Everywhere you look in California, it seems there are signs of economic recovery. Statewide unemployment rate? Down. State revenues? Up. Way up. And, at city council meetings across California, public officials are saying the worst is over. It got us wondering: Now that cities are seeing light at the end of the tunnel, how are they setting their spending priorities? And what have they learned?
Few cities have seen the bloodletting San Jose has: a decade of severe budget cuts, year after year after year. At a boisterous City Council meeting three years ago, dozens of speakers -- including Louis Rocha Jr. -- lined up to plead for saving things like libraries, youth centers and programs for people with learning disabilities.
"I believe we can find a way to balance this budget without pitting people against each other," Rocha had said. "Creative solutions will save services. We are one city. Choose a solution for all of us."
By comparison, a community budget hearing in San Jose last week was practically serene. Soft jazz played over loudspeakers at a high school gym as Mayor Chuck Reed ticked off new spending plans.
San Jose Mayor Chuck Reed talks with District Supervisor Pete Constant before a city budget meeting where some rare good news was shared with voters.
"This year we're able to open four libraries that had been padlocked; brand-new, never used," Reed said. "We added another 800 streetlights we've turned on already this year from those we turned off to save money. So, it's getting a little better."
Like most cities in California, San Jose isn’t out of the woods yet. Mayor Reed blames state officials who increased pension benefits for state workers during the dot-com boom -- changes that trickled down to the local level.
"The state of California acted as if it was rich and didn't have to worry about a thing. And the stock market was gonna keep going up and up and up and that was just totally unrealistic," Reed said.
City Manager Debra Figone said San Jose has cut $680 million and 2,000 positions out of its budget over the past decade -- adding there’s still a $3 million shortfall this year. But at least there are no more layoffs.
"We now have staffing levels the same we had in 1988-89 when population was 250,000 less people," Figone explained. "So our ability to deliver services has drastically changed."
Supervisor Pete Constant has represented the west side of San Jose since 2007.
"Residents have really felt the impacts," Constant said. "You know the first few years you can survive a deficit by trimming around the edges, consolidating, efficiencies. But when you go into a decade of budget problems you have these service cuts that really hit them in the face. They can see ‘em every single day."
Resident Robin Helf would agree with that. Like others who showed up at last week’s meeting, public safety was on the top of her mind. She and her neighbors are unhappy about police response to a recent rash of burglaries.
"[Residents] are told that even when they have fingerprints and ample evidence that, 'Sorry, we don't have the detectives to sort through this, investigate it, and use it and pursue it further,' " she complained.
Max Neiman studies the finances of California cities. His take: Even as local revenues recover, there is a kind of lingering shell shock on the part of city officials.
"I think all of them are very cautious in this environment," Neiman said, "because they found this experience to be so painful in terms of service cutbacks, laid-off employees, furloughed employees. There was a lot of bloodshed."
Neiman noted that while state government relies heavily on volatile income tax -- which falls and rises quickly with the economy -- local government depends on sales and property taxes, which plunged during the home foreclosure crisis and haven't recovered.
Michael Coleman, with the League of California Cities, said the deep recession and slow recovery have forced many cities to do things they never would have considered in the past.
"You’ve seen folks go in and do major restructuring," Coleman said, "and not just with libraries or street pavement or parks and recreation. But really getting into the public safety service area."
That’s what happened in the city of San Carlos on the northern edge of Silicon Valley. Three years ago, after voters rejected repeated ballot measures to raise taxes, city leaders took drastic measures to close a $3.5 million deficit. The targets, said Assistant City Manager Brian Moura, were three agencies previously considered sacred cows.
"In the case of park maintenance we contracted with a private sector company," Moura said. "In the case of fire we actually broke up a shared department. And in the case of police we contracted with the sheriff."
Disbanding its own police department and restructuring fire caused a firestorm of criticism, especially from public employee labor unions that feared layoffs and pay cuts. But a funny thing happened, said Moura. Relying on the county sheriff for law enforcement meant the city didn’t have to pay for extra officers to cover those on vacation, disability or sick time. The county did that for them.
"Suddenly we were getting three, four officers on a shift always," Moura said. "Whereas before we budgeted for that many, but if something happened we didn’t always get what was shown in the budget.”
In fact, Moura said, the city had what they called “excess savings,” which they invested back into things like traffic enforcement and a sports league for local kids. It worked out well, but experts say this kind of restructuring can be risky if it's done wrong. Still, three years after revamping government services, Moura said other cities in the county have followed the lead of San Carlos.
"It would be difficult to go back to those other models, in part because we now see that the arrangements we have in place today are giving us in most cases a higher level of service for less cost," he said.
But many cities and counties are still putting off tough, unpopular decisions. Reserves are depleted. Most importantly, said Coleman with the League of California Cities, local governments must come to grips with long-term costs for employee pensions and retiree health care.
"Cities that are well managed are taking on the hard news and the hard realities of making sure those programs are funded and not waiting for those bombs to blow up in their face," Coleman said. "And I think the cities we’re going to have problems with in the next five or 10 years are the ones that are still in denial."
In fact, San Bernardino recently became the third major city in California to declare bankruptcy after failing to balance its budget. And in Los Angeles, labor unions attacked Mayor Antonio Villaraigosa's call to eliminate a 5.5 percent salary increase for city workers.
And still sitting out there is the local impact of sequestration, with across-the-board federal budget cuts that are just now trickling down to local government programs, putting yet another dent in their bottom lines just as things are looking up.