Worst. Budget. Ever.

Sacramento will have to rethink what kind of city it wants to be, if it wants to survive in today’s economic environment. That’s the message from city finance officials to elected council members as they prepare to tackle this year’s budget.

“Business as usual is not going to continue to work,” Assistant City Manager Gus Vina explained during a two-hour budget workshop earlier this month. “We need to right-size the organization to respond to the new economy.”

There’s little agreement yet on the city council about what to slash, or where to raise taxes and fees. But there does seem to be consensus on this: Worst. Budget. Ever.

“We’re in uncharted territory for sure,” City Councilman Steve Cohn told SN&R. “We’re looking at cuts we’ve never seen before, at least in modern history.”

Right now, the city is faced with a $40 million budget deficit going into the next fiscal year. And there’s little reason for optimism ahead. Sacramento is bracing for further cuts from the state, a likely hit from the California Public Employees’ Retirement System, and having to take money out of the city’s general fund to repay what the county grand jury says was a misallocation of city utility funds. Don’t forget the expected wave of commercial foreclosures and—oh yeah—Vina’s boss, City Manager Ray Kerridge, just quit.

The city actually faced a larger budget deficit, $58 million, two years ago. This budget is deemed tougher because a) the police and fire unions got new contracts last year, so there’s little chance of getting new concessions from them; and b) because the budget has been shrinking, this deficit actually represents a larger percentage of the overall budget pie; and c) everything’s been cut already. Many departments have lost 50 percent of funding in the last three years. The city has cut 800 jobs in that same period.

City staff will present a budget to the city council on May 1, for adoption in June. Vina is suggesting that the city look for ways to consolidate some services with the county, and ways to contract out some work now done by unionized public employees.

And he’ll be asking the council to consider what programs are essential for the city (or mandated by state law) and which might be abandoned.

Up to this point, the city council has imposed across the board cuts to most departments, while trying to spare fire and police as much as possible from those cuts. Three years ago, public safety made up about 50 percent of the city’s discretionary budget. Today, after deep cuts to other programs, public safety’s share has risen to 77 percent.

“When you have an economy that turns on you and its going to last a couple of years, we can deal with that,” said Vina. “We can ask people to do more with less. But we can’t continue to do more with less anymore. We’re absolutely at a point where we need to decide the size of the workforce and what we can actually deliver.”

To help suss out where the council should start cutting—or looking for new revenue—the city hired the consulting firm Management Partners to conduct an independent review of the city budget.

In a preliminary report the council on February 11, the consultants noted, among many other observations, that Sacramento has relatively low developer fees, and spends more than most similar sized cities on parks ($85 per capita) and fire services ($225 per capita). The city is also at a big disadvantage because the biggest property owner in town—the state of California—doesn’t pay property taxes.

The state’s contribution to local coffers, or lack thereof, is something that grates on Councilman Cohn. “Let’s comb through all the things we do for state government. It seems we have a huge obligation there, without any revenue coming back.”

Cohn also suggested immediately cutting the city’s popular planning academy and freezing its $300,000 account for public financing of city council election campaigns. The fund has been little used, but it happens that one of Cohn’s opponents in the election for his District 3 council, Shawn Eldredge, has said he intends to use public financing to run his campaign (see Cut&Paste, page 17).

City staff will soon begin holding community workshops on the city budget. At those meetings, city officials are likely to hear a lot about what services and programs residents want protected. But less about what the public is willing to give up.

“I think we have to ask, ‘What type of city do we want to be?’” said Councilman Ray Tretheway. He pointed to the city’s recent preoccupation with Mayor Kevin Johnson’s strong-mayor measure. “I personally think we want to be a city that empowers neighborhoods. Those are two different cities; they are going to lead us to different priorities. I think we need to have that high-level discussion.”