In one week, Oakland Mayor Sheng Thao will unveil her first-ever plan for how Oakland should spend its money.
Discussions about the city’s next two-year budget have been underway for months, but May 1 is when residents will learn how exactly their new mayor wants to divvy up public dollars for core services ranging from police and fire to housing and infrastructure.
In a typical budget year, the vast majority of the mayor’s proposals are likely to sail through the process. High-profile battles erupt nearly every cycle, but they tend to center on a relatively minute fraction of overall spending.
This year is likely to be very different. Oakland officials say the city is saddled with a staggering projected budget deficit of roughly $325-345 million in its General Purpose Fund, which makes up about 40% of the city’s total spending each year. A recent city report called Oakland’s current General Purpose Fund shortfall “the largest…in its history.”
And unlike the budget of the last two years, Oakland doesn’t have federal COVID stimulus money to help fill the coffers. The last time elected officials were tasked with making cuts on this scale was 10 years ago, during the Great Recession.
“Oakland is facing an unprecedented budget shortfall that leaves all kinds of services at risk,” Ed Gerber, former longtime chair of Oakland’s Budget Advisory Commission, a civilian group appointed to give councilmembers advice on how to plan the budget, told The Oaklandside. “The Mayor and the Council will be incredibly challenged to come up with solutions.”
What is the city budget, and how does it work?
Every other year, Oakland, like many local governments in California, is legally required to adopt a balanced budget—meaning the city can’t plan to spend more money than it expects to bring in through taxes and other revenue streams. Oakland’s budget is biennial and is divided into two one-year spending plans.
The process of hammering together a budget for a city of more than 430,000 people is a long and labor-intensive process. It starts in January and doesn’t stop until the end of June. Figuring out the city’s spending priorities requires input from the mayor, city council, city staff, and residents. What comes out the other end is a very long document, usually hundreds of pages.
Once the mayor presents her budget on May 1, the city council convenes a series of public meetings where officials and residents discuss what should or shouldn’t get funded. During this process, council members can—and usually do—tweak the budget by adding, removing, or adjusting the mayor’s proposed expenditures.
It’s worth noting that councilmembers also publish their own budget priorities, and they don’t always line up with what the mayor wants to fund. For example, during the last budget cycle, some members of the city council wanted to slash funding for OPD, which the mayor strongly opposed.
The hundreds of millions of dollars that flow into the budget come from a few different sources, including local levies, such as sales and property taxes, and voter-approved bonds, grants, and service fees.
The part of Oakland’s budget that city officials have a lot of power over is the General Purpose Fund. It makes up just 38% of the city’s budget, but it’s a lot of money. In the 2021-2023 cycle, Oakland’s General Purpose Fund was roughly $872 million.
The remaining 62% of the city budget consists of restricted funds, which have to be spent on specific purposes. For example, developers have to pay certain fees to the Planning and Building Department to get various permits for construction projects, and these fees can’t be spent in other departments.
The city also maintains a capital improvement program that pays for major infrastructure projects, such as improving the water quality in Lake Merritt or repaving streets. Oakland drafts an updated capital improvement program for each budget cycle, which is how the city pays for almost all of its infrastructure. A lot of funding for infrastructure comes from bonds approved by voters. For example, last November, voters approved Measure U, which authorized raising up to $850 million for affordable housing, road repairs, and other public infrastructure.
Debates over public safety dominated the last budget process
Oakland City Council approved a $3.8 billion two-year budget in June 2021. Despite the economic havoc wrecked by the pandemic, Oakland officials were able to avoid painful cuts and layoffs thanks to one-time COVID federal relief funds totaling around $188 million.
But Oakland’s administrator, Ed Reiskin, warned at the time that this money wouldn’t fix longstanding structural problems in the city’s budget. “It masks an issue that has been exacerbated by the pandemic,” Reiskin said in a statement.
Oakland’s last budget discussions were heavily influenced by the national protests and uprisings that followed the police murder of George Floyd in Minneapolis in May 2020 and the killing of Breonna Taylor by police in Kentucky in March 2020. Shortly after Floyd and Taylor’s deaths, five Oakland City Councilmembers announced their intention to cut as much as 50% of the Oakland Police Department budget. Other cities proposed similar initiatives as part of a movement to “defund” police departments to free up money for social programs that target the root cause of crime.
