Page 4 - FY 2022-23 Supporting Information

To mitigate the impact of these risks, I urge City leadership to maintain its
commitment to building healthy General Fund reserves, which the 2022-23 Proposed
Budget achieves with 8.8 percent of General Fund revenues. Healthy reserves heading
into the pandemic gave the City a pathway to sustain core services in the face of one of
the most damaging financial crises of our generation. The availability of healthy reserves
going into our third year of living through the global pandemic with the backdrop of high
inflation, rising interest rates, and the ongoing Russia-Ukraine conflict demonstrates fiscal
stewardship and an understanding of how quickly balanced budgets and surpluses can
turn to shortfalls and services cuts.

Of course, the primary purpose of the City is to serve our residents. In this respect,
the 2022-23 Proposed Budget represents the restoration, continuation, or enhancement
of several services. Positions in various departments lost at the height of the pandemic
have now been restored and fully funded. Nonetheless, with the loss of significant one-
time federal grant revenues in 2022-23, the General Fund fell about half a percent below
the 2021-22 Adopted Budget. To balance, the Proposed 2022-23 Budget did not continue
some of these one-time programs. I look forward to working with you over the coming
weeks to evaluate these decisions and to discuss priorities within the framework of our
mutual commitment to fiscal responsibility and healthy reserves.

Financial Policies

The Proposed Budget complies with most of the City’s budgetary Financial Policies,
and falls short of others.

Reserve Fund
The Reserve Fund Policy requires a minimum balance of 5 percent of all General
Fund revenues. The Proposed Budget achieves this goal with a July 1 balance of $466
million or 6.25 percent of General Fund revenue. The Proposed Budget also sets aside
funding in the Unappropriated Balance of $79 million, contingent upon receipt of
reimbursements from the Federal Emergency Management Agency, to repay currently
outstanding loans from the Reserve Fund and other sources for COVID response
activities. If repaid, I project that the Reserve Fund will end the year at $535 million.

Budget Stabilization Fund
In compliance with the Budget Stabilization Fund (BSF) Policy, the Proposed
Budget includes a $64 million appropriation to the BSF. With this appropriation, the BSF
will begin the year with a fund balance of $184 million

This contribution is required because the cumulative growth of the City’s seven
economically sensitive General Fund tax revenues is 8.79 percent, 5.19 percent above
the 20-year average. Therefore, the City must make the maximum contribution of one
quarter of the value of these revenues above the average. This excess revenue totals
$257 million, triggering the $64 million contribution.