Budget Stretch Run

Budget Timeline

Aug. 1: Proposed budget presented to Council by city staff

Aug. 8: Department budget videos and presentations available on city's website

Aug. 14: Council budget work session

Aug. 22, 29: Budget, tax rate, and utility rate formal public hearings

Sept. 9-11: Official adoption of overall budget, and tax rate

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City Council officially returns to City Hall today (Aug. 1) from its summer hiatus, to engage the year's major recurring task – approving the city budget – a lengthy process that resumes this morning with the presentation of the proposed budget by city staff. Officially, City Manager Marc Ott proposes the next year's budget (Oct. 1 marks the beginning of Fiscal Year 2014), and council disposes. Council will revise departmental requests as it deems necessary, adjust and balance projected costs vs. anticipated needs, allocate uncommitted funds (a relatively tiny portion of a $3 billion All Funds budget), and in light of all those preliminary decisions, settle on a tax rate.

In pragmatic terms, much of next year's budget detail is in fact settled by now, simply because city business is ongoing, most costs are structural and predictable, determined by contract, or reflect consistent city policies that are built into the budget's framework. But the budget preparation process, which is a year-round task that appears before council first in the spring, inevitably means changes in detail, unanticipated developments, and new or concluded projects that alter the financial plans.

Spring Forward

First, a brief recap: When the budget staff presented the preliminary numbers and projections to City Council in April, the tone was cautious optimism. Continued steady economic recovery from the recession, Deputy Chief Financial Officer Ed Van Eenoo told the members, meant the city was also in better financial shape overall; nevertheless, structural cost drivers – additional public safety staff, rising health insurance costs (although those have slowed somewhat), and a few new programs – would mean an additional $29.1 million in costs over FY 2013, for an estimated $784 million General Funds budget (the portion that excludes the "enterprise" or profit-making departments). For more detail, see "Happy Times ... in Moderation," April 26.

The budget office was in the process of finalizing the latest figures last week, when I asked Van Eenoo if much had changed since spring, as sometimes happens. "Things haven't changed very much, really at all," he said. In some years unanticipated costs develop over the summer, and occasionally, even new revenue appears – a few years ago, especially intense summer heat meant extra income for Austin Energy and an accordingly larger contribution to the GF. That won't happen this year, as council has since changed the transfer formula and capped it (for the present) at $105 million per year.

This year, says Van Eenoo, there aren't many surprises. For example, the sales tax projections, which have been strong over last year, remain in the ballpark of predictions. "At the time of the forecast, back in April," he said, "we were anticipating about 9 percent growth rate for the year, and right now we're at about 8.5 percent. So we're still in the same percentage area for sales tax growth."

Sales taxes account for about 21% of GF. Property taxes represent about 41%, and Van Eenoo received certified numbers from the Travis Central Apprais­al District this week. Overall, those evaluations were expected to rise, both because of new construction and rising market prices. In April, the budget office estimated that Austin's overall property evaluation would show a 6% increase – the certified numbers received this week confirm an increase of 5.9%.

Those income numbers, of course, have a major influence on the overall budget, and more specifically, on the projected property tax rate. The "nominal rate" is the current 50.29 cents per $100 assessed value, which presumably (with rising property values) would bring in more money without a change; the "effective rate" (not yet determined, but lower than the nominal rate) would result in the same income for the city. Judging from the early Council buzz, while Council may bump the rate a bit to accommodate rising costs, there's no enthusiasm to approach the "rollback rate" (more than a 5% increase), which would trigger an election.

From the Dais

All the council members who commented said they were waiting to hear what the city manager proposes before making any budget decisions. But Mayor Lee Leffing­well, who has come to be the default economic conservative on the current council, said that in advance, "I'm going to be pushing as hard as I can to make certain that public safety is adequately funded, in particular maintaining, at a very minimum, the cadet classes we've planned, and maintaining our standard of two officers per thousand [residents]." That's been a somewhat contentious (though still council-majority) standard of late, with Council Member Bill Spelman in particular criticizing it as a mechanical metric whose only virtue is simplicity. Spelman has called for more flexibility both in overall hiring and in moving certain Austin Police Department functions to non-sworn-officer (and therefore less expensive) personnel. But Leffingwell calls "two officers per thousand" a bare minimum, and notes that last year, a staffing study by the Police Executive Research Forum actually recommended more sworn officers ("Report: APD Understaffed," by Jordan Smith, July 13, 2012).