Then-Mayor Schaaf warned that the amended budget would “destroy” Oakland’s public safety system by freezing 50 unfilled police officer positions. Schaaf was also unhappy about council amendments that cut the number of planned police academies from six to four, axed a second police traffic squad, and froze OPD’s 911 surge units, which provided extra officers to respond to emergency calls. Some of these cuts were short-lived. Thao, representing D4 on the council at the time, returned in September 2021 with amendments to add a fifth police academy, which was approved by the council.
Ultimately, in Oakland, as in other cities, the police weren’t defunded. In June 2021, City Council voted six-to-two to increase OPD’s budget by $38.5 million for a total of $674 million.
But the 2021-2023 budget did divert about $18.5 million in funds Schaaf had wanted to give to OPD for alternative violence prevention programs. Oakland combined this money with other funds to increase funding by 50% for the Department of Violence Prevention, which was established in 2017 to assist people affected by violent crime. The city also more than doubled spending on the Mobile Assistance Community Responders of Oakland (MACRO) program, which sends unarmed civilian first responders to 911 calls that typically involve nonviolent mental health emergencies.
The City Council also established a Reimagining Public Safety Task Force, which was made up mostly of residents appointed by the council. This commission studied the city budget and police department and came up with numerous ways to reduce the role of the police in the city’s public safety system and increase funding for other departments.
The 2021-2023 budget also allocated over $80 million to combat homelessness and created dedicated encampment cleaning crews. It invested in cultural affairs programs and added staff to departments to improve services ranging from permits to curbing illegal dumping.
With all that said, how successful was the last budget in achieving its stated aims? It’s a mixed bag. The Department of Violence Prevention may have helped reduce gun violence for a period of time but failed to meet its goal of dramatically reducing homicides in Oakland. The city paid a hefty settlement to a former employee who accused the department head, Guillermo Cespedes, of harassment and retaliation. Cespedes left for another job this year, leaving the department without a permanent chief.
OPD continues to receive the highest level of funding of any department in the city, but it’s still understaffed compared to similarly sized cities with comparable rates of violent crime. The department also experienced a major setback earlier this year when the mayor fired Police Chief LeRonne Armstrong. The mayor cited a critical report from a federal court monitor who blamed Armstrong for allegedly failing to correct breakdowns in OPD’s discipline system. In the wake of Armstrong’s termination, it’s unclear whether OPD’s court oversight will be lifted.
MACRO has proven to be popular with City Council. In their budget priorities for the coming cycle, most council members support funding the program, and several want to expand it city-wide.
What’s driving Oakland’s massive budget shortfall?
Some of the trends fueling Oakland’s financial problems are highlighted in a staff report submitted to City Council in March. According to this report, the city has experienced a “significant” decrease in the estimated revenue from real estate transfer tax levied on property sales. Higher interest rates set by the Federal Reserve caused property sales—mostly homes, but possibly also office buildings and warehouses—to drop by 31.4% during the first half of 2022.
In other words, the city expected a lot more homes to be bought and sold in Oakland over those months than the number of homes that actually changed hands.
The city also relies heavily on its transient occupancy tax, which is paid by hotel guests. Much of that revenue comes from business travelers who have not returned to the city in pre-pandemic numbers.
The city also banked on getting a bump in revenue from fees for licenses and permits for events, with officials assuming there would be a spike in gatherings following the termination of COVID restrictions. According to the city’s report, that didn’t happen.
Dan Lindheim, a professor at UC Berkeley’s Goldman School of Public Policy and former Oakland city administrator, said it will be hard for Thao to make cuts to general fund spending that can make up for the expected deficit. Like other cities, Oakland spends most of its general fund on police and fire, and Lindheim said these services are very difficult to reduce.
“If you’re not going to seriously muck with police and fire, it’s really hard to make a whole lot of savings in the general fund,” he said.
How can residents get involved?
Each council district will hold a community forum where residents can provide input to city officials. (We’ll add links and more information when it’s available.)
- District 1: May 22, 2023
- District 2: May 20, 2023
- District 3: May 19, 2023
- District 4: May 20, 2023
- District 5: May, TBD
- District 6: May 18, 2023
- District 7: May 17, 2023
Councilmembers will also discuss the budget and their proposed amendments at upcoming City Council meetings where residents can offer input:
- May 4, 2023: Mayor’s proposed budget presented at a special meeting.
