Blytheville Finance Director John Callens told to the Blytheville City Council's Finance Committee Wednesday evening that significant cuts in the city's number of employees were most likely to be required to reduce the city's current deficit.
The committee met in special session Wednesday evening to be informed of a "rough draft" working budget for 2016. The draft is essentially a compilation of the projected needs of each department, as submitted by each department head. The meeting was primarily an informative meeting with Callens explaining the format and contents of the working document and the causes of the city's $1.6 million deficit, as the "rough draft" budget is written now.
Once these preliminary meetings and suggestions are concluded, Mayor James Sanders is required to submit to the City Council a balanced budget proposal by Dec. 1. Once the council receives that budget, the council will either approve or modify it for final adoption.
Callens read an article that stated that his office has not been given "good numbers" over the last three years, but he assured councilmen that the numbers that are given now are the best they have been. He also explained that the 2014 budget, which was in place when he took the job, was not nearly as detailed as the ones they operate with now. He blamed past budget formatting as one reason why the city had a $1.9 million deficit in fiscal year 2014, though it appeared to be balanced.
"The more information you have the better...The 2014 budget had a $1.9 million deficit in general funds that you didn't ever realize...they weren't able to even meet payroll [without scrambling and pulling funds from other departments]. The reason is when the budget was done, everything was lumped together," Callens said.
He said that now, with all the details and categories reflected, one can see where shortfalls are. He also said that in the new budget, general funds and infrastructure are listed together, because the city has had to utilize infrastructure to help general funding. He also said that the current problem was not new, but has been around for years.
The committee discussed the total number of employees that the city has on its payroll. Councilman Kevin Snow said that the number he was given was 206 full-time and 19 part-time employees. Callens added that of those employees, about 134 are paid out of general funds.
He also told the committee that despite the deficit, it will get better in a couple years. He said improvement will come because some of the problems, such as jail fees and paying off past due excise fees, will be reduced and therefore this budget, without those items would reflect a normal budget of $8 million instead of the current $9.2 million.
"A large part of this deficit will be overcome in a couple years," Callens explained, "We had 2013, 2014, 2015 and also 2016 [jail fees]...which comes to about a million dollars. We have already collected $360,000, we haven't paid it, but it is isolated in general funds. So in reality we only owe about $600,000 more... so about $700,000 that we have budgeted will not be reoccurring...If you look there you see the sales tax [past due excise tax], we have $438,000 budgeted there...so that leaves about $400,000 that is the past. About 840,000 will go away, which will leave us short about $400,000...But, I know we don't want to continue to use infrastructure, to continue to tie it all up in general," Callens added.
Another part of the problem, according to the Finance Director, was that of the city's 206 full-time and 19 part-time employees, 134 of them were paid from general funds. Also, despite the fact that 65 percent are paid out of general, only about 47 percent of revenue comes into the general funds.
Callens said that about 10 percent of the budget is "set expenses" such as vehicle insurance, utility, leases for sanitation trucks, etcetera. He also said that if the city were to maintain the same number of employees that it currently has, there are some additional expenses that would be considered set (unable to be reduced at will) such as pensions, social security, uniforms, workman comp and salaries. Therefore, he added, only about 17 percent of the total budget is actually "variable costs".
"Our cuts, the majority of them, I'm not saying that you won't be able to find some small amounts of them, but when you're talking about a million dollars, the vast majority of cuts will have to come from employees," Callens said.
He also said that this problem is not so much about excessive expenditures, but mostly caused by reduced revenues.
Callens specifically said that "Parks and Rec" will be much more difficult.
"It would be very difficult...to cut $200,000 from the budget without some kind of eliminations...I don't see how it could possibly be done," Callens added.
"So basically you are saying that our largest departments are where we're going to have to take the largest chunks from," Councilman John Musgraves asked.
Callens also added that if the average employee salary was $33,000 (including insurance, social security, workman comp, uniforms, etc.), one million dollars requires a cut of 30 employees.
