According to recent projections presented to the San Francisco Municipal Transportation Agency (SFMTA - aka Muni) Board by Muni staff, the agency anticipates an operating deficit of $128.9 Million (M) for the next fiscal year. This is a staggering sum considering the total approved operating budget is $816.7 M.
In this post we will present a summary of the reasons for the deficit and some potential solutions. Future posts will focus on details within the SF Muni Budget. The source for the data cited in this discussion is derived from budget information provided on Muni's website and video of Muni Board meetings.
The Immediate Problem
For the 2010 fiscal year (July 2009 to June 2010), Muni expenditures are expected to exceed budgeted allotments by $39.1 M while revenue is expected to miss estimates by $89.9 M. This results in a total operating deficit of $128.9 M.
The majority of the expenditure increases are due to salary & benefit increases and billings from other City Departments. Overtime costs are $14 M over budget, retirement costs are $6.6 M above projections, and unemployment costs are up $4.5 M. In addition, other City Departments, such as the Police Department and San Francisco General Hospital, are billing Muni for an additional $11.8 M in services. This is above the $68.4 M that Muni previously estimated. This is a somewhat absurd accounting practice since all of these agencies, including Muni, are San Francisco City agencies, but we will leave that issue alone for now.
Revenues are down significantly in several areas:
-State and Regional funding ($54.8 M)
-City General Fund Reduction ($24.3 M)
-Advertising ($6.2 M)
-Parking Citations ($6.0 M)
-Miscellaneous Areas ($0.7 M): Includes parking meters, garage revenues, interest, cable car fares, etc.
The Fundamental Problem
Muni's budget has exploded over the past several years. The chart below shows Muni's adopted budget for fiscal years 2004 to 2010. Also shown on the chart is Muni's 2004 budget adjusted for inflation (per the Consumer Price Index).
The chart shows that Muni budget has grown by 76% over the last six years while a budget indexed to inflation would have increased by only 20%. The budget growth has been driven uncontrolled spending facilitated by fare increases. More information on this uncontrolled spending will be presented in future posts.
The Solution
Muni has proposed a myriad of short term solutions. They are available in on Muni's website (see pages 10 and 11 in this presentation). Some of the solutions include furloughs/wage decreases and service reductions. While the wage reductions have some merit (a 4.6% wage reduction isn't much considering all employees are recieving a 3.5% wage increase in FY 2010), the service reductions make zero sense. Muni is proposing several levels of service reductions - the most extreme is an 8% reduction in service. However, this results in a 3% reduction in expenditures; hardly a good solution when the deficit is 16% of the operating budget. Increasing revenue is also challenging. Again, more details are available in the Muni presentation and do not need to be reiterated here.
The solution to the budget problem is to void the adopted fiscal year 2010 budget and readopt the fiscal year 2008 budget (resulting in a budget decrease of almost $130 M). While this is much easier said than done, re-adopting the 2008 budget will force sacrifices that will bring the operating budget in-line with current revenue. In addition, management must rein in overtime spending, retirement, and unemployment costs. Increases in the retirement age (perhaps from 30 years of service to 35 years), reductions in executive salaries, and halting capital projects (e.g. the Central Subway) need to be considered.
Future posts will explore these solutions in more depth. Look forward to more media coverage on Muni's budget woes in the next few days. The SFMTA Board of Directors meeting on April 7 is expected to shed more light on the budget problems and proposed solutions.
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