Of course, since public safety already consumes roughly two-thirds of the GF budget, hiring more cops has inevitable tax consequences. On that score, said Lef­fing­well, "I think there's going to be great emphasis on trying to hold the line on property taxes. ... I believe the effective tax rate ought to be our goal. We may not be able to achieve that, but we'll set that as a goal and see what happens – at least do our best to keep them as absolutely low as we can."

The same sort of push-pull on costs and taxes was an undertone from other council members. Mayor Pro Tem Sheryl Cole said she has always supported the two officers per thousand standard, and that council has "a responsibility as we go forward to keep that ratio." But she is also persistently concerned about the city's overall "affordability," in which she includes everything from basic housing costs to the property tax rate itself. "We haven't seen all the unmet needs yet," she noted. "It's hard to balance all the costs of the city with the needs of the city, because eventually they become the same thing. ... It's always difficult, trying to find a balance."

Council Member Laura Morrison, on the other hand, remains skeptical about projected public safety costs as well as the two officers per thousand APD rate. "I've always supported being more flexible than that," she said. She noted that APD brass has requested another 45 sworn officers beyond the "2.0 standard," and "they've taken the nighttime trails [the 24-hour greenbelt trail pilot added at mid-year] and asked for additional officers to take on that responsibility. If we were to do that, we would be busting the budget all over the place. My thought is that we should stick with what we normally do or decrease it, and try to invest in things that prevent crime."

Council Member Kathie Tovo seconded Morrison's concerns, particularly emphasizing investment in more programs for at-risk youth, partially as a way of reducing public safety costs at the front end, before young people drift into anti-social activities. Tovo has been pressing both her council colleagues and staff on youth programs in the past year, and says she'll be watching the proposed budget to see if those efforts are going to be rewarded. She mentioned both the Parks and Recreation budget and the Library as areas that have endured more than their share of cuts over the last few budget cycles, noting that these are both areas where youth programs can show direct social (and long-term, money-saving) benefits.

Tovo also mentioned the Neighborhood Housing and Community Development Depart­ment as having suffered too much in recent austerity cuts, and echoed Cole in saying that the city needs to maintain its ongoing affordable housing programs. Cole in particular is concerned that ongoing affordability programs not get lost in the potential push for another November housing bond vote – which would also have its own property tax implications.

Tovo considered the public safety issue briefly from the other side of the equation. She noted that she's already receiving emails from residents who want to make certain that public safety remains fully supported in the upcoming budget. She said she understands that public safety is a high priority item on any list of city needs, but noted that people pressing for more spending on any city need – including public safety, already the major budget item – "need to understand that there are definite consequences in terms of taxes."

She added that she looks forward to the "always lively" discussion of two officers per thousand, but she'll be looking for a balance. Like other members, Tovo said, "My operating principle is to keep as close to the effective rate as we possibly can. Many families in our community are struggling, and we need to make sure that we're keeping the tax rate as low as possible."

Unmet Needs ... and Employees

As always in budget discussions, one citizen's necessity is another's frivolous expense, and this year will be no different. Beyond the base budget to be proposed this week – estimated last spring to be roughly $29 million in the red before anything is added – are staff-determined "unmet service demands" that council will consider as potential additional expenditures. The city's list, compiled from public surveys, compiled department needs lists, and manager review, amounts to a grand total of $34.4 million, of which $20.16 million is defined as "priority" unmet needs (see details below). These priority items range from $310,000 requested by Municipal Court (for rehabilitation services, where backlogs reverberate throughout the criminal justice system) to $8.1 million for new APD staff (83 new full-time equivalents, including 45 derived from those PERF recommendations). While the lion's share of "unmet needs" overall remains in public safety, there are also priority requests for Parks, Libraries, Neighborhood Housing, etc. – the city manager and council will have to decide how many of those $34 million in priorities can be addressed in one budget year.

Even before they get to that, however, there are broader cost drivers to consider. Last spring, all three public safety union contracts – police, fire, emergency medical services – remained to be negotiated, leaving the budget office to speculate what the resulting budget impact might be. Van Eenoo provided council with two potential "forecast scenarios" – one reflecting no raises, one reflecting 3% raises for all 12,000 city employees – and described the latter as "unsustainable" even at the rollback tax rate. Since then, the Austin Police Assoc­i­a­tion contract has been negotiated and approved, and its financial terms reflect a 1.5% increase for sworn officers. That's right in the budget department's anticipated wheelhouse, and shouldn't cause too much of a budgetary ripple. But Fire and EMS remain in negotiation and uncertain; the Austin Firefighters Association talks were just suspended, although the issue that led to an impasse is not money but hiring procedures. The budget may have to move forward without certainty for those departments.

