Balanced Budgets

If a politician sends you campaign literature that says, “I balanced the budget!” watch out, because balancing a public budget is no big deal. In fact, California cities, counties, and the state itself are required by law to pass balanced budgets!

The biggest problem with the supposedly “balanced” budgets of cities and counties is that they ignore future liabilities like pension promises that are hundreds of millions of dollars greater than what our pension fund investments can hope to pay for.

These “balanced budgets” also don’t count postponed maintenance on roads, sewers, and other necessities. It’s as if you and I said, “We’re rich!” while the roof on our house is full of holes, and we don’t save the money to fix it. That works only so long as it doesn’t rain, and even in Santa Barbara, it eventually will rain.

Most politicians, including Das Williams and Salud Carbajal, seem to have little understanding of finance. You can’t really blame them since they have never worked in private industry and had to really balance the books.

When they claim that they “balanced the budget,” what they really mean is that they approved a budget crafted by the executive staff of the various departments (sheriff, fire, mental health, airport, etc.) that make up the government they are responsible to oversee. They just looked the other way when it came to putting money aside to pay for future costs.

And politicians can have a negative affect on the budget if they dip into city or county funds reserved for future expenses to pay for something today.

For example, most of the years Das served on the Santa Barbara City Council (starting in 2004) were strong years financially for the city. Revenues went up. Yet in nearly every year of his tenure, the City Council used money from the “rainy day fund” to cover operating expenses. This included pay and benefit increases to public employees that the city couldn’t afford. It should have been saved for street and sewer maintenance, as well as future pensions for retiring employees. So don’t be surprised if police, fire, and other employee unions back Das’s candidacy. They pretty much have to. That’s the way the game is played.

By the time the 2008 recession hit, Santa Barbara’s rainy day fund, which should have been $11 million, was down to $800,000. Without a financial cushion for hard times, the city was forced to cut services and furlough workers. In other words, you the taxpayer lost services that you thought you had financed with your tax payment. See how this works?

But every year Das was on City Council, the City Council “balanced” the budget — right into one of the most serious financial crises the city has ever faced. What counts is not that the budgets were balanced — again, that’s a legal requirement. What mattered was how they were balanced.

It would be more accurate to say that during Das’s time on City Council, budgets were balanced with complete disregard for the city’s future. By the time the problems showed up, he was on his way to his next job, this time at the state level, where his poor financial decision-making could affect not just people citywide, but Californians statewide.

People often ask me who I favor in the upcoming races for county and state offices. If fiscal responsibility is our first priority for officials who represent us, then Jennifer Christensen at the county level and Katcho Achadjian at the Congressional level are my choices. Christensen is our Santa Barbara County investment officer. In other words, budgets are her specialty.

Katcho is a Armenian immigrant who came to this country 45 years ago. He paid for college by working at a gas station. Now he owns three of them. So he knows firsthand what saving is all about.

Wouldn’t it be great to have someone on the Board of Supervisors and in Congress who understands finance and will spend wisely for our community?

Frank Hotchkiss is a member of the Santa Barbara City Council.