City of Memphis’ Proposed FY 2012 Budget
Below is Mayor A C Wharton’s fiscal 2012 proposed budget, presented to the City Council earlier today:
“It is a very lean budget – but we are committed to operating within our means, making government more efficient, and cutting costs at every opportunity.
Despite the cutbacks, this budget does not close any libraries; it currently keeps all community centers open; it fully staffs the new vehicle inspection station; it reflects our commitment to address blight by minimally impacting operational funds from Community Enhancement in comparison to other divisions; and it financially supports our ongoing efforts to recruit and retain companies and jobs.
And while these highlights are notable, the most prominent figure in the fiscal year 2012 budget by far is SCHOOL FUNDING. This budget finally brings to center stage the 2008-2009 cut in funding for Memphis City Schools and our multiple year plan to repay this debt. In the budget book with which you’ve been presented, 10 million dollars has been earmarked for 2008 school funding.
In a larger context, ten million dollars may not sound like a significantly high amount given the size of the overall budget. But with all of the cuts and reductions we have made over the last two years and the reality that 70 percent of our budget goes toward personnel costs, we could not reasonably avoid impacting employees.
Specifically, the $10 million for 2008-2009 school funding will be secured through approximately 125 city employee layoffs and a system-wide furlough strategy that will mandate “employee leave without pay” for 12 days of the year.
These “rolling layoffs” will be applied to all city employees except those who took a 5 percent cut in pay last year. In our efforts to ensure that city operations are minimally impacted, these 12 furlough days will essentially be applied to 12 of the 14 paid holidays that city employees currently receive. This approach will essentially cut pay for employees on days they were already scheduled to be off of work.
We have been operating under extraordinary circumstances. With a serious rise in foreclosures and unemployment, and a sharp drop in tax revenues and returns on investments, the painful sting of a historic economic recession placed city finances in a tailspin from which we are only now beginning to recover. We need not look far to see other cities struggling with similar challenges
Both in our push for increased efficiency and our response to the fiscal crisis that has impacted government at every level, we have implemented any number of austerity measures, budget reductions, and cost-savings.
We have facilitated unprecedented collaborations between divisions of government and between the public and private sectors. We have rooted out corruption and waste as evidenced with our changes to the General Services Division.
We have restructured our debt.
We have sold assets and currently proposed the monetization of parking meters.
We have delayed important Capital Improvement Projects.
And we have taken extraordinary measures to stay current in funding Memphis City Schools.
- We have made 23 million dollars of combined cuts from our city divisions except fire and police. Keep in mind this means cutting from only 40 percent of the overall budget since public safety accounts for nearly 60 percent of it.
- We have had our top-earning employees within city government to take a 5 percent pay cut and the next tier of salaried employees to take a 3 percent cut.
- We have drawn some 22 million dollars from our city’s reserves.
In the last two budget cycles alone, we have allocated to Memphis City Schools the amount of $100 million from general revenues. Without a permanent funding source for schools, we are essentially now taking money directly from city operations to fulfill this obligation. Or to put it more succinctly, school funding is coming at the cost of shutting down and shrinking the variety of services city government provides to local citizens.
Be aware that these approaches and “to the bone” cuts have worked to address our current year school funding and to mitigate the fallout from the worst economic recession our country has seen in some 70 years……BUT all of these seriously considered actions have NOT directly satisfied our need for a sustained funding source for the schools. Neither have our steps met the 2008-2009 financial obligation to Memphis City Schools. These piecemeal and one-time efforts have in no way provided the sustainability needed to ensure we are able to annually fund the schools or even to provide services to the people of Memphis at the level they expect and deserve.
We are now at a pivotal crossroads, an intersection where we must pay our current and make-up our past school financial obligation in the same fiscal year. It doesn’t take much analysis to easily conclude that the compounding of our already monumental financial challenges by the added weight of providing 2008-2009 funding is UNsustainable. It stretches us beyond our current means and it will, if not fundamentally addressed, bankrupt city services and our ability to provide them.
