equivalent reduction of 38 police officers (we only have 41 police officer positions, and 56 sworn police positions in total). It is unlikely that police services would be impacted to this degree. However, since public safety services represent almost 50% of General Fund operating costs, it is equally unlikely that police and fire services can be unaffected by this budget grab. If this reduction is simply distributed proportionately among all General Fund programs, staffing would have to be reduced as follows: Required Fxis Reductions Regular Staffing Police 11 83 Fire 7 55 Public Works 9 68 Community Development 4 26 Recreation 2 71 Other Departments 5 38 TOTAL 38 281 WHY SHOULDN'T CITIES HELP THE STATE? ■ The State's budget problems are its own. It is unfair to ask cities to solve problems that they did not create. ■ Cities have already helped the State. Over the last year alone, the State has shifted (or outright taken) over $500,000 annually from the City of San Luis Obispo in cigarette in-lieu revenues, fines & forfeitures, booking fees, sexual assault exams, and property tax administration fees. ■ Cities are facing the same kind of revenue shortfalls as the State due to the recession, and have already made tough budget decisions on both the revenue and expenditure side because of it. It is simply unfair to ask cities to do more; further budget reductions will have a very significant impact on the delivery of essential services to the community. ARE THERE OTHER ALTERNATIVES FOR THE STATE? Yes. For example, the State's existing revenue system includes $20 billion in loopholes that are not being used at all to close their $11 billion budget gap. As long as the State fails to close these loopholes, it is wrong to force cities to drastically reduce essential health and safety services.