Getting Through This Together
May 10, 2009 8:47 PM
The bad budget news just keeps on coming, but it's important to keep our perspective and to respond to the challenges we face thoughtfully.
Yesterday, the Governor announced that the state's projected deficit at the end of its two year budget cycle in 2011 would be about $1.5 billion worse than the $5 billion hole he expected when he put his budget together back in February. He's going to respond with layoffs and unpaid furloughs for state employees, deep cuts to state programs and cuts to state aid payments to local governments like Madison.
While this is certainly bad news, the exact dimensions of the problem for our city will come into focus over the next few weeks. My first concern isn't for city government itself, but for the many Madisonians who will lose their jobs or see their paychecks reduced in the coming months. Then, of course, there will be some ripple effect as these workers cut back on their spending.
As for city government, it is important to understand that the city and state budgets are very different animals. Our city budget relies heavily on property taxes while the state relies primarily on income and sales taxes. There is an advantage for municipalities here in that property tax collections are much more predictable. Property taxes are collected pretty much in one lump sum by the end of January each year, although some taxpayers choose to split their payments with the second payment coming by July.
The state, on the other hand, has to rely on projections of income and sales taxes that will come in over the coming two years. Those projections, in turn, are highly dependent on the economy. People lose their jobs and income taxes aren't paid. People slow their spending and sales taxes go down. What's happening now is that the state's projections were way off because the recession turned out to be much deeper then was predicted several months ago. For example, income tax collections were down 52% in March and 30% in April compared to last year. This means that the state has a budget problem for this year, 2009.
In Madison, our problem is not as immediate. The lion's share of our revenue is already in in the form of property tax payments. Other revenues, like investment income and building permits, will be down, but they make up a relatively small part of our overall budget. So, at this point (and I need to emphasize at this point) I'm hopeful I won't have to take any draconian measures for 2009. We'll know more by about this time next week when we have more complete revenue and expenditure predictions for the year based on first quarter activity.
What is more concerning is 2010. We're likely to see significant reductions in state aid payments, new construction in the City has slowed, and state levy limits and expenditure restraints could come into play more heavily then they have in the past.
The important thing is to approach the problem carefully. We need to collect information, analyze trends and make the most prudent decisions we can. When you're driving a big bus, slamming on the breaks can injure a lot of people and throw the bus out of control. It's better to tap the breaks and ease to the shoulder.
So, when the Comptroller finishes his review of the data next week, I'll sit down with him, Treasurer Dave Gawenda and others to review our options. I'll also be in close touch with Council leadership. A full review of our quarterly numbers with the Board of Estimates will be scheduled as soon as we can do that.
These are hard times, but if we keep our heads about us, plan carefully, talk to one another, and work together in good faith we'll come out of it poised to take advantage of the recovery that will surely come.