A tale of two budgets

As previous posts have noted, the COVID-19 tragedy will, among other things, wreak havoc on the finances of states, local governments and school districts. The most direct evidence of these consequences appeared last Friday.

County Executive Mark Poloncarz announced that all county departments, including those headed by independently elected officials, would need to come up with 13.1 percent in cuts in their spending during the current fiscal year.   With only half a year left in which to implement approved cuts, they will feel more like a 25% cut to the remainder of the fiscal year. Since most county spending is mandated by the state, that won’t be easy.  Given the lingering effects of the recession and massive unemployment we are now seeing, it is likely that similar cuts will also be necessary in 2021.  It is sound policy to begin the hard work now.

Fortunately the county’s finances have been well managed. The fund balance reserves stood at about $102 million at the end of 2019.  Poloncarz has often demonstrated his willingness to make hard decisions, with the general support of the County Legislature.  Nonetheless likely cuts in state aid and a substantial decline in sales tax revenues the county depends on will make this process very hard.

And then there is the City of Buffalo. Mayor Byron Brown is required to release his proposed budget on May 1.  He waited until it was almost May 2 to do so this year.

And what a budget it is. Consider these highlights:

  • The budget makes no serious effort to cut spending.
  • The City’s tax levy would actually decrease.
  • The budget relies on the biggest to-be-determined asterisk in the history of local budgeting since the Erie County red-green budget fiasco of 2005 — “Federal Disaster Relief” in the amount of $65,082,569.
  • If the federal cash does not materialize, the Mayor plans to borrow the money.
  • At that stage the Mayor would proceed to make cuts in the budget.

There is something wrong with presenting a budget that lives on the illusion that the city will be magically bailed out by the federal government. How quaint to indicate that the millions of dollars the city is expecting is not some round number that might be considered as the federal government figures out what to do next.  An exact number ($65,082,569) appears to simply be a “plug number” used when the budget makers ran out of other creative ways to balance a budget that only tinkers with spending but is otherwise expected to hemorrhage cash in many major revenue accounts.

The Brown administration has for years ignored warnings from the Comptroller’s office about impending budget problems. They used up all of the undesignated fund balance two years ago.  There is still the $39 million rainy day fund available, accessible in a “break glass” situation.  That day is here, but it probably won’t fill the city’s needs.  And when it is gone, what happens then?

The City’s budget message seems to be that, in the face of a pandemic, Buffalo is immune from the need for painful cuts in spending. Keep in mind that the public health and social services that are being stretched to the limits by the needs of this community are managed and in large part paid for by the county government, not the city.

The Mayor reports that the city now expects a $15 million deficit for the current fiscal year, which is interesting since most of the year had been completed prior to the escalation of the pandemic problems in March.

Interesting also is how much the Mayor’s projected 2019-2020 deficit varies from that of the City Comptroller, Barbara Miller-Williams.  Only a few days before the Mayor released his budget her office was projecting a deficit of up to $35 million for the year with the possibility that the city would be out of cash this past Friday.

Finally it is also interesting that the Buffalo News, in its reporting on the mayor’s budget, ignored the inconsistencies between the Comptroller’s and the Mayor’s deficit projections.  Before these matters go any further someone might want to figure out whose numbers are closest to reality.

The Common Council could of course exercise their authority to make the budget realistic. They have no history of operating independently on budget matters.  They won’t do so this year either.

The Buffalo Fiscal Stability Authority could immediately go to a “hard board” status to assert management control over city finances. They have been content to “monitor” the previously identified revenue shortfalls in the city budget.  They have a responsibility to do something more than that.  Don’t hold your breathe.