My post last week provided details on the City of Buffalo’s precarious 2020-2021 budget. Drawing on both budget facts that pre-dated 2020 and an analysis of the 2020-2021 budget prepared by the Buffalo Fiscal Stability Authority (BFSA), the numbers present a very dramatic and uncertain financial future.
Here is a summary of the ongoing dilemma that the city faces:
1. The city ran an operating deficit in 2019-2020 which required them to borrow $25 million. The city sold a Revenue Deficiency Note in that amount to close out the year.
2. The current budget is dependent on receiving $65.1 million of “Federal Disaster Relief;” and $11 million of casino revenues; and the state limiting their aid cut to 20 percent; and sales tax receipts not going down more than $18.4 million during the year. In addition, the budget expects that spending will not rise over budgeted amounts.
If all of that happens over the next ten months the city could complete the current year with revenues and expenses in balance. But the balance would be artificial since it is highly dependent on a large one-shot revenue that will likely not be available in subsequent budgets.
3. The city’s four year plan anticipates paying back the $25 million loan in December 2021 by cutting expenses that year in a like amount. In addition, questionable revenue projections in the 2021-2022 fiscal year could create or add to a new operating budget deficit for 2021-2022.
For the next fiscal year, which will begin ten months from now on July 1, 2021, the city is projecting massive cuts in spending. About 85 percent of the city’s budget, excluding transfers to the Buffalo School System and the debt service fund, is for personnel expenses, so cuts in the 2021-2022 budget will require cuts in uniformed and civilian staffing as well as other expenses.
The size of the projected cuts varies greatly by department but the reasons for the differences are not explained in the four-year plan. Here is a summary:
• Common Council – a cut of 1.7 percent; total department personnel in 2020-2021– 41
• City Clerk – a cut of 19.8 percent; total ’20-21 personnel – 24
• Mayor & Executive – a cut of 8.2 percent; total ’20-21 personnel – 81
• Audit & Control – an increase of 1.9 percent; total ’20-21 personnel – 51
• Law – a cut of 4.9 percent; total ’20-21 personnel – 29
• Assessment – a cut of 4.2 percent; total ’20-21 personnel – 34
• MIS – a cut of 27.1 percent; total ’20-21 personnel – 29
• Administration & Finance – a cut of 21 percent; total ’20-21 personnel – 59
• Parking – a cut of 4 percent; total ’20-21 personnel – 42
• Police – a cut of 1.9 percent; total ’20-21 personnel – 1,004
• Fire – a cut of 0.8 percent; total ’20-21 personnel – 790
• Human Resources – a cut of 2.9 percent; total ’20-21 personnel – 20
• Public Works – a cut of 7.9 percent; total ’20-21 personnel – 353
• Community Services – a cut of 44.8 percent; total ’20-21 personnel – 30
• Permits & Inspections – a cut of 3.2 percent; total ’20-21 personnel – 87
• Grants In Aid – no change
• Utilities – a cut of 5.9 percent
• Fringe Benefits – a cut of 5.2 percent
To arrive at actual cuts in personnel and other departmental expenses next year is not as simple as reducing costs by the above noted cuts. It is fair to say, however, that some departments might suffer significant staff reductions in 2021-2022.
Other suggested cuts in the areas of utilities and fringe benefits seem problematic, since reductions in these costs are not common. One of the larger fringe benefit costs is for retirement costs, which total more than $10 million annually. Retirement system rates are determined by the Office of the State Comptroller.
There is more. The 2021-2022 budget, like the current one, also has some questionable revenues.
In that fiscal year the city’s four-year plan reports that there will be $35 million in casino revenues, consisting of the same $11 million anticipated this year plus $24 million which the city administration considers owed to it from the casino in previous years. The 2021-2022 projection includes $10 million more in state aid than they expected this year even though the state budget office’s four year plan expects no increase in state aid for at least the next three years. Finally, the city’s plan for 2021-2022 anticipates that by next year sales tax revenues will be back to pre-pandemic levels, also a doubtful assumption.
If suggested spending cuts cannot be achieved or if one or more of these iffy revenues does not materialize in the projected amounts then the city will have a new 2021-2022 deficit to deal with. On top of all the uncertainties in the ‘21-22 budget, to the extent that the ‘20-21 projected revenues from the Federal government or other sources fail to materialize, that shortfall will ripple though subsequent years and compound the problems.
All of the above issues can be best summed up with a technical budget term: mess (noun, meaning a situation or state of affairs that is confused or full of difficulties). City services and city taxes will be significantly affected by what is done or what is not done about these dilemmas. Every day and week and month that goes by narrows the city’s options and complicates the ultimate decisions. Time is not on the city’s side.
One point worth noting: the financial problems Buffalo is experiencing are to greater or lesser degrees playing out in many other states, localities and school districts throughout the country.
While Buffalo’s problems are much bigger (the BFSA is asking for authority to borrow $121 million), it should be noted that the Amherst Town Board on August 3rd requested special state legislation that would allow $8 million in deficit financing for 2020. The Town is “proposing legislation that would …authorize the issuance of certain obligations by the Town of Amherst to provide both short-term financing for the substantial revenue shortfalls faced by our Town… to amortize the deficits created by such revenue shortfalls over a period of [more than two] years.”
The City of New York in June asked for state authorization of $7 billion in deficit financing. The Legislature took no action before adjourning for the summer.