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Bankrupt San Bernardino must cut spending by a third

Widespread layoffs or pay reductions for city workers are expected. The city is preparing to file for bankruptcy protection.

July 25, 2012|By Phil Willon, Los Angeles Times
  • Audience watches the San Bernardino City Council on July 18 declare a fiscal emergency and begin preparations to file for bankruptcy protection.
Audience watches the San Bernardino City Council on July 18 declare a fiscal… (Kirk McKoy, Los Angeles…)

San Bernardino must cut government spending by a third, almost assuredly resulting in widespread layoffs or pay reductions for city workers, as it prepares to officially file for bankruptcy protection, city officials said.

Interim City Manager Andrea Travis-Miller told the City Council that it must cut $45.8 million from the $166-million budget to ensure the city remains solvent throughout the current fiscal year, which runs through next June. Crafting the austerity plan will be required as part of the Chapter 9 municipal bankruptcy process.

"By any definition, a 30% budget cut in a single fiscal year is a severe haircut. Indeed, you might even call it a scalping," Mayor Patrick Morris said at a special council meeting on the city's fiscal crisis Tuesday evening.

At the meeting, the seven-member council voted unanimously to suspend debt payments and freeze staff vacancies, saving $5.4 million in July alone, the first and easiest step in what's expected to be a budgetary bloodletting in the months ahead.

Next month, the council will begin the more difficult cutting. In anticipation of layoffs, city officials already are preparing job placement and financial assistance programs for employees.

San Bernardino became the third California city to declare insolvency this year, joining Stockton in the Central Valley and Mammoth Lakes in the Eastern Sierra Nevada.

Travis-Miller said the 30% cut to the general fund budget would allow to city to live within its expected revenue of $120 million this fiscal year. The city's police and fire departments will not be immune. Public safety accounts for close to 75% of the city's general fund budget.

On Tuesday night, residents and city employees berated the council members for leading the city into financial ruin, while others pleaded for them to set their political infighting aside.

Joe Arnett, an unsuccessful City Council candidate, began shouting at the elected leaders: "You ought to be ashamed."

Steve Rouchleau, who has worked for the city parks and recreation department for 24 years, cautioned the council: "Please, play your cards carefully, because our lives are in your hands," he said.

Since the council's vote to file for bankruptcy protection, 63 city employees have filed for retirement, which will lighten the city payroll but add to the financial burden when the city has to cash out their unused vacation and sick time.

The U.S. Department of Housing and Urban Development and state Department of Finance have indicated that they will launch audits of the city's finances after San Bernardino officials acknowledged that the city had improperly borrowed from restricted accounts to help keep the city afloat.

phil.willon@latimes.com

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