GRAND RAPIDS — After cutting roughly $65 million of expenditures from the general operating fund over the past four years, city officials get to reduce that same account by another $67.2 million over the next five years.
And $8.96 million of that five-year total has to be clipped or funded, at least in part, by July 1 — the day the city’s 2007 fiscal year begins. City Manager Kurt Kimball and city commissioners, though, have different ideas on how to cover that deficit.
Kimball wants to cut expenses to preserve the reserve fund. But commissioners want to spend more from the reserve fund to add a few services for residents.
At a recent budget session, commissioners told Kimball they want to spend another $1 million above his proposed budget, with $700,000 going to the operation of three city-owned swimming pools this summer. The remaining $355,000 of additional spending would pay for other services and come from the general local revenue fund.
“The commission said ‘We want you to spend that money,’ so we are going to,” said Kimball.
At the end of this fiscal year, Kimball said the city’s reserve fund is expected to have a balance of slightly more than 9 percent. But seeing that city commissioners had set that fund balance at 7.5 percent last year, Kimball thought he could spend a maximum $1.67 million from the reserve on the deficit and still meet the balance that commissioners wanted.
“We’d still have a balanced budget, but we’d have an operating budget that we would have to draw from our reserves to the tune of $1.6 million or so. And the commission said they didn’t think we needed 7.5 percent, and wanted me to spend more money out of the reserve than that,” he said.
“They, in essence, gave me direction to deficit-spend more than I was suggesting was permissible.”
By not spending the additional $1 million that commissioners called for, by making a $3.66 million reduction in pre-funding for the retiree health package, and by spending just $1.67 million from the reserve, Kimball’s plan only needs to cut $2.57 million to cover the $8.96 million deficit. Plus, the reserve fund would be at 7.5 percent going into next year’s general fund deliberations.
But now Kimball feels the reserve fund will likely end up at 6 percent or possibly 5.5 percent, instead of the 9 percent it was projected to be or the 7.5 percent commissioners wanted it to be, by the time the budget-making process ends sometime in June.
“That means the cutting that we have to do to eliminate that $8.9 million problem is diminished by every dollar that we deficit-spend. So I got direction on several different fronts, none of which really helped me a great deal in problem-solving for the $8.9 million problem, except for the suggestion to deficit-spend more,” he said.
“I guess that helps for ’07, but it probably creates a bigger problem for us in ’08.”
Tax revenue to the general fund is expected to be $93.4 million in FY07. The police and fire departments are projected to need $59.1 million of that tax revenue.
“Police and fire are such a lion’s share of the budget that you’ve got to look there to some extent,” said Kimball. “Otherwise, you’re not going to accumulate the money to get to 8.9 (million) unless you eliminated half of our operations.”