Oakland mayor: New budget proposal will save city from drastic cuts amid record shortfall

OAKLAND — Facing the largest-ever shortfall in the city’s general fund, Mayor Sheng Thao on Monday proposed a two-year, $4.2 billion budget that would avoid drastic spending cuts by leaving jobs unfilled, including in the police department, and merging city services.

The majority of the City Council has already indicated some support for Thao’s plan, which would keep Oakland’s spending roughly equal to the city’s expected revenues, and avoid layoffs, even as recession fears loom nationwide. The budget’s public review starts Tuesday.

“Unlike the budget crisis of the past, we have achieved a balanced budget without resorting to government closures or layoffs which disrupt critical services to residents,” the mayor said Monday in a memo introducing the proposal.

The city’s overall shortfall over the next two years totals $360 million, or about a fifth of the general purpose fund, which pays for most of the city’s salaried positions and daily operating costs.

Thao, along with other city officials, has blamed the deficit on dried-up federal COVID relief, as well as underwhelming revenues from taxes on home sales and hotel bookings — apparent symptoms of the housing crisis and a decline in local tourism.

To work around the shortfall, Thao’s budget proposes freezing numerous unfilled job positions, including many in the city’s police force, stalling Thao’s campaign promise last year to go on a hiring spree once she took office.

Under the plan, the equivalent of 120 full-time police officer positions would remain unfilled, though the actual number of people who would have filled those jobs is much smaller because officers work so much overtime.

Several city departments that deal with housing, family support and economic development would be merged, which the mayor said would make city services more “streamlined and efficient.”

Oakland police’s internal affairs division, meanwhile, would be pulled out of the department and placed under the purview of the city’s civilian-led police oversight group — a notable move on the heels of a recent OPD misconduct scandal.

On Monday, Thao’s proposal received positive reception from members of the City Council, including President Nikki Fortunato Bas and council members Carroll Fife, Kevin Jenkins and Rebecca Kaplan — the latter three comprising the council’s budget committee.

“(We) commend Mayor Thao for her creative and thoughtful plan to achieve a balanced budget while avoiding layoffs, maintaining critical services, and making record investments in affordable housing,” read a statement from Bas’ office.

Although the $360 million shortfall seems staggering, it’s unclear in the proposal exactly how the projected revenue losses break down. The proposal indicates that in the coming two years, Oakland expects to make nearly $21 million less in revenue from those two taxes combined than what’s been generated during the current budget cycle.

In 2021, the city received $36 million in COVID-19 relief through the federal CARES Act, but that funding — and the consequences of losing it — doesn’t appear to be reflected in the proposal.

Thao points to the city’s new progressive business tax — which is assessed differently to large and small businesses, rather than at a flat rate — as helping shore up revenues.

Measure U, a bond paid for by property taxes, will also provide $200 million in affordable-housing investment, the mayor’s memo states.

Thao had previously asked city officials to calculate how 20% cuts to operations could be reflected in the budget, a worst-case scenario that the proposed budget manages to avoid.