He suggested that once the councilmen have an opportunity to look at the working document in detail, that the committee should meet once again, but with department heads present. He said that would allow them to ask specific questions of them regarding what cuts could be made in each department and what affect each of cut would cause.
"Do you have any idea how many employees we are short in each department?" Musgraves asked.
"The areas we are short...we are down a couple employees in the street department (director and one in the shop), we are short four employees in the police and one in fire," Callens answered.
"So I guess I am asking, with those that we are short, there is no way to have any hiring," Musgraves asked.
"That is one of the ways of looking at it. That could be a starting position, but you are short four police officers. Is that an area that you want to look at cutting? This is a decision that has to be made, but we are already short there. Do you want to eliminate those positions or what do you want to do?" Callens said.
"Now it looks like we're really going to be hurting. I mean this town is really going to be hurt. If we have got to cut more police...my concern is Blytheville. We gonna be hurting," Councilman R. L. Jones said.
Callens said that he realized that in the past, money was moved from Wastewater to help finance the general fund. But he added that is not a long term fix, particularly since the money is supposed to go for making sure that the city's wastewater and water systems are kept up to the standard that it needs to be.
"On the other side of that, again you don't want to get into the idea of illegal excisement. And places those things just to make money and putting a tax on our citizens just to make money in order to pay these bills. Those are not legal ways of actually getting money. So we need to look at traditional ways of taking care of our [problem]," Mayor Sanders said.
Callens reiterated that it was not a new problem for the city.
"I went back and researched every year all the way back to the year 2000. The only year that general funds didn't run a deficit was in 2004. It run a deficit every year for the past 17 except for one year, and that was 2004...Basically this has been going on for a long time and if we want to get the city financially sound, then for one thing it's got to a point that something has got to be done about it...The reason that they got themselves in trouble in 2008 over payroll taxes is because this problem existed at that time also," Callens added.
Finance Committee Chairman Stan Parks told the committee what his priorities would be with the new budget.
"I think our primary concern would be the health and safety of our citizens and everything else becomes secondary. What I mean by that is, have adequate police protection to keep the city safe. We were hoping to have more police officers. If we can just stay staffed like we are and control crime and possibly get a handle on it that would be good. We need to try to maintain our ISO 3 rating with the fire department and have adequate fire protection that our citizens have been accustomed to. And by health I mean adequate trash pickup on a regular basis like we've been doing and everything else I feel is probably secondary to that," Parks said.
Callens explained how that was precisely the problem they faced.
"Okay out of general [funds] though, but you basically named the three areas. You've basically got the police department, if we maintain there, if you want to keep 42 [officers] there, that eliminates any cuts there. The fire [department], if you want to maintain the ISO 3 rating...I don't know how much reduction you can have if any and keep an ISO 3 rating, so that's something that you may have to look at going away. And then you have sanitation, here again, if you say you want to maintain, we might not have to cut but a couple employees, but a couple employees in sanitation is still only about $100-$125 thousand and $100,000 is a long way from around a million dollars," Callens explained.
"That's true," Parks replied.
Callens also explained that cuts probably couldn't come from "general administration," because the city has repetitively been "written up" every year by the state's legislative audit for not having adequate oversight within the "admin office" because of not having enough personnel.
Mayor Sanders also added that with increased and additional insurance reporting requirement being mandated from the federal government, the city may have to look at hiring someone for that purpose alone in the future as well.
The committee then asked various questions about some of the line items in numerous departments in order to have a better understanding of the "rough draft" budget they were looking at.
Callens reminded the committee that they had to act quickly, telling them they basically had about two weeks to offer their suggestions before the proposed budget had to be submitted.
The committee agreed to meet again next Monday evening, after other committee meetings are completed, and discuss with department heads what cuts the departments suggested could be made and what affect each cut would make.
thenry@blythevillecourier.com