This looming issue is one I hoped to deal with early on. In my first budget process as City Mayor – not long after being elected – I presented a tax increase in my presentation that was rejected by the Council. In fact the increase I suggested was in line with our considering the 18 cents property tax break given to citizens when school funding was for 2008-2009. With every penny on the property tax rate equaling to approximately 1.1 million dollars, an 18 cents tax break is now an annual 20 million dollars in lost revenue.
For 2012, the direct impact of the 2008-2009 cut in school funding will be nearly 30 million dollars. As previously outlined, 10 million dollars will be the first payment in the proposed installment plan for restoring the 2008-2009 funding. Another 20 million dollars should be considered relative to the loss of tax revenue caused by the 18 cent tax break , the funding for which was later determined by multiple courts to rightfully belong to Memphis City Schools.
These circumstances frame our understanding and remind us that, at this point, only hard choices remain. With the tremendous devotion of the vast majority of city employees and the work so many are already performing to pick up the slack caused by vacancies in their departments and divisions, layoffs and furloughs were hard choices. But our current realities make such hard choices unavoidable. And among these hard choices must be the overarching discussion of “how much government and city services can we afford to fund?”
Ultimately, we are past the point of easy fixes…..just hard choices.
We can no longer threaten our city’s bond rating by drawing on the city’s reserves. As we have seen with the recent storm damage and resulting clean-up, we must be prepared as a city to respond to emergencies.
In proceeding, there will undoubtedly be some arguments we can make through this budget process that will be easy and that could engender a good amount of community support. But as elected officials charged with the community’s trust, we must ensure there is integrity in the process that underscores the fact that we are dealing with real numbers and hard decisions that will affect people’s lives, and not struggling to advance rhetoric with shortsighted or altogether hollow financial implications. Of course we all know what’s good for headlines is not always beneficial to our bottom line; what could more universally make citizens and employees happy does not always make financial sense.
If there is a message for us, it is the theme that has resonated throughout every meeting and in every session that has brought us to this point today – that theme is SHARED SACRIFICE. Given the circumstances under which we are forced to operate, the brunt of our cuts and reductions cannot be borne on the backs of a few. This is why the sacrifice within this budget touches and impacts a true cross-section.
Layoffs will not be applied to public safety – not our fire or our police. Citizens should expect the same level of service. BUT, with our understanding that a majority of the city’s budget and employees fall within these divisions, they will all be subject to the furlough strategy being implemented. SHARED SACRIFICE
All libraries will remain open, BUT the hours of operation will be cut.
Community Centers will remain open, BUT programs for youth and seniors will be virtually non-existent due to the loss of staff. SHARED SACRIFICE.
Community Enhancement crews will not be diminished, BUT the mowing cycles will be adjusted to save money. SHARED SACRIFICE
SHARED SACRIFICE means our compromise on issues and SHARED SACRIFICE has an application for every neighborhood and every constituency group; every division of government and every member of the Council.
Even with the daunting challenges we face, we still have every right to be hopeful. Working together we have shown an ability to chart an upward course for our city even through this turbulent period. Your cooperation and decisive actions have been invaluable in securing a number of economic development opportunities, the scale of which few communities have ever seen. Memphis beat out 50 properties in 22 states to win over Mitsubishi Electric’s largest U. S. investment and its accompanying 275 jobs. Riviana Foods has opened its new 431,000 square foot plant in South Memphis. Pinnacle Airlines agreed to not only stay in Memphis, but to move downtown, bringing with them employees of then recently acquired Mesaba Airlines. Blues City Brewery will set up shop in the old Hardy Bottling Company in Hickory Hill with 500 jobs it seeks to start filling within weeks. Electrolux is bringing 1200 jobs to our city, positions that are planned to generate another 2200 employment opportunities. We also retained Cargill, saving 250 jobs, and witnessed the expansion of employees at U. S. Food Service.
With this level of economic development progress, crime numbers continuing to fall, the positive national attention Memphis is gaining, and an emboldened image for our city being strengthened by the confidence of its people, we have the wind at our backs.
Moving forward, I am confident that you will make the tough decisions that will facilitate city government establishing a more sustainable financial footing that will preserve and enhance the progress we have made and the hopeful image we continue to advance.