Budget big city concern

October 12, 2009
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With the general fund facing up to a $24 million deficit for fiscal year 2011, Grand Rapids City Manager Greg Sundstrom convinced city commissioners last week to begin working on that spending plan right away.

Commissioners will start trekking through the financial jungle this week during the first of nine budget meetings — the earliest in recent memory they have gotten together to discuss how to fund operations. Those nine meetings are scheduled through December, with more likely to come after January, and are set to run for a total of 22 hours.

“This is the earliest we’ve started, by far. We usually don’t start until April,” said Sundstrom.

The FY11 general fund goes into effect July 1.

The city is facing its largest deficit in recent memory. Revenue from income and property taxes has fallen due to the ongoing recession and mortgage crisis. At the same time, revenue-sharing payments from the state to the city have shrunk and are continuing to shrink. State lawmakers have cut more than $50 million in those payments to the city for at least the past six years. The last full payment the city received was in 2002 and was for $14.4 million.

Grand Valley Metro Council Executive Director Don Stypula recently told his members, including the city, not to count on receiving any revenue-sharing dollars next year — money that comes from the state’s sales tax generated in an area.

Local governments once collected the sales tax. Decades ago, however, the state started capturing all the sales tax revenue, returning a proportional share to local units.

“The thing that makes this so difficult is that many believe this is a gift from the state, and that local government really has no right to complain about this gift if the state can no longer afford to give the gift,” said Sundstrom.

“It’s really not a gift. A law was put in place many years ago that changed the form of taxation at the local level and at the state level. The state decided that to be more efficient in government, it would collect all of those types of taxes and redistribute them. Unfortunately, they have stepped back from that position,” he added.

“They still collect the taxes, but they don’t distribute them any longer.”

The current general operating budget totals $115 million and is the smallest in more than a decade. The spending plan, which covers many of the services the city provides, including public safety, had ranged between $120 million and $125 million since the mid-1990s.

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