The Red Lobster Test
By Joel P. Engardio
Before buying our house, my husband Lionel and I took the Red Lobster test. What if we both lost our jobs and had to get by working as servers at the seafood restaurant? If the lower pay along with income from adding roommates was enough to cover the mortgage, then we could afford the house.
We took the exercise seriously, because we both knew what it was like to not have money. Lionel grew up in extreme poverty in Taiwan and remembers his family running out of rice as his father, a curbside motorbike mechanic, struggled to find customers. I remember my mom cleaning other people’s houses to make ends meet in Saginaw, Michigan.
We chose Red Lobster for more than its irresistibly delicious Cheddar Bay biscuits. At 30, I spent a year serving those biscuits at the San Bruno location. I had experienced an unexpected downturn in life. I needed a flexible job that covered basic expenses while I figured out my next move.
Looking at San Francisco’s $9.6 billion budget, I wonder if City Hall could use the Red Lobster test. Our budget has ballooned by $3 billion since 2011 when we started recovering from the last economic downtown. What’s going to happen when the next tech bubble bursts? How are we going to pay for everything?
Let’s not forget how awful it was when San Francisco faced a nearly $500 million deficit in 2009 – no match for the $79 million we pulled from our reserves. The resulting cuts to city services were painful.
Today, our general reserve is fully funded at the required two percent of budgeted general fund regular revenues (increasing to three percent by 2020). That’s good news if we continue to meet revenue growth assumptions. But when our spending grows at the same rate -- or faster -- we are on a crash course with the inevitable downturn.
In addition to the general reserve, there are rainy day reserves that we should be filling with money during boom times. Yet no rainy day deposits are scheduled for the next two budget years. Complex rules can account for that, like triggers that need to be hit or caps that have been met. But we should change the rules so we can save more.
It would be prudent for City Hall to cut spending, focus on efficiency and build up savings while revenues are strong. Spending should only grow based on long-term forecasts that account for San Francisco’s consistent boom and bust cycle.
If City Hall streamlined its bureaucracy while the economy is robust, we could be thoughtful about how to maximize government performance. We wouldn’t just be reacting under pressure in a financial crisis.
Does San Francisco really need 30,000 city employees -- one for every 28 residents? Lay-offs were required in 2010, but we’ve added even more employees since.
San Francisco can justify spending more money than most cities because it’s also a county with additional responsibilities like a jail and airport. But how do we compare to Philadelphia, another city-and-county combination? Philadelphia has twice as many people – and its budget is $1 billion less.
San Francisco can do better.
We can start by not creating an entirely new branch of government called the public advocate. The last thing we need is the expense of a shadow mayor’s office and all the staff it would require. We have plenty of public advocates we’re already paying for: two-dozen elected officials, including 11 district supervisors.
We should also carefully consider the many budget “set-asides” on the November ballot. They promise to fund necessary and noble items, like the parks set-aside that voters approved last June. But set-asides can be shortsighted, giving supervisors less control over the discretionary spending they were elected to manage.
After Lionel and I moved into our house, we celebrated with dinner at the Red Lobster where I worked before we met. I offered a toast to our career success and how disciplined we had been in saving for the future.
Then our discipline was quickly tested when the basket of Cheddar Bay biscuits arrived.