☆ Moses: give San Jose the “freedom” to fix its structural deficit
“Avoiding layoffs is not in the interest of the taxpayers,” says Mark Moses, and it’s “too late to find savings from efficiency gains this year.” Instead, he argues, San Jose should begin a long-term approach to financial health: management should slowly regain control of the workforce, and sunset wasteful programs. An Opportunity Now exclusive Q&A.
Opportunity Now: The San Jose Spotlight article about the city’s budget deficit quotes City Manager Jennifer Maguire, who’ll “try to avoid layoffs or deep cuts to city services, instead seeking cost savings through efficiency gains and eliminating vacant positions.” Is that a reasonable approach?
Mark Moses: First, "avoiding layoffs" is not in the interest of the taxpayers. If the city has taken on too much, it needs the freedom to correct its missteps. And if one attempts to cut city services without a clear standard and without a clear commitment to delimiting the scope of city activity, the result will be predictable: the employees and programs that are least politically protected will be shed. Politically and contractually protected people and programs will proceed as usual. Financially, this approach will only help on the margins. And it is too late to execute "cost savings through efficiency gains" that would substantially impact the 2026-27 fiscal year financial results.
ON: You’ve argued that true efficiency gains are limited in a heavily unionized environment. In that context, what practical levers does a city manager realistically have?
MM: Much of that depends upon the city council. If the city council is not willing to confront some of the traditions of the public safety departments, the city manager cannot touch a significant portion of the general fund budget. When you add all of the legally required activities fulfilled by the city clerk, human resources, and finance, you are left with areas that have strong political backing – climate initiatives, housing, social justice, etc. Is the city council going to let the city manager cut those activities?
ON: In practice, which parts of the general fund budget are politically or contractually protected, and which parts are the first targets?
MM: From what I can tell, the climate advocacy and social justice programs have strong political support. It will be difficult to touch those. Meanwhile, the largest contributors to the deficit are those who are least worried. For example, the largest driver of fire department expenses is minimum staffing requirements. It's these inflexible staffing provisions that generate overtime 24/7/365. But contractually, the city cannot change the way it schedules or deploys firefighters. Further, others attempting to boost their political standing and secure preemptive protection from budget cuts only make it more difficult for the city.
The first targets will be those without clear political or contractual backing.
ON: So that helps explain why certain groups are now scrambling to defend what they can against budget cuts. But if they need to be cut now, how were these programs and personnel costs approved in the first place?
MM: All these programs and personnel that various interested parties and groups are now trying to protect were approved on the premise that they were affordable.
ON: Was that a flawed premise, or did costs/revenues evolve in a way city leaders failed to anticipate?
MM: Consider that every time a new position or program is added, the action is taken with the implicit assumption or explicit representation that there are sufficient funds available. Such assumptions do not undergo much scrutiny – and they are never subject to any deep examination or sensitivity analysis. If such rigor took place, cities would not be operating under such financial stress. When leaders are excited about building a new building or acquiring a new facility, they don't want the reality of maintenance costs in year ten or replacement costs in year fifteen to spoil their plan. So, yes, this is a combination of flawed assumptions and conveniently evading the full cost of new people, programs, and facilities.
ON: Vice Mayor Pam Foley said, “This is the most difficult budget year I’ve seen in my over seven years on the City Council – and the largest shortfall.” The Spotlight article points out that over the past 20 years, the city’s cumulative shortfalls have added up to $800 million. Was this predictable?
MM: Yes. When a city’s mission is unbounded and it ties its management hands, it is bound to experience increasing shortfalls. And keep in mind that these increasing shortfalls are taking place notwithstanding the sales tax increases, fee increases, and hotel tax increases that the city has implemented over the past two decades.
ON: You’ve talked about how improving a city’s financial health is a years-long process. But what could city leaders do this budget cycle to get the ball rolling?
MM: My top three immediate suggestions are: (1) drop the politically trendy programs whose goals are vague, unattainable, and/or destructive; (2) make it a priority to claw back management's rights to schedule and deploy the workforce one labor negotiation at a time; and (3) for those unsustainable activities that the community has relied upon, develop a timetable for sunsetting them in order to allow time for the private sector to fill the gap.
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