Budgets Start to Come Into Focus
May 19, 2009 4:29 PM
As more information concerning our 2009 and 2010 city budgets becomes available, it's time to start taking some steps to weather the storms we see coming.
The comptroller just completed an end of the year projection for 2009 based on first quarter performance. His analysis shows that we could run a $3.3 million deficit by the end of the year if first quarter trends hold. Of course that's a big "if." None of us can predict the future, especially when it comes to things like investment income. And, because we budget conservatively, in an average year we generally finish the year with a fund balance of about 1.5% of our budget - or about $3.5 million. So, it's possible that when every line item is analyzed, we could still break even. Finally, even a $3.3 million deficit would represent only 1.4% of our total budget.
So, why worry? Well, here's why we should be concerned. If the economic outlook for 2010 turns out to be as grim as the current year, then we'll have to adjust all of our revenue projections to 2009 performance levels. That alone could force us to start putting together our 2010 budget with $3 million or so less to work with. Then when we take into account the cuts that are likely to come in state aid programs, we might add another $2.5 million in lost income. Then come the expenditure increases we know are out there: health insurance goes up on average about $2.5 million a year, debt maintenance could go up by as much as $6 million, and we haven't begun to settle our union contracts yet.
All of which is to say that it's not unlikely that we could start our 2010 budget work staring at a hole of $10 million to $20 million. And when you layer on the uncertainties of state expenditure restraint and levy limits, things become even more challenging.
So, we need to take action now to try to avoid the worst of what might come in 2010. Today I'm asking city department and division heads to help me in doing the following four things:
· First, as of today we will freeze hiring. Any vacant city job where an offer has not been made to candidate cannot be filled until it is evaluated and approved by my office.
· Second, I'm asking all agencies to look at their 2009 travel budgets and give me a plan to cut them by 20%.
· Third, I will review the 2009 Capital Budget to find things that we can cut or delay so that our debt service increase for the 2010 operating budget can be trimmed.
· Finally, looking ahead to the impact on the 2011 operating budget, I'm kicking off the 2010 capital budget today by asking agencies to cut 20% from the overall target number for 2010 in the Capital Improvement Program.
As of today I'm not yet proposing layoffs or furloughs of City workers. I want to avoid that if we can. My belief is that if we take prudent actions now and we all work together, we can get through this difficult time.