2012 Budget - Big Picture, Big Problems

Over the next couple of weeks the City-County Council committees will offer final amendments to each of their segments of the 2012 budget.   The full Council will vote on the entire budget in two weeks, on October 17.

As I've noted before, I've been spearheading the McANA effort to review the budget for the 5th year running.  Today, I'd like to take the eagle's view of the budget and talk about what I've been able to glean from the big picture.

First of all, this has been the most difficult budget to review.  There are stylistic changes, like how charges are made and for which departments.  There have been changes in the presentation that do not normalize out the unique expenditures or revenues that happen from year to year.  The practice in previous years made it easy to compare apples to apples.  In addition, there are significant issues with this budget regarding from where the money will be coming - specifically the administration's plan to tap excess revenue from both the consolidated downtown TIF and the Ameriplex TIF. 

We are told, but not shown with clear data, that there is a $64 million gap between revenues and spending for 2012.  To bridge this gap, we are told, that the Ballard administration has cut $20 million from individual department and agency budgets through their request for a 5% cut in base expenditures.  The administration also desires to take $38.5 million from the consolidated downtown TIF.  This all totals $58.5 million.  One item they are not publicizing is the extraction of $7.5 million of funds from the Ameriplex TIF to cover anticipated shortfalls in the debt service for the 'redevelopment district'.  I have asked for a list of the items funded by this district.  That brings the total to $65 million.  Close enough to $64 million for government work.

On the revenue side, I have had to pull figures together on my own, as my request for the summary revenue page has been met with the statement that the Controller's office does not want to put it out without being sure it is correct, and that they hope to release it prior to the full Council vote on budget.  Swell.

So, here is what I found about revenue shortfall for 2012 compared with 2011.

Total tax revenues - including property and income taxes and accounting for the effect of the tax caps - is $16.5 million less for 2012 than 2011.  One would expect these numbers to rebound as the economy recovers.

Federal grants are expected to drop by $15.7 million.  One would expect these numbers to rebound as the economy recovers.  However, the statement made regarding all grant funded programs has been that if the money does not materialize, the program is cut.

The healthy rainy day fund was nearly depleted last year, creating a drop from that source of money of $15.8 million.  I would not hold my breath on the recovery of the rainy day fund any time soon.

Last year, $3 million was taken from the golf course subfund of the Parks fund - but it was one time only.

The sale of the parking meters caused a $4 million revenue drop that used to go to IMPD and DPW.  This revenue will never come back.

The sale of the sewer utility caused a $13 million revenue drop that used to go to IMPD, IFD, and DPW.   This revenue will never come back.

The total revenue shortfall from the 2011 budget to the 2012 budget noted above comes to $68 million.

However, I see these revenues falling into three categories - revenue that will recover with the economy, money to fund projects that will not happen if the funding does not come through, and revenue that will never come back again.  One would expect the best effort to be made to bridge the gap for those revenue streams that should recover - trying to make ends meet until a better day returns.  One would expect to forgo those projects funded by grants.  And one would expect structural changes to the operation of the City-County to accommodate the reality that some funds are gone forever, as the assets that generated the revenue are gone forever.

Using those categories, the $16.5 million reduction in tax revenues should be bridged.  This was already accomplished with the $20 million in budget cuts.

The $15.7 million reduction in federal grants should simply mean that those programs do not happen.

The $17 million from the sale of the parking meter and sewer utility assets is never coming back and there really should be permanent cuts made to reflect this reality.

The $18.3 million from the loss of the rainy day fund and the lack of new funds from the golf course subfund could go into either the first or last category - but I think they belong in the latter, since they cannot come back until much after the economy recovers.  This would bring the need for a structural budget change to $35.3 million.

Instead of dealing with this reality during an election year, the Ballard administration prefers to rob the downtown TIF district in order to make ends meet. 

The statement has been made that there will only be $20 million in excess funds left in the consolidated downtown TIF to appropriate for the 2013 budget.  The Ameriplex TIF has been robbed to depletion over the last couple of years.  There will be almost no wiggle room left and severe cuts, the need for which are being ignored this year, will have to be made next year.