Welcome to July. The weather finally feels like summer. There is a holiday coming up. They say there will be baseball games on television before the end of the month. The calendar moves on.
June 30 was the last day of the City of Buffalo’s 2019-2020 fiscal year. It was rocky. July 1 is the first day of the City of Buffalo’s new fiscal year. It is going to be rocky.
Mayor Byron Brown on May 1 proposed a budget for the next fiscal year. With some reluctance the Common Council by a six to three vote last month approved the budget. Council members expressed concerns about some of what that document contained.
While all government budgets have problems with the expense side of the ledger, Buffalo’s financial difficulties have been rooted more on the revenue side of the picture. The problems are big and they have been ongoing for several years.
Recent city budgets have contained tens of millions of dollars in estimated revenue that can best be described as creative. There have been millions in fees that have never been enacted such as an entertainment surcharge/tax; proceeds from city property sales far in excess of what could reasonably be expected to materialize; income from fines that is unattainable; exaggerated casino payments; and other assorted overestimations of revenues.
Over the past several years, ending in 2018, the city exhausted all of its reserves except for its “rainy day fund” that amounts to approximately $39 million. It’s pouring now. Nay, there’s a monsoon now. The “break glass” use of the rainy day fund is coming soon.
In the fiscal year just ended Buffalo found it necessary to borrow 18 million dollars to fill a budget gap that included the recurring problem of overestimated revenues as well as the fiscal shocks of the pandemic. The city incurred additional pandemic-related expenses while the city’s share of the county sales tax diminished, parking collections dropped, and traffic fines went down.
City Comptroller Barbara Miller-Williams announced in late April that the city had a $35 million cash deficit and was in danger of not having enough money to make payroll. Not to worry, the Brown administration announced, we have a plan for that. They simply used a joint city-school district bank account that is managed by the City Comptroller’s Office to make up the shortfall. Then, the Brown plan went on, when the city government received its regular payment from the State of New York in June the money would be returned.
At about the same time Governor Andrew Cuomo was warning local governments that shortfalls in state revenues would partly be made up by reductions in money provided to the localities. That possibility does not seem to have been factored into the city’s plan for repaying the joint city-school system account.
To bring the 2019-2020 budget gap filling story up-to-date, the Cuomo administration announced last week that they would not be sending certain money to municipalities because of the state’s own budget hole. There was no indication about when or in what amounts those funds might be forthcoming. For Buffalo the delayed or lost revenue could be up to $20 million. That would be the same money that the city intended to use to repay the joint city-school district bank account for the money the city used in May. A plan to repay that money remains to be seen.
To fill a projected budget gap for 2019-2020 the Common Council approved the borrowing of $18 million, but that does not account for the temporary or permanent loss of up to $20 million in state aid that the city expected to receive last month.
On to the 2020-2021 fiscal year. The approved 2020-2021 city budget revenues includes $65.1 million in “federal disaster relief,” something that at the moment has no basis in law, and $11 million in revenues from the Buffalo Creek Casino, which has just re-opened in a limited operational mode. $76.1 million is more than 14 percent of the city’s total budget, so if any substantial portion of those millions is not forthcoming the city will be left with a big new hole to fill in a new fiscal year that is now underway. In budget-speak, the city now has a structurally unbalanced budget where operating revenues do not match operating expenses.
But the city administration, according to spokesman Mike DeGeorge, has a plan for that too. He texted the Buffalo News to say: “When the federal government provides adequate, direct and flexible aid to state and local governments, the state will disburse the withheld AIM funding to Buffalo and the other cities. In the interim, the City of Buffalo has a plan in place to cover any deficit or gap that may arise as a result of this action.”
Whatever exactly is included in the administration’s plan to “cover any deficit or gap” appears to be as closely guarded as Colonel Sanders’ secret blend of 11 herbs and spices for the chicken he serves. When the city budget was adopted in late June Council members reported they had no information on what is included in the budget gap closing plan. Meanwhile other governments, including the County of Erie, have already approved plans for budget cutting if federal government relief is not forthcoming.
Elizabeth Warren had all sorts of publicly detailed plans for moving the country forward. On the other hand, Richard Nixon, during the 1968 presidential campaign, had a secret plan to end the Vietnam War. For the moment anyway, the Brown administration’s plan for paying off borrowed money and for filling a hole in their new budget seems more Nixon-like than Warren-like.
The city’s secret plan, whatever it is, will get harder to implement with each day that passes in the new fiscal year. Did I mention that there is a Buffalo Fiscal Stability Authority that could legally step in to bring some order to the impending chaos?