SANTA MONICA—On February 8, the Santa Monica City Council met to discuss budgetary matters, in addition to hearing the 5-year financial forecast. Severe budget shortfalls were projected for the coming years, portending deficits and cuts in city services.

City Council members discussed various solutions and approaches in order to avoid the predicted financial cyclone that is thought to potentially require substantial reductions in basic amenities, pensions and city jobs.

As City Manager Rod Gould remarked to Council members, “We’d like to present for you a two-year budget for the next two fiscal years. This way we would present 24 months of allocations and service commitments (and) save considerable staff time ”¦ but allow the Council to adjust the budget every six months to make course corrections.”

Councilmember Kevin McKeown was at the forefront of these discussions, arguing for fee increases and various cost-cutting measures that would raise the needed revenues while minimizing the impact of any future deficit.

One such proposal was the implementation of a biennial budget, something that would introduce accountability into the spending process.  Under this model, the city would regularly revisit the adopted financial plan every 6 months, to ensure solvency and sustainability.

Following the 5-year financial forecast, three possible budgetary outcomes were identified, with the “worst case” outcome serving as the basis for current City Council proposals. Using the baseline outlook, the forecast projects a $12.3 million deficit by 2016, despite a $1.7 million surplus for the fiscal years 2010-11. The worst case scenario projects a deficit of $26.3 million by 2016, more than double the baseline amount.

The City Council decided to incorporate the findings of the 5-year financial forecast. The Santa Monica Finance Department will begin to work on preparing the city’s first two-year budget, representing a historic departure from conventional practice.

“I think what we have here is a curveball coming at us,” McKeown stated at the meeting. “If we don’t realize that, in a few years, those numbers (reflecting revenues and the ability to cover costs) are moving farther apart, and be prepared for that, we will be in a situation where we won’t be able to sustain these wonderful programs. We’ll find ourselves cutting programs, laying people off, and disappointing members of the community.”

Councilmember Bobby Shriver was equally pessimistic, saying that the “800-pound gorilla is the 86 percent benefit compensation on our friends in the police department.”  “It’s a choice game. In an era of declining or flat revenue with strongly escalating expenses, what has to happen at some point is the people have to choose between the additional police officer and senior services,” said Shriver.

With the two-year budget strategy, Santa Monica is seeking out new ways to close the budget gap.