Beyond that is the larger question of non-public-safety employees, not under contract but represented indirectly by the AFSCME union. AFSCME Business Manager Greg Powell has been reading the budget office's projections since the spring, and he's unimpressed. "This is a $2 billion budget," Powell said. "What we're talking about, in terms of a raise for city employees, is about a $12 million item. ... It's a matter of priorities."

Powell says the union will be pressing City Hall hard for a significant raise. "We've looked at city of Austin employees trying to stay abreast of the cost of living in Austin over the last several years," he said. "Our numbers show about a 17-18 percent increase in the cost of living in the Austin metro area over the last five years, and our members having received about 10 percent increase over that same five years. Our city employees have fallen behind, in regards to just stay abreast of the cost of living." Powell argues that if there's "no money" for raises, as management is claiming, it's because managers have been spending too much money on administration and bureaucracy.

"It's a matter of what's important to you," meaning city management, Powell insisted. "If what's important to you is building a bureaucracy for what is, if not the 'best-managed city in the country' [a Marc Ott slogan] certainly the 'most-managed city in the country.' We're looking at an expansion of bureaucracy at the city of Austin that's unprecedented." Moreover, Powell said, the APA settled at 1.5% because the union reps were aware Austin police are already the highest paid in the state, and they also wanted to "create some space" for a broader employee increase. Asked for his perspective, APA President Wayne Vincent confirmed that his union "wanted to make sure that there would be an opportunity for city employees to get a pay raise ... and a bite at the apple."

So expect city employees to be heard from in the coming weeks, arguing that their families' "unmet needs" should be at least as much a budgetary priority as Planning and Development Review (a $2.6 million bump). In the absence of an actual budget recommendation, council members were noncommittal on raises. "We have terrific staff at the city, and we want to make sure we retain them," said Tovo. "But we need to make sure that we operate within our means."

Meanwhile, other groups have already been lobbying council members on particular issues. To take only one example, a newly formed coalition – whose members include the Austin Parks Foundation, the Trail Foundation, Tree Folks, Keep Austin Beautiful, and the Shoal Creek Con­servancy – are calling themselves "Great Austin Parks" ("to marshall support for more funding for the Austin Parks and Recreation Depart­ment in the upcoming city budget"). GAP (www.greataustinparks.org) is advocating a $4.75 million increase in parks funding, for "trees, trails, maintenance, and pools."

It's not yet clear if that recommendation is over and above the unmet needs request already made by PARD, but council members are already hearing about it. Both Morrison and Tovo mentioned the new group, and Cole noted that the city needs to design a "multiyear approach," especially on operations and maintenance, to address park needs throughout the city. "One of the chief metrics for parks is how many acres have we acquired," Cole said, "instead of how well are we maintaining the condition of the parks. ... I think people would rather have fewer parks that are well-maintained than many that are not."

And so the discussion begins – or persists, since in this budget cycle we are likely to hear many things we have heard before, and will hear again. More than one council member mentioned "special events" – specifically, whether the numerous departmental requests (e.g., for more police officers) citing special events as creating an unmet need might mean that "these private events need to be covering their costs."

Beyond these big-ticket items, the list will certainly go on. As Cole put it, "We're going to face a medley of unmet needs – along with the age-old question of how to pay for them."

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Summary of Unmet Service Demands

City of Austin FY 2013-14 General fund

	Priority Demands		Other Demands		Grand Total
Department	New FTEs	Net Cost	New FTEs	Net Cost	New FTEs	Net Cost
Police	83	$8,116,941	61	$6,447,466	144	$14,564,407
Parks and Recreation	7	1,040,557	52.75	4,876,625	59.75	5,917,182
Fire	24	2,135,714	9	921,640	33	3,057,354
Planning and Development Review	26	2,637,882	4	396,331	30	3,034,213
Emergency Medical Services	12	2,458,961	3	215,632	15	2,674,593
Health and Human Services	9	1,251,811	13	986,567	22	2,238,378
Library	15	883,579		153,255	15	1,036,834
Neighborhood Housing & Comm. Dev’t		606,101	1	225,813	1	831,914
Animal Services	14	715,624			14	715,624
Municipal Court		310,000			0	310,000
Total Unmet Service Demands	184	$20,157,170	143.75	$14,223,329	333.75	$34,380,499

Source: City of Austin Budget Office