Monday, January 22, 2007
Slim Budget Forecast for 2008
By Jim Ludwick
Journal Staff Writer
City Hall could be in for some belt-tightening.
Financial projections presented to the City Council last week suggest the city can't continue its trend of spending without adjustments.
During the fiscal year that begins in July, revenue will increase $3.5 million. That's less than 1 percent of a budget that has $491 million in spending.
But it won't be enough to cover anticipated increases: more than $15 million in personnel costs, largely because of pay raises in union contracts; $2.6 million for capital projects that are coming on line, such as parks and a West Side transit facility; $500,000 for the October election; and numerous other bills.
The city will save $15.4 million, compared to this year, because it has turned operation of the jail over to the county. However, it will lose $18.5 million in revenue because of the same action: Officials approved a city tax cut when the county assumed responsibility for jail expenses.
There will be about $10 million in unreserved carryover from this fiscal year, the forecast says. That's a reduction of $25 million; this year's spending was bolstered by $35 million in carryover, the report says.
On balance, the city needs about $22 million in cuts, additional carryover or revenue, according to the report. That's the equivalent of 4.5 percent of the projected spending.
Chief Administrative Officer Bruce Perlman said the city will be able to come up with the money and is looking at ways to cut expenses in the current year.
"We're scrutinizing hiring very carefully," and departments have been told that their budget requests for next year should not call for net increases, except in critical areas such as public safety, Perlman said.
He said the city is hoping for additional economic growth that will provide tax revenue.
Perlman said revenue is difficult to forecast precisely. "It is not an exact science. It's like meteorology: '20 percent chance of snow.' It's not a certainty."
One cost-cutting option that has been used will not be available this time. Wage increases for most employees can't be withheld or minimized, because they already have been established under multi-year union contracts.
The forecast says general-fund resources, including money for reserves, will total $510 million in the coming fiscal year, compared to $543 million this year.
Albuquerque will face sluggish growth in gross-receipts tax revenue as construction slows down and the national economy cools, the forecast says. The far smaller amount of carryover, as well as the recent tax cut, also are factors.
There could be a different picture by the time the mayor proposes next year's budget in April, especially if the city cuts back right now.
But if budget growth stalls, the city will still be at a very high level of spending compared to the past.
Budget growth has been substantial since Mayor Martin Chávez took office in 2001. Annual spending is ahead of inflation by $125 million.
Chávez has proposed five general-fund budgets during that period. If all five budgets had increased at the rate of inflation, annual spending would now be roughly $366 million, instead of its actual level of $491 million, based on the Consumer Price Index and city financial documents.
Mayors don't simply choose the size of their budgets. The process is driven by the city's revenue growth, especially from the gross-receipts tax. In good times, tax revenue increases because there is more local spending.
The final budget plan requires approval by the City Council.
Total resources for the general fund, including revenue, carryover and reserves.
Fiscal 2006: $533 million
Fiscal 2007: $543 million
Fiscal 2008: $510 million
Source: City financial forecast