Budget Consequences of the Defeat of the City’s Sales Tax Ballot Measure

The final results are now official, and the City’s Sales Tax Ballot Measure E has lost by a razor thin majority, with 50.3% of City of San Diego voters saying NO and 49.7% voting YES. Out of more than 573,000 votes cast, Measure E fell just 3,500 votes short of passage.

This is an incredibly disappointing and frustrating result, especially because of below-average turnout by voters likely to support a tax measure. In the Presidential election in 2020, 84% of registered voters in San Diego County cast a ballot. Four years later in 2024, only 76% bothered to vote. As the Voice of San Diego wrote in its Politics Report this week, “the stunning lack of interest in voting almost certainly had catastrophic consequences for Measures G and E, the two sales tax hikes that came so close to winning.”

Measure E would have raised the City’s sales tax from 7.75% to 8.75%, generating an additional $400 million annually in general fund revenue to the City. Because of the defeat of E however, the City of San Diego is forced to continue to operate with the lowest sales tax rate of any City in the County of San Diego, and one of the lowest of any City in the State of California.

There are consequences to this decision by the voters, and the Mayor and City Council must now navigate those impacts by right-sizing (cutting) the City’s expenditures to match its revenues. MEA has been in constant communication with the Mayor and Council on the best path forward, and we will continue to engage at every level throughout the budget process.

This morning, Mayor Todd Gloria announced a number of steps his administration is taking – starting today – including a hiring freeze of all but the most essential positions related to public health and safety; freezing non-essential overtime and non-personnel expense; reviewing capital improvement projects and potentially re-prioritizing those funds; exploring additional revenue-generating ideas (such as raising parking meter rates); and a number of other steps meant to immediately get to work on closing the City’s structural budget shortfall.

Given the circumstances, MEA is generally supportive of these moves. The required budget cuts ahead are significant, but if we start now – with more than half of FY2025 still in front of us – it will make the required cuts in next year’s FY2026 budget less dramatic and provide a more gradual path to structural budget balance. In other words, the more the City does now in terms of hiring freezes, service reductions, eliminating vacant positions, cutting outside contracts, etc., the fewer (deeper) cuts will have to be made later.

MEA will be making a lengthy presentation to the City’s Budget Committee next week, where we will present a number of additional recommendations and considerations for the Mayor and Council to consider, including:

• Given the budget situation, some form of a hiring freeze makes sense. But the City must also reduce the services that go along with those positions. Vacancy levels in MEA-represented positions have improved but are still high, and employees are already stretched too thin in most general fund departments. So at the same time the City freezes hiring and cuts positions, it must also cut the scope and level of services that employees are responsible for delivering.

• The City has been adding new services, programming, departments, and facilities at a rapid pace, and more is planned in the coming years. But the City already lacks the resources and employees to properly deliver on existing service level promises, and with the hiring freeze that is only going to get worse. The City needs to stop digging the hole deeper. Services, programming, departments, and facilities need to be reduced, not expanded.

• The City currently budgets more than $250 million in external general fund contracts each year. Those outside contracts should be immediately frozen or cut, except those that support the safety and security of City employees and citizens. Instead of asking MEA to support external contracts for operations that lack City employee capacity, the City needs to cut the services associated with those contracts.

• Since 2015, the City’s workforce has grown by about 20%. Over the same period, the number of Program Manager and Program Coordinator positions has grown by nearly 400%. Any currently vacant general fund Program Manager or Program Coordinator position should be frozen and cut. Since these management positions have grown at a rate 20 times higher than classified positions, vacant PM/PC positions should be the first ones to be eliminated in this process.

• All existing cost recovery/fee revenue structures should be increased to reflect actual City costs/market rates. The City should also look at any new cost recovery/fee revenue options that could be created (e.g., paid parking in beach lots), and the City must also prioritize getting an appropriate refuse collection fee implemented as soon as possible.

• We will be reminding the Mayor and Council of mistakes the City has made in past budget cycles, such as 2009, where a number of short-sighted cuts were made that actually proved to increase costs to the City. We will also highlight a long list of current general fund expenditures that are “nice to haves,” but not essential to the City’s delivery of core services and therefore should be reduced or cut.

City employees must not bear the brunt of this budget balancing process and – unlike in 2009 – MEA has the political support and broad agreement from the Mayor and Council on this point. We have collectively made so much progress in the last several years securing more competitive compensation, and making the City a better employer and a better place to work. MEA will fight to ensure that the Mayor and Council do not go backwards on this progress despite the City’s budget challenges.

This is a significant but fixable budget challenge. We will continue to keep you posted as the process continues to unfold. In the meantime, and as always, don’t hesitate to reach out to MEA at info@sdmea.org or 619-264-6632 to discuss this or any other issue.