Keep Your Eye On The Moving Money

We have had a few weeks to consider the Mayor’s proposal to raise and spend more than $3.9 billion for fiscal year 2008, which begins July 1, 2007. We can now comment on how our Mayor is prioritizing spending. We can also take a look at pending legislation to alter the current year’s budget to provide insight into the Mayor’s intentions.

The first thing that is striking about the Mayor’s proposed budget is that, as a city, we are planning to spend more — a lot more. For the fiscal year that ended last June, actual spending from the General Fund budget was about $3.4 billion. Mayor Street’s proposed budget for the fiscal year that will begin this July is more than $3.9 billion. The increase is nearly 15 percent over two years, which is much higher than a simple inflationary increase. (It makes little sense to compare the FY 2007 budget because the current fiscal year is ongoing.)

Spending is projected to be up in nearly every city department, but there are definitely some areas in the budget where spending has increased by a lot more than in other areas. By far, the largest increase is projected for employee benefits, driven by increasing health-care and pension costs. The Street Administration has not used the opportunity of negotiations with the city’s unionized workforce to address this increased cost, so the budget for fiscal year 2008 anticipates an additional $191 million in employee-benefits costs above the fiscal year 2006 level — a 25-percent increase.

Other major areas of the budget that are projected to have above-average increases from FY 2006 to FY 2008 include funding for debt service to pay for the increased costs of recent borrowing. Increased borrowing costs associated with mayorally initiated projects contributes to increased debt service payments of more than 23 percent (nearly $37 million) over the two-year period. Spending for the Department of Human Services is also anticipated to increase by nearly 22 percent ($121 million) over the same time period.

The Mayor’s Neighborhood Transformation Initiative was supposed to demolish abandoned properties in the city so the city would not have to use money from the annual budget to pay for demolitions. But that hasn’t exactly worked out so well and the cost of demolitions performed by the Department of Licenses and Inspections is expected to increase by more than 21 percent ($1.75 million) from FY 2006 to FY 2008.

One other puzzling area of projected increase is for purchase of city vehicles. While the budget would anticipate increasing spending by nearly 43 percent (more than $5.7 million), it is not clear that this budgeted increase is not a way to tuck some extra money into a safe place just in case it is needed elsewhere in the budget as the year goes on.

It is no secret that money is “stashed” in the budget at the beginning of the year and then “unstashed” later in the year when it is convenient for the City Administration to do so. Although City Council approves a budget each spring, changes can still be made to the budget later in the year in the form of a Transfer Ordinance, which is essentially an amendment to the budget law that must be passed by City Council and signed into law by the Mayor. The authorization to spend money can be transferred from agency to agency (from the Police Department to the Fire Department) or from lump sum to lump sum within agencies (from Police Personnel to Police Materials and Supplies). Money can even be transferred from one budget “fund” to another (from the Grants Revenue Fund to the General Fund).

Along with his proposed budget for next fiscal year, the Mayor also asked City Council to consider a Transfer Ordinance to alter some spending in the current city budget. The most remarkable aspect of this legislation is less where the money is going (it will fund expected increases in employee benefits and crime-related spending; and less-expected increases in personnel costs for offices run by elected officials including the Mayor’s Office and his Managing Director’s Office, the Sheriff’s Office, and the City Commissioner’s Office). What is more interesting is where the money comes from.

To fund the transfer of money in the current budget, the Mayor would shift the power to spend money away from spending on debt service (the city often hides money here at the beginning of the budget). Additionally, spending authority would come from appropriations originally made to the Department of Human Services. Although we could probably spend a lot more to deal with the problems faced by the most vulnerable in our society, when state and federal funding does not materialize, the city often transfers the power to spend to elsewhere in the budget. Finally, the money would come from spending power related to receiving grants. Here, the city typically overestimates the amount of funding we might receive and then when revenues like tax collections come in higher than expected, we transfer some this excess appropriation power to other uses.

So when we don’t spend money for its originally budgeted purpose or when we generate revenues above and beyond anticipation, we do not give that money back to the taxpayers, we spend it. Thus, no matter how one looks at the numbers in the budget, the first conclusion must be that those numbers are simply growing larger and larger. The city is spending more and more from one year to the next — and, as the Transfer Ordinance documents — we are even spending more than we said we would spend in the current year. Perhaps the biggest issue, then, is the fact that (much as in this column) we spend far too little time talking about the results all that spending creates. If our spending is higher than ever, are we at all convinced that the overall outcomes purchased with all that spending are better than ever? That is the conversation we must aspire to.