Oakland is expecting to receive between $163 and $192 million in federal aid, city officials said at a meeting Monday. The funds will be used to balance existing deficits in Oakland’s budget, and to buffer the city against the lingering economic effects of the pandemic as the city plans its next two-year budget.
Like other local governments across the nation, Oakland’s revenue from hotel, parking, sales, and other taxes has been reduced by millions of dollars due to the pandemic. Overspending by the police department also caused massive deficits this past year. Last Summer, the City Council took steps to close a $122 million budget shortfall, but the city still faced a $62 million deficit. In December, City Administrator Ed Reiskin reduced spending by $29 million across various departments, but that left Oakland facing a $33 million deficit for the fiscal year ending June 30, 2021. City staff project that revenues won’t recover over the coming year and further budget reductions could be necessary in the coming year.
The federal assistance will go a long way toward preventing layoffs and service reductions. The funding is part of the American Rescue Plan, which passed the U.S. Senate on Saturday and is expected to gain final approval from the House of Representatives today before it heads to President Biden for his signature.
The $1.9 trillion relief package includes $1,400 stimulus checks for many individuals and extended and supplemented unemployment benefits, child and dependent care tax credits, and other direct financial aid to individuals and families. The plan includes $350 billion in aid to local governments and states.
Oakland’s exact share isn’t known yet, but Budget Administrator Lisa Agustin told members of the City Council at a finance committee meeting yesterday that it will probably be between $163 and $192 million.
“We received some very good news over the weekend,” said Agustin. “The bill does have to go back to the House for a final vote but we’re pretty confident that the bill will be signed into law by early this week.”
Agustin said Oakland will be allowed to use the money to backfill revenue lost due to the pandemic and that the funds can be used as far into the future as 2024. Oakland will receive half the funds this spring and half in spring 2022.
City staff presented several scenarios to the councilmembers yesterday showing how the money could be used to reduce most of the city’s deficit this year and next year, but staff said it still won’t be enough to replenish the city’s reserves, leaving Oakland financially vulnerable.
“The federal aid will help but not solve our entire problem,” said Agustin.
City department heads planned for more severe cuts
In December, before the Georgia election flipped two Senate seats giving Democrats control of the U.S. Senate—and therefore increasing the likelihood of federal aid to cities—Oakland City Administrator Ed Reiskin directed the city’s department heads to prepare for budget cuts of 10% to 20%. Reiskin called it a “brainstorming exercise.”
In January, the departments sent memos to Reiskin outlining how these cuts would affect city residents by significantly reducing services and even cutting some programs.
One memo prepared by the Department of Transportation’s said that to reach a 20% cut, the city would have to discontinue its crossing guard program until June 2022, turn off street lights at night across multiple parts of the city, and institute hiring freezes that would further delay street paving, sidewalk redesigns for ADA access, bridge and road repairs, and construction of bicycle and pedestrian infrastructure, and traffic signals, among other projects.
Eliminating crossing guards further into the future would primarily harm children, especially kids of color in Oakland’s lower-income neighborhoods, according to the memo.
In a separate memo, Housing and Community Development staff wrote that even a 9% cut to that department would result in 20 fewer units of affordable housing being built or purchased.
“For illustrative purposes, this means one less Inn at Temescal which is now housing formerly homeless veterans,” the staff memo explained, referring to the hotel the city recently bought using CARES Act funds.
HCD staff also explained that a 9% cut would stall the city’s implementation of the state accessory dwelling unit program that is meant to spur construction of backyard cottages and ease the affordable housing crisis. Reducing the department’s budget would also potentially cause more displacement: “Just as a new wave of potential eviction and emergency housing measures expire, [the rent adjustment program] will be unable to ensure tenants are informed of their rights, access to housing counseling to address tenant/landlord issues will be reduced, and the unit will be forced to delay hearings and appeal decisions due to staff reductions.”
The Human Services Department, in its memo, noted that to achieve a full 20% budget reduction it would “likely have to shutter programs such as closing a Senior Center and/or closing a program such as Senior Companion/Foster Grandparents or both,” and significantly cut programs that prepare and deliver meals to seniors and Oakland youth. The department would also need to reduce spending on Head Start child care programs.
The likelihood of new federal assistance means deep budget cuts to city departments may no longer be necessary. Reiskin said yesterday that it was good the city didn’t make further cuts beyond the $29 million made in December. Even so, according to city staff, Oakland currently faces a $44 million budget deficit for the current fiscal year.
The city administration will bring proposed amendments to the city budget to next Tuesday’s council meeting.