It’s budget season in Buffalo City Hall. City government and the school board are actively reviewing spending and revenue projections for the new fiscal year that begins on July 1.
City government a year ago gambled that the federal government would come to the aid of the city that had in recent years significantly overestimated many revenue sources. The biggest bet of all was when city leaders rolled the dice and projected $65 million in federal relief funds in 2021.
In Mayor Byron Brown’s new four-year financial plan submitted with the proposed budget it is stated that his administration “correctly anticipated receiving from the federal government” relief funds. Said funds will be used “to retire the short-term deficit borrowing it undertook at the close of the 2019-2020 (sic), while also using a portion to close the revenue gaps which were the result of the physical distancing measures put in place to slow the spread of the virus.”
Consider what is being said there.
“Correctly anticipated receiving…” In order for the extraordinary federal funding to be received, all that needed to occur was: (1) the election of Joe Biden as President; (2) Democrats holding on to the House of Representatives; (3) Democrats winning both Georgia Senate seats in January run-off elections; (4) the successful ending of the Trump insurrection at the United States Capitol that was intended to prevent the peaceful transition of power to the winner of the presidential election; and (5) a relief plan that got through Congress without a vote to spare. Anyone who could have “correctly anticipated” all of that should become a professional gambler, not a politician.
For those keeping score at home, it should also be noted that “the short-term deficit borrowing (the city) undertook at the close of the 2019-2020” fiscal year was more the result of bad revenue projections at the beginning of that year than it was as the result of revenues lost due to pandemic shut-downs and distancing protocols. In June 2020 City Comptroller Barbara Miller-Williams noted that in “the City’s third-quarter Gap Report, a projected budget shortfall would approach $18 million at the close of the current (2019-2020) fiscal year.” The third quarter of the city’s 2019-2020 fiscal year ended March 31, 2020, meaning that a substantial portion of the $25 million that the city borrowed in June 2020 was related to a deficit that was in place before the full impact of the pandemic shutdowns occurred.
The four-year plan also reports that “the City anticipates that it will require a small amount of federal stimulus funds to close revenue shortfalls in Year 2” (2022-2023).
Much has been made of the large amount of funds that city is eligible for under the American Rescue Plan that was approved in March. The original number was $350 million. More recently the total was reported as $331 million for reasons unknown. Suffice it to say, the amount is huge.
My previous post about the Rescue Plan quoted language in the law which defines how the Plan money can be spent. One permitted use, expenditures for health related activities, is not significant for the city since county government is mostly in charge of such things. Revenue losses and extra spending related to the pandemic are clearly something the city has incurred and is qualified for. Public works of various types such as perhaps the replacement of the city’s lead pipe water lines might qualify. Public works projects are certainly worthy of consideration for use of the federal largesse, but such spending will have little or no impact on the city’s operating budget.
Use of the federal funds to deal with last year’s and this year’s revenue shortfalls related to the pandemic are easy to justify. It will be very hard, however, to continue using that rationale for including federal relief funds in the city’s operating budgets beyond 2022-2023. It will, therefore, be back to the city relying mostly on its own revenue generation to pay operating expenses (plus continuation of substantial state funding). Cost cutting is not in the city’s four-year plan. Property tax increases also do not figure prominently in the city’s plans over the next four years.
This is not to say that the city administration is not looking for creative ways to raise revenues. Figuring into the city’s future plans are the “marijuana sales tax, opioid settlement money, and higher than previously anticipated sales tax revenues as pent-up economic activity associated with travel, tourism, and large-item purchases are released during the recovery… Other significant revenues include… increase to fees and fines through a reorganized Bureau of Administrative Adjudication, sale of parking assets, casino revenue, increase in damage to property settlements, grant awards, and an increase to collections.” Anyone who has followed along with the city’s dreamy visions of new and expanded revenues in budgets past might detect some similarities in these prognostications.
Buffalo city government two years ago exhausted their reserve funds except for a “rainy day fund” of approximately $39 million that is basically a “break glass in case of emergency” account. Federal relief funds cannot be used to replenish reserve funds and Mayor Brown has no identifiable plans for doing so. Nonetheless, the Mayor’s four-year plan reports that “the City’s fiscal position is poised to be one of the strongest it has ever been… By directly addressing the economic challenges the City has been saddled with for decades, we will be able to address the fiscal challenges with which City policymakers continued to grapple.” The Brown administration, which took office in 2006 and seeks to continue through at least 2025, has long been in charge of managing those economic challenges.
Federal Rescue Plan funding for state and local governments was intended to help those governments get back on their feet, to pay off pandemic-related debt, and to fill some recurring revenue shortfalls and added expenses. Most local governments in Western New York did minimal borrowing in 2020 and prepared 2021 budgets that were balanced with minor property tax increases.
Buffalo’s 2019-2020 budget was closed with a large amount of short-term debt and the 2020-2021 budget had giant revenue holes in it. Federal relief funding will pay off last year’s operating budget deficit, fill major holes in the current budget, and do the same to some degree in 2021-2022 and 2022-2023. The federal funds do not, however, resolve any of Buffalo’s long-term structural deficit problems.
Federal relief funding is not an endless spigot of money. The city’s four-year financial plan’s Pollyannaish view of future budget prospects means that their new budget is just another kick-the-can-down-the-road document. At some point the money will not be there and it will be time to pay the piper.
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