As the Economy Turns

I've noted a number of times in public meetings that our budget projections are a moving target. Every day, new information impacts (some positive, some negative) our bottom line budget for 2009-2010. While most of our projections are based on the hard data that we receive from our staff and other government agencies, we also closely monitor the State and National economic news as well.

National economic news is especially important when it comes to our pension costs. We fully expect our required pension contribution to Calpers to be increased significantly next year. This is due to the woeful state of the stock market. While there are some folks now bullish about the recent performance of the market, those of us who have closely followed the market the past few decades are not quick to assume that it is headed in a positive direction.

An interesting piece was written in the Huffington Post today about the potential short term stock market bubble and why it may be happening. It is good reading about the psychology of the market and the economy and you can read it here.

While the Huffington Post article is concerned with us chasing the next bubble in the economy, a new study by the Pew Research Center demonstrates significant changes in household spending patterns over the past couple of years. It further reinforces what we've been seeing in our sales tax numbers--that households are cutting back on expenditures--particularly non-essential retail purchases. You can read the study by clicking here.

It is these types of studies that convince us that sales tax, our most important city government revenue source, is going to continue to struggle. Sales tax revenues are not only an important component of the General Fund. Sales taxes also fund much of our transportation funding and pay for a good chunk of police and fire services as well.