Page 6 - FY 2022-23 Supporting Information

compensation adjustments after July 2023, and a downward trend in pension contribution
amounts.

There are several risks to these surpluses. If revenue growth slows due to an
economic downturn, as I discussed above, it would reduce the projected surpluses.

Further, continuing one-time spending, expanding service levels, adding new
services, or pursuing major new projects would also reduce projected surpluses. This
includes the continuation of services added in the Proposed 2022-23 Budget as one-time,
such as the $55 million in the General City Purposes, Additional Homeless Services line
item. Other spending increases, such as employee compensation adjustments that are
not currently in place, an upward shift in the pension cost trends, or general inflationary
pressures, would also reduce the surpluses.

Areas of Concern

It is customary for my Office to identify the areas of concern with the Proposed
Budget that we believe may require attention and/or solutions during the course of
2022-23. As already stated, the related risks of continued inflation and an economic
slowdown are external factors that could pose challenges to both revenue and
expenditures.

The Proposed 2022-23 Budget includes $253 million in General Fund subsidies to
special funds. These subsidies are at times the result of policy decisions or funding source
restriction, but I have provided a list of all such subsidies to help you assess whether the
subsidized services are your highest priority use for the General Fund.

The Proposed 2022-23 Budget includes $25 million in departmental reductions.
While I believe these are necessary and reasonable, especially in light of the significant
savings that some departments are generating in 2021-22, department leadership will still
have to manage to reduced funding levels despite demands for service. Also, while the
Budget includes appropriate contingencies for potential labor costs and unbudgeted
homelessness spending, there may be demands that exceed these contingencies’
capacities in these areas.

I look forward to discussing these issues and any others that may arise as you work
to adopt a fiscally responsible, balanced budget for 2022-23.

Sincerely,

Matthew W. Szabo
City Administrative Officer