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We’ve got some budget challenges coming

Some chickens are coming home to roost.

BagOfMoney

Beginning next summer with fiscal year 2016, Houston will face a projected $142 million gap between expected revenues and expenses in its general fund, which is fed chiefly by property and sales taxes and funds most basic city services. That exceeds the $137 million budget gap Houston had to close during the economic recession, when Mayor Annise Parker laid off 776 workers in making numerous cuts in 2011.

And the projected gap will widen in the years to follow. By fiscal year 2018, the budget deficit is expected to top out at a projected $205 million.

The calculations resulting in those projected deficits assume no raises for city workers or added investments in vehicles and technology that cannot be put off forever, said Councilman Stephen Costello, meaning the actual deficits could be higher.

“There’s still not enough attention directed toward the next four years, which is really the problem that we have,” said Costello, who chairs the council’s budget committee. “We need to start looking long-term.”

[…]

About 51 percent of the increase in the proposed budget is driven by employee contracts, 18 percent represents dollars transferred to specific funds and not available for spending, and another 17 percent is an increase in debt service, Dowe said.

The revenue cap cannot alone be blamed for the looming crisis. The cap will allow revenues to rise, after all, but they will rise at the combined rates of inflation and population increase, not at the breakneck pace of property appraisals many homeowners have seen this year.

Driving the problem are soaring pension payments and a spike over the next four years in the cost of servicing debt.

The single largest expense increasing in the proposed 2015 general fund budget is a 21 percent hike paid into the city’s three pension funds, to $261 million. That’s more than what is spent on libraries, parks, trash pickup and municipal courts combined.

And pension payments are only projected to increase. Next year, Dowe said, the city expects to cough up $50 million on top of its scheduled payment to the police pension thanks to a contractual trigger that requires the account to maintain a funding level of at least 80 percent.

In refinancing debt, Dowe added, past mayors put off principal payments for future leaders to pay, creating a debt bubble that now is coming due. General obligation debt payments will jump from $297 million this fiscal year to $355 million by fiscal 2018, before falling.

The good news is that the debt service cost is a four-year speed bump, so it’s at least a temporary situation. The pension issues are ongoing, and no matter how many columns Bill King writes about it, I don’t see it getting resolved in a way that satisfies, or at least doesn’t completely alienate, everyone involved any time soon. While ridding ourselves of that stupid revenue cap may not be a whole solution to this, it would still at least minimize the problem. To me, priority one is working to repeal the revenue cap, and priority two is coming to grips with the fact that no matter how much we gripe about pensions, the fact remains that public safety is by far the largest budget item. If we want to, as CM Bradford put it, define what our core services are, then we need to do that exercise for all of the budget. If 65% of the budget is off limits for considerations about efficiencies and savings, then we’re kidding ourselves. If any member of City Council is unwilling to do that, I will thank them to spare me the usual talk about “making tough decisions”.

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One Comment

  1. Steven Houston says:

    Correct me if I’m wrong but didn’t Mayor Parker just make a big dog and pony show about how this year’s proposed budget restored all programs previously cut, greatly expanded recycling, and included heaps of money for BARC and other projects? I’m not suggesting that any specific program is necessarily unworthy but if you know ahead of time that any restoration is going to mean mass layoffs before the fiscal year is out, why on earth engage in such a display? Is that fair to the people who get temporarily hired, because they will be the first to go? Wouldn’t it be better to use any “extra” money to pay off some of the debt or park it in the rainy day fund to address some of the upcoming “challenges” first?

    And I’m sure those at HFD who have been negotiating their pay contract are going to have reasonable cause to think this is just a way of pushing them off yet another year as their comparative pay sinks further down the list. On top of that, HPD is set to start contract negotiations with a fresh new study showing they are undermanned to the tune of anywhere between 500 and 2000 officers for a city this size, their recent recruiting problems requiring the city to hand cadets big signing bonuses as well as lower hiring standards to fill their upcoming class (the last one had 30 cadets rather than the 75 desired). You can only drop standards so much before even more trouble comes of it.

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