Mindful that employee pension and healthcare costs are going up by $3.5 million even as sales tax revenue has gone down, city officials began drafting Bakersfield's proposed 2014-2015 Fiscal Year budget at a kick-off meeting Tuesday.
"I expect it to be a budget which isn't very far off the current-year budget," City Manager Alan Tandy said in an interview. "We're not expecting cuts, we're not expecting layoffs or hiring freezes, but it is not likely we'll have much discretionary spending to add personnel."
About five months remain in the $512 million 2013-2014 Fiscal Year budget, which emphasized the importance of public safety by adding 10 sworn Bakersfield Police Department officers. The current fiscal year ends June 30.
Tandy said it was too soon to predict whether the city police force -- already at 389 its highest number ever -- could add more officers again this year.
He added that his comment about discretionary funds was "applicable to the entire organization."
Finance Director Nelson Smith said in an interview that the city's cost for its employee pension plans through the California Public Employees' Retirement System is expected to rise between 1.5 percent and 3 percent for each of the next five years, depending upon the plan.
This will cost the city nearly $2 million in the next fiscal year, and about $11 million over the next six years.
The rise is largely due to the 24 percent loss in CALPERS' investments in the 2008-2009 Fiscal Year, Smith said.
While the insurance agency's investments are since back in the black, it posted just a 1 percent profit on investments during the 2011-2012 Fiscal Year -- the most recent year for which figures are available.
The city's unfunded liability has risen by $8.7 million, to just more than $176 million for the 2011-2012 Fiscal Year.
Unfunded liability is the amount CALPERS would be short if every Bakersfield city employee whose pension it covers retired tomorrow.
The city's cost for the one Kaiser Permanente and two Blue Cross health plans which it offers employees also rose, between 8.5 percent and 15 percent for contracts approved last month.
The increase will cost the city $1.5 million during 2014, Smith said, and is largely based on medical claims paid out.
"If our actual claims paid exceeds a certain amount, our rates go up," said Smith, adding that rates can go down. He attributed the rise to "probably in Bakersfield, there's more of an air quality-asthma-type issue, but statewide it's related to obesity and the medical issues related to it."
The last bit of bad news department heads must consider as they craft their budgets is the city's sales tax revenue.
According to the most recent figures available, sales tax for the second and third quarters of 2013 fell .8 percent compared to the same period in 2012.
The city earns about $700,000 per 1 percent of sales tax collected, so the .8 percent drop represents a dip in income of about $560,000.
Expected growth in property tax revenue and income related to property development will help but isn't expected to do much more than cover the $3.5 million rise in healthcare and pension costs, Tandy said.