Burbank city coffers are exceeding the budgeted projections by 5.2% at the fiscal year’s halfway point, with revenue streams driving the surplus, according to a report by Burbank financial services staff during a Feb. 27 City Council meeting.
Meanwhile, lawmakers at the state level are clamping down on spending as economists project a $37.9 billion budget deficit in the next fiscal year.
Far removed from budget disorder in Sacramento, Burbank is enjoying solid growth at the end of the second quarter in general fund revenues boosted by consumer spending and new development throughout the city, said Burbank Financial Services Director Jennifer Becker.
“I think we are in solid financial condition, thanks in large measure to your leadership and that of your team,” said Mayor Nick Schultz at the meeting, directing his comments to Becker.
Tourism in the city is also on the rise, with parking and hotel tax revenues trending upward, too. Demand for city services is also high, said Becker.
“For a couple years now, we’ve heard the predictions from economists and the media that the looming recession is right around the corner,” said Becker. “Here we are in 2024 and no recession has arrived.”
Instead, the United States saw a stronger than expected increase in GDP, consistent wage growth, record-breaking levels of consumer confidence and an easing of inflation from as high as 8% in 2021 to 3.4% end of December to 3.1% end of January.
City staff has earmarked opportunities for revenue savings this 2023-2024 fiscal year, which ends in July, earning Burbank about $7 million by end-September. At the meeting, financial services staff identified an additional $4.7 million in revenue adjustments, bringing new revenue increases to $11.7 million, or a 5.2% surplus above initial projections.
Revised general fund revenue projections now sit at about $233 million total for the fiscal year period. Positive gains came largely from a 9.7% increase in property taxes, a 5.2% increase in sales taxes from auto sales, restaurants and hotels, and other sources of revenues.
“In comparison, L.A. County [sales tax] receipts were actually down 2.7% and the state of California overall was down 1.7%, so Burbank is definitely bucking the trend here,” Becker said.
Revenues are down overall on the state level, as California Gov. Gavin Newsom’s $291.5 billion budget proposal comes with a $37.9 billion budget deficit. This comes just after the state built up record budget surpluses during the COVID-19 pandemic.
The state’s revenue woes are an odd consequence of the “very progressive” personal income tax, which relies on the performance of high-income earners in California, Becker said.
When much of the state was impacted by severe winter storms between 2022 and 2023, the federal government granted a six-month extension to taxes to offer relief to those affected. Since nearly every California county was affected during that time, the state received the majority of its FY 22-23 tax revenues months after it already adopted its FY 23-24 budget.
“So now we have two years of deficits that the state has to dig its way out of, and the governor is proposing to do so by drawing on those rainy-day funds and reserves set aside in prior years,” said Becker, adding that Newsom will also reduce programs and make other adjustments, the result of which will have no direct impact to Burbank.
Despite Burbank’s sunny economic outlook, costs are climbing for goods, services and commodities as a result of a still-strained supply chain, and unlike most of the country, Burbank has experienced higher unemployment due to the recent writers and actors strikes.
“It isn’t really indicative of any outside economic forces,” said Becker.
It’s still a tight labor market, she added, with shortages and recruitment challenges persisting. Becker said labor market conditions are tough on employers, but great for workers who are seeing wage growth as a result of labor scarcity.
A final concern, which Schultz said always gives him a “little heartburn,” is the city’s pension obligations. As CalPERS investments continue to underperform, Schultz thanked city staff for finding creative ways to find cash to pay off the city’s recurring pension liabilities, a huge cost to the city.
Burbank still has an additional $109 million in “rainy day” reserves, seen as a cushy fallback should the economy take a dip in the future, Becker said.
First published in the March 9 print issue of the Burbank Leader.
