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The San Ramon City Council is set to consider options for closing the remaining $3.5 million deficit projected in the city’s budget for the upcoming fiscal year following the approval of millions of dollars in budget cuts and other cost-cutting measures as officials grappled with a $14.1 million deficit earlier in the budget planning process.
In a special meeting this week coming on the heels of multiple town halls and previous council meetings on the city’s financial outlook and budget for the coming fiscal year, the council is set to weigh in on closing the remaining deficit via General Fund reserves or money from post-employee retirement benefit funds.
At the last regular meeting on May 28, councilmembers favored addressing the remaining budget gap by reducing General Fund reserves from 36% to 30%, but requested more information on that option as well as the possibility of using Other Post-Employee benefit (OPEB) trust funds to pay for retiree medical expenses currently being paid for with General Fund assets. They rejected a third option presented by staff, which would be to undo $1.6 million in funding restored following $8.1 million in department cuts and instead implement another $1.9 million in additional cuts.
If the council opts for lowering General Fund reserves, it wouldn’t be the first time, with the city’s first General Fund Reserve Policy requiring that reserves be maintained at 50%. That requirement was lowered to 40% following a subsequent analysis from city staff, still well above the 26% to 35% level that the internal analysis recommended. Following a report from consultants including information on other city’s reserve levels – many of which were between 20% and 25% – councilmembers accepted a recommendation to lower San Ramon’s required General Fund reserve levels to 36% in 2021, the requirement currently in place.
In order to tap into additional reserve funds, the council would not necessarily have to change the current 36% level required under city policy. However, the move would require the city manager to put together an action plan detailing how funds would be restored to the 36% level, with the plan being presented to the council within 30 days of the decision to use funds past the current reserve threshold. If the council instead elects to permanently change the city’s current reserve policy, it would require a resolution to be discussed and voted on at a future council meeting.
Instead of, or in addition to, tapping into additional General Fund reserves, the council could turn toward funding from the city’s OPEB trust fund, which is aimed at contending with costs for medical benefits for retirees instead of funding those costs via the General Fund. If that option was used to address the full $3.5 million deficit remaining following other measures, the OPEB fund – currently at a $36.6 million balance compared with $41.2 million in liabilities, or 88% funded – to an 80% funded status.Â
While reducing the threshold for general fund reserves below 36% would require a decision on whether or not to change policy or direct the city manager to prepare an action plan, no action would be required in order to move forward with a transfer from the OPEB fund.
City staff are asking for feedback and decisions on the options set to be presented at the upcoming meeting, with directions set to be incorporated into a full draft of the city’s 2024 to 2025 budget for the council to consider adopting on June 11.
The San Ramon City Council is set to meet at 4 p.m. on Tuesday (June 4). The agenda is available here.
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