- June 15, 2023: Special council meeting on the council president’s budget amendments.
- June 20, 2023: Regular Council meeting on the budget.
- June 26, 2023: Special Council meeting on the budget.
- June 29, 2023: Special Council meeting on the budget (if needed).
On June 1, the Budget Advisory Commission will publish an online report outlining budget recommendations for the city.
What does all this mean for the upcoming budget?
According to one recent survey, most residents are unhappy with the city’s ability to address public safety issues, the mental health crisis, and housing and homelessness. Council members’ budget priorities echo these concerns.
Every councilmember wants to continue funding civilian programs that reduce street and police violence, including MACRO and the Department of Violence Prevention. And all of them want funding for road safety initiatives like traffic calming infrastructure and barriers to prevent sideshows.
Councilmembers want continued investment in homelessness prevention services and funds to grow and preserve the city’s stock of affordable housing. They also emphasized economic development, which include proposals to support small businesses and youth jobs programs.
Most councilmembers said Oakland should fill vacant posts, especially in the human resources and IT departments. Oakland’s Information Technology Department is still recovering from a devastating ransomware attack.
But the looming deficit will almost certainly impose constraints on the council’s ability to achieve some of these goals.
According to the Finance Department’s recent report, department heads have been asked to propose their lowest priority services for reduction or elimination. The report also notes that the budget proposal should mitigate the impact on city services as much as possible, especially in cases where the reduction or loss of a program would harm vulnerable populations and/or communities that have experienced racial disparities.
In March, the San Francisco Chronicle reported that Thao plans to freeze hiring in several departments, including her office, the city administrator, finance, human resources, and the Department of Violence Prevention. According to a city report from last winter, some of these departments are badly understaffed, at least on paper: the Department of Violence Prevention had a 53% vacancy rate; the City Administrator was more than 24%; for Human Resources, which oversees hiring, the vacancy rate was almost 26%.
Thao still plans to fill hundreds of vacancies in important departments that don’t rely on general-purpose funds for revenue, such as planning and building, housing, transportation, and public works. These departments reported vacancy rates ranging between 22% and 32%.
A mayoral spokesperson told The Oaklandside that Thao’s hiring “slowdown” in some departments this year will potentially save the city between $50-60 million. The spokesperson said the city anticipates being able to fill vacancies in over 600 positions that are funded with revenue outside the General Purpose Fund, noting that other funds are not facing deficits.
“Avoiding layoffs is a top priority in this budget, and we are on track to do that,” the spokesperson said, adding that more details will follow when the proposed budget is released on May 1.
Erin Roseman, Oakland’s Director of Finance, said that without layoffs, the city instead must focus on service reductions.
“No departments are off the table,” Roseman told The Oaklandside.
How will Thao reckon with labor?
Thao was organized labor’s favored candidate in the 2022 election. She enjoyed significant support from unions that represent Oakland city workers. These employees have a significant stake in who becomes mayor because that person plays a big role in negotiations between the city and the unions for their salaries and benefits.
This isn’t an immediate issue for Thao; most of Oakland’s collective bargaining agreements with unions don’t sunset until 2024 or 2025.
Julian Ware, Oakland Vice President of IFPTE Local 21, said his members want the budget to protect essential city services, especially for youth and people of color. This includes housing initiatives, civilian community responders, parks, libraries, early childhood education, and economic workforce development. Ware’s local represents public sector workers throughout the Bay Area, including 979 Oakland employees.
Ware noted the budget crunch may require service cuts, but he hopes these will be distributed evenly across departments. He added that many city employees are already doing the work of two to three people—a problem Thao wants to address. Workers in understaffed departments like IT and planning are frustrated with heavy workloads that hamper their ability to deliver basic services, said Ware, who works as a spatial data manager for Oakland’s IT department.
Ware said staffing and budget problems predate Thao’s tenure as mayor, and he told The Oaklandside he doesn’t blame her for the city’s dire financial problems, although he hopes she will find a way to fix the structural problems.
“The current mayor inherited a bad deal, and she has to pull her way out of it,” Ware said.