Democracy on the Front Lines
City Administrator’s Blog
March 2, 2012
For me and the department heads, this is budget season. We spent most of the last month preparing the budget meetings. Each year, the City is required to prepare an annual budget that outlines how the organization will spend its money for the fiscal year. Our fiscal (budget) year begins on May 1. (I have no idea why it starts on May 1, since the state fiscal year starts on July 1, the federal fiscal year begins on October 1, and does not even fall at the beginning of a quarter.)
Our total budget, including enterprise funds (water, sewer) and capital projects, is around $58 million. However, most of the City’s operations are covered in the General Fund, which is around $15 million. The General Fund includes administration, police, streets, planning & zoning, and economic development. The water and sewer systems are funded solely by user fees (your utility bills). The Parks & Recreation Department is funded through a combination of property taxes, utility tax, user fees, and the General Fund. The Fire, Library, and EMS departments are funded through dedicated property taxes.
In preparation of the budget, I require each department head to submit a detailed, line item budget to the Finance Department to be compiled into one document. Then the entire Management Team sits around a table and each department head must justify his/her budget to everyone else. This provides opportunities for questions, policy discussions, and synergy. What seems like a department-specific budget problem may actually be relevant to other departments and we can work out a solution. We eventually arrive at a proposed budget by consensus – everyone knows what is in each other’s budget and they all accept the final product.
I find this transparency to be particularly valuable. It eliminates the mystery of the budget process, and every department head knows exactly where the money is and where it is going. They have ownership in the entire budget and provide a united message to the City Council that this is the best budget for the City of O'Fallon. Budgeting is not done this way in many cities, but I don’t think I could do it any other way.
The big issue this year continues to be the declining economy. We are highly dependent on sales tax (around 45% of the General Fund) and we are not immune to the national economic slowdown. We also receive a significant amount of income tax revenue from the State of Illinois, and the state is currently four months behind in sending our share of the income tax. They owe us around $800,000.
We do not know what will happen to the economy in 2012, but we are anticipating a slight increase in commercial and sales tax growth. The state legislature has not resolved its budget crisis, so there may be more cuts ahead.
Because of severe revenue shortfalls, we have cut more than $3.4 million over the past three years. We are projecting next year’s budget to be about the same as this year’s budget.
While revenues are flat, expenses are not. We still have to absorb increases in wages, health insurance, worker’s compensation, information technology, and general inflation. As a result, a flat budget will require painful cuts in all departments.
Once the Management Team has come to a consensus on the budget, the proposed budget is presented to the City Council Committees beginning February 27 and into March. The City Council will vote to approve the budget in April and we will be on our way to a new fiscal year on May 1.