Mission, Not Accomplished

City Manager Toby Futrell

The word on the streets around City Hall is that Austin's fiscal 2005 budget cycle – the fourth year in a row of major cutbacks – will be largely devoid of both surprises and fireworks. The first is surely true, since budget season now seems to last all year long. City Manager Toby Futrell's "draft policy budget," presented to the City Council last week, largely rehearses what she's already told the council several times: While things are getting better, the city's fiscal picture hasn't quite turned around yet, and another year of painful cutbacks is in the offing. (Actually, according to Futrell's long-term forecast, three more years of cutbacks await this council and the next one, although thankfully, the amount of those reductions shrinks in future years.)

Back when the city was rich, the draft policy budget – a tool that has only seen sporadic use in recent years, and never before by Futrell – was a useful let's-do-lunch tip sheet, allowing management to float controversial trial balloons and giving lobbyists and interest groups a chance to make their cases before the actual budget's appearance at the end of July. Now that the city's not so rich – recent hype about higher sales tax collections notwithstanding – the draft policy budget is more depressing than enlightening. Though city revenues are on the upswing, built-in "cost drivers" mean the General Fund budget will still be nearly $20 million in the red, even with a (marginal) property tax increase to the effective rate, without an average 5% across-the-board cut to all its departments.

It's a testament to the times that council members are sighing in relief at only having to cut $19.4 million from the General Fund. (That's a damn sight more palatable than the $45 million gap they were expecting to encounter earlier in the year.) But nobody expects anything like a 5% across-the-board cut to actually happen. Public safety – which accounts for nearly 70% of the General Fund – is, as usual, more or less off limits. Indeed, the biggest "cost drivers" that are forcing the budget back out of balance, even as revenues grow, are police and firefighter staffing and salaries – and nobody knows the impact that Austin firefighters' newly acquired collective bargaining rights will have on the city coffers. (Those negotiations likely will not begin, and almost surely will not be concluded, before the FY 2005 budget is adopted in mid-September.)

Public safety isn't the only area of civic endeavor that's likely to fall off the budget carving table. Public health, for the most part, is now to be the business of the new Travis Co. hospital district, and Futrell's draft policy budget suggests she will "maintain current funding levels for public health services and social services" that remain in the General Fund (thus avoiding a repeat of last year's siege of City Hall by the social-service agencies dependent on city funding). Futrell is unlikely to budge on her plans to reinstate merit raises ("pay for performance") for all employees after a three-year absence. And health care costs for city employees are forecast to go up 15%, or more than $4 million.

Elsewhere in the General Fund, there's precious little left to cut; the libraries are already closed two days a week, the Parks and Recreation Department now only performs critical maintenance to its facilities, the city laid off about a quarter of its development review staff last year, and so on. Under the dry headline "major operational assessments," Futrell outlines just a sampling of the consequences: "We have minimized impacts to our community and sustained service levels despite severe reductions, through innovations, efficiencies, and sweat equity throughout the organization. But it has not been easy." Even a 5% cut in most General Fund departments would require the sort of hard-to-reverse decisions that scare council members and inflame voters – closing facilities, eliminating whole programs, and the like.

So where is this $20 million to come from? Not from increased transfers from the utilities, which are already supporting the General Fund as much as city financial policies (and the bond houses) will allow; indeed, the cash-strapped water utility will be asking for an 11.8% overall rate increase just to meet its own groaning capital-spending needs. And, despite last week's hoopla, the money won't come from increasing sales tax revenue; Futrell's budget officer (and now also assistant city manager) Rudy Garza went as far as to apologize to the City Council on behalf of the Statesman, which went a little overboard in its reporting of the sales tax news. (The larger-than-expected growth in collections is for this fiscal year; that level of growth has already been factored into next year's forecast, Garza said.) Likewise, the forecast also includes more than $1 million in new and expanded user-fee income, such as a proposed $400 fire department fee for cleaning up after car wrecks (expected to raise nearly half a mil), so that money tree has already been shaken.

That leaves the council with two choices, really, other than prayer-without-ending for an end-of-year windfall. (Now that she's on the council, former city finance director Betty Dunkerley no longer has the power to spin gold out of straw in the City Hall basement.) Either the City Council dips further into the General Fund's cash reserves than Futrell would like – she's already expecting to raid the savings account for $8 million in "critical one-time capital expenses," but that still leaves a projected ending balance of more than $30 million. Or it raises property taxes – that is, to a rate higher than the anticipated "effective rate" (which goes up as property values go down) of 50.13 cents per $100. Actually, it would be more like 44 cents, with the balance going to the new hospital district.

An all-tax or all-reserves strategy would be as untenable as the draft policy budget's all-cuts strategy would seem to be. So presumably, between now and July 29 Futrell will get some guidance from the council as to what mix of cuts, taxes, and reserves is most palatable to bridge the gap. (Say, for example: $9 million in cuts, $5 million out of reserves for "one-time" needs – a usefully imprecise term of budget art – and a property tax one cent over the effective rate. That should cover most of the gap, and prayer-without-ceasing usually covers the rest.) But the council may be so shell-shocked and burned out that it takes a powder (again) on hard choices in this budget cycle – which will flow seamlessly into the next election cycle.

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FY 2005 General Fund Forecast

Revenues: $471.4 million

Expenditures

FY 2004 base: $462.3 million

"Cost drivers": $28.5 million

Total: $490.8 million

Deficit: ($19.4 million)

5% GF spending cut*: $19.4 million

Beginning balance: $38.2 million

"Critical one-time": $8.0 million capital spending

Adjusted ending balance: $30.2 million