The Controller Drops the Third Shoe

VOICES-We are all used to the phrase, “…waiting to hear the other shoe drop…”  

Well, the Mayor dropped the first shoe for his FY2015-2016 Budget Proposal in his four “Priorities Outcomes.” The Neighborhood Council Budget Advocates (NCBAs) dropped the “other shoe” when they focused on  5 over-arching concerns.  

In my March 7, 2015 CityWatch a rticle (“NC Budget Advocates sit down with the Mayor”), I compared the Mayor’s four Priority Outcomes to the NCBAs’ five focus issues.  They compare favorably but have some differences in their emphasis.  Priorities are usually used by governments to impress the public that the government “knows what is important.”  However, I believe that stating Priorities tells everyone what the declarer can’t do, hasn’t a plan to do, doesn’t know how to do or (maybe) just does not want to do.

On March 3, 2015 the City Controller, Ron Galperin, dropped “…a third shoe” when he published his annual Financial Forecast and told all of us all of the things that he wanted to be done, financially.  No Priorities.  No eliminations.  Just positive goals for an idealized World Class City. 

The Controllers’ Guiding Principles for a Healthy Budget are:

1.  Implement a budget based on performance and measurable results; that is,  implement Performance-
     based Budgeting.

2.  Focus on Return on Investment (ROI); that is, improve the City’s efficiency and productivity. 

3.  Reform City procurement; that is, create a City-wide system to buy quality goods and services,
     efficiently, at a fair price from reliable vendors and pay them promptly.

4.  Reduce liabilities with a comprehensive risk mitigation strategy;  that is, upgrade the City’s risk
     management system.

5.  Invest in technology; that is, upgrade our communications and information management to 21^st
      Century standards. 

6.  Put the City’s vast assets and resources to work; but I really don’t know if the City will do this or how
     the City government can do this.
    
7.  Improve accounting and accountability in Special Funds;  that is, hold the relevant Department GMs
     and Division Heads responsible when they fail to perform.

8.  Explore savings in healthcare and pension costs; that is, decrease health care benefits, raise current
     employee contributions to their pension plans and decrease the pension benefits of “new hires.”

9.  Maximize current City Revenues and collections; that is, establish efficient, effective Collections
     for all the City’s’ billings.

10. Continue to build the City’s Reserves, that is, avoid short-falls and generate a “surplus,” which is
      the only way the City has any “extra” funds to add to its Reserves Funds.

Creating a more successful budgeting philosophy and practice is the NCBAs’ first concern and, here, the Controller points to the specific areas that need to change.  

The City needs almost $ 1 billion to close its short-falls;  an annual Structural Deficit of $ 200 - $ 300 millions, an annual, six-month deficit of $ 400 - $ 600 millions and an overly-large Accounts Receivables of $ 200 - $ 400 millions.

The Controller starts by re-advancing and supporting the Performance-base Budgeting concepts which were introduced by his predecessor, Wendy Greuel, in 2011.  He seems to agree with the NCBAs that the City’s current concern for people (Line-item Budgeting) is failing to define the total costs of services.  The City needs a different approach as it restores losses and creates World Class City services.

The Controller predicts that the City will have about the same revenue (income), $ 5.115 billion, next year
as it had last year.  Unless more funds are found, next year’s staff will have to be decreased and more services lost even if there are little or no increases in employee salaries.  But salary increases for many employees is already expected to increase costs by hundred of millions of dollars.

The Controller points to the fact that, each year, General Fund expenditures (expenses) exceeds revenues (income) from July 1 to December 1 (before the large Property Tax payments arrive).  He predicts that the City will need about $ 350 million in “line-of-credit” funds to cover an expected $ 500+ million deficit in FY2015-2016.  In past years, this shortfall has been covered by depleting our Cash Account, by borrowing Tax Revenues Anticipation Notes (at the cost of about $ 7 million in interest) and by inappropriately using Reserve Funds (which are supposed to be for “emergencies” and not for predictable or recurring costs). 

The Controller does not even suggest that there are ways to decrease the Structural Deficit and/or the July 1 to December 1 short-fall.  The City could reschedule some of the two-times a year Property Tax payments to four-times a year …or… advancing the DWP Power Transfer (about $ 250 million) to the month of July …or… rescheduling payments of a (reformed) Business Tax from February to July.

The NCBAs are pleased that the Controller wants major improvements in our Collections System and they want the City to recognize and make permanent the activities of the Office of the Inspector General for Collections. 

The work of reforming and producing the FY2015-2016 Budget Proposal is just beginning.

Will a fourth shoe drop?  …then, we could have enough for a horse (or a budget … of a different color).

 

(Daniel Wiseman is a long-time Neighborhood activist and an occasional contributor to CityWatch.  He has served as an NC Budget Advocate.  The views expressed here are his own.)

-cw

 

 

CityWatch

Vol 13 Issue 23

Pub: Mar 17, 2015