Thursday, September 07, 2006

Budget 101: Part 2

If you've read Budget Part 1 you might have a few questions:
  • How did we wind up with a budget deficit?
  • Why does it matter?
  • What are we doing to fix it?
  • Why is this a campaign issue?
1) We wound up with a General Fund deficit by spending more than we took in for several years in a row. Oregon law requires each fund to be balanced in each budget, but somehow we went for year after year without either finding enough money to cover the shortfall or cutting expenses and services to match our income.

2) The deficit matters for three reasons:
  • As long as we're spending a significant portion of our income just to fill the hole, we aren't spending it on all the things we need to keep our city great. We're not increasing police or fire budgets to match inflation or population growth. Any idea which requires funding, no matter how widely supported, must be put aside for another day.
  • State law requires us to fix it. In the most extreme case, the state will make us fix it. They'll make the choices on how our taxes are spent, not us.
  • If we don't fill the hole quickly it will be even harder. The City has very little control over its income-- property taxes are set by statute, many of the fees depend on the health of the economy. If building or tourism slow down or property values decline, revenues will be reduced. We won't be able to balance the budget without major cuts to services.
3) What are we doing to fix it? The City has fixed the systemic problems that lead to the deficit. Any of you who've run a business will be surprised at this list, but the City is now:
  • Not spending grant money until the grant is received.
  • Tracking expenses department by department against budget (budget vs. actuals) to catch overspending before the end of the year.
  • Transferring money between funds to account for costs one fund incurs on behalf of another (example: all funds pay part of city manager's salary).
  • Raising fees for city services (examples: planning review, licenses, etc.).
  • Spending less money.
4) If we have a plan in place to fill the hole, why is this a campaign issue? A plan is just a blueprint. To successfully fill the hole we will need each budget and each financial decision over the next three years to match this plan-- and we need to be lucky.
  • We need to be sure our City Councilors are not afraid to dive into the budget spreadsheet and ask lots of questions.
  • We need to avoid " 'No' fatigue." It's hard to say "no" to spending money on every project you really want to make happen-- but we can't relax our fiscal discipline.
  • We need to assume things will not go to plan. We need to constantly look for problems, and fix them aggressively.
I have been told I shouldn't talk about the budget too much in my campaign. It's not easy to explain, and since services aren't being cut yet most people don't see the problem. I guess I don't see the point to running for office without saying anything. And don't worry, I'm not quitting my day job.


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