================================================ Remember - 2 Posts Per Person Per Day ================================================ FYI - this was copied to all city employees and is public.
Pat Byrne St. Clair and Lexington Parkway Neighborhood
City of Saint Paul Interdepartmental Memorandum
To: Department and Office Directors
From: Mayor Randy Kelly
Date: April 15, 2004
Subject: 2004 Savings Plan and 2005 Budget Planning
As you know, the city budget faces continuing pressures in 2005. After consulting with all of the members of the City Council, I am asking each of you to make spending savings in your department budget this calendar year in an amount totaling $1 million citywide. Reducing actual spending under the 2004 adopted budget to save an additional $1 million this year is a step to help balance the budget next year.
I am making this request:
(1) to help protect taxpayers against a property tax shock in 2005, and
(2) to provide some additional insurance against cuts in city services next year.
If we don't achieve these spending savings this year, it is certain that either the taxpayers will pay more next year or city services will have to be reduced. It is appropriate to act today, April 15. As taxpayers once again acknowledge how much of their income and savings go to taxes, it is important to keep that burden as low as possible while maintaining the services that people want and need.
Why do we have these challenges for 2005?
Here are the challenges we are facing in putting together the budget for next year, and why we need to start acting now:
(1) Even without adding services, our 2005 budget is projected to be short about $16.75 million:
* State LGA is slated to drop as much as another $4 million next year.
* We have to find replacement or supplementary financing for some of the emergency measures we took last year to absorb a $20 million LGA cut.
* City departments face continuing inflationary and service demand pressures.
* The result is a 2005 budget gap now measured at $16.75 million.
(2) Taxpayers also face another challenging year:
* Many property taxpayers are seeing tax increases this year of 10% or more due to market value increases, state law changes, and levy increases by the county and school district.
* The median valued home's taxes are growing 9.5%, and 38% of the homes in Saint Paul will have property tax increases of more than 10% in 2004, despite the city not increasing its overall tax levy again this year.
* Next year (in 2005), due to value increases and state law changes, property taxes on homes are already expected to rise 3 to 5% even if no levies are increased anywhere, and by 7 to 9% if the county and school district both raise their tax levies by the same amount�all this BEFORE we even begin to think about our own budget and levy.
* Making up the entire budget gap through a tax increase would require the city to raise its tax levy by over 25% next year.
How did I arrive at the amounts that each Department is being directed to save?
I decided not to simply assign each department the same percentage of budget savings. The departments differ in their reliance on general funds and various special funds, so requiring each department to save the same amount from their general fund spending would have resulted in inequities.
I also made a conscious policy decision to require fewer reductions in certain departments �like police, fire, libraries and parks and recreation�because of the priority that the public places on those very visible services.
I also looked carefully at where there were available vacancies so that the savings could be accomplished without layoffs. The savings targets have been designed to avoid the need for any layoffs this year. They make use of vacancies and other known savings opportunities wherever possible. The targets are also sensitive to departments with existing service and budget pressures.
It is not unusual to reduce spending mid-year in anticipation of a future budget problem.
It is good to remember that we took similar mid-year actions the last two years. In the spring of 2002, I directed departments to underspend their 2002 budgets by about $1.1 million. While some publicly questioned the wisdom of that action at the time, it became clear as we moved into the following budget year that we had done the right thing. Again, in 2003, we made significant mid-year adjustments to prepare for the problems we knew would face us in 2004. This is just a common-sense way of protecting the public against significant service cuts, just as any family would begin reducing spending today if they knew they would face money problems next year.
How does the 2005 problem compare with the 2004 problem?
The budget problem for 2005 is actually less than the one we solved for this year:
* Measured on the same basis as this year's, the 2004 budget had a $23.4 million gap to close.
* We balanced the 2004 budget in a variety of ways, but a major part was through spending reductions adopted during 2003 and then carried into 2004.
* Because of the spending reductions made during 2003 in the middle of the year, 2004 spending levels were able to increase modestly above the reduced 2003 (amended) levels.
* We solved the budget problem for this year in good part due to prudent budget management actions we took the year before, and made the remaining budget adjustments easier to deal with.
We will take a similar approach this year: Creating additional savings this year through relatively modest spending adjustments will give us a running start as we work on the 2005 budget.
What else is being done to prepare for the 2005 budget squeeze?
* The current hiring and travel freeze process will remain in effect for the remainder of 2004, in order to maximize available vacancies so that the 2004 savings goals can be met and so the 2005 budget will avoid layoffs to the maximum extent possible.
* The savings plan will provide a basis for 2005 department budget planning by starting from a base that already captures $1 million in reduced spending next year �cuts that can be avoided next year if we take savings now. In total, this will mean that $2 million will be available to help solve the 2005 budget gap ($1 million in additional savings carried forward from 2004, coupled with the same savings (cost containment) carried into 2005.
In summary, restraining spending modestly this year will help reduce the pressure on next year's budget.
* Overall, savings targets average 0.4% of departments' 2004 budgets�a level of savings that can be achieved without disrupting any key public services or dislocating any current employees, and that will lessen the need for cuts or tax increases next year.
* The 2004 savings plan provides a starting point for departments to now begin their 2005 budget planning
* $1 million in spending restraint begun in 2004 and carried forward into 2005 would still allow total general spending across city departments to increase modestly next year*to help cover inflationary and service demand issues.
I am confident that we can continue to balance and meet our priorities of a safe, livable, affordable city without sacrificing any of them.
We have met budget challenges even greater than this in the past, and if we again start to take prudent, proactive steps now to avoid even more difficult choices later on, we will have done the best possible job for the citizens and taxpayers of Saint Paul.
I appreciate your dedication and diligence in managing through a very tough period in the public sector over the past couple of years, and I know I can thank you in advance for your efforts as we begin to manage and plan our way to a successful 2005 budget.
�Hey, I give you my phone number - when you worry, call me, I make you happy. �
Bobby McFerrin _____________________________________________ NEW ADDRESS FOR LIST: [EMAIL PROTECTED]
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