Budgeting 101 - Helping You Understand The City Budget
Every year about this time, City staff begins the process of introducing Woodburn’s Proposed Budget. While not always the most interesting or attention-grabbing issue involving the City, it is still of critical importance to the community. This past week I have been working on my FY 2015-16 Budget Message. Overall, I’m hopeful that the improving economy is stabilizing what has been a declining General Fund revenue picture for the City and the City’s programmatic position will be improving slightly as well. However, you will have to wait for the full message to see all the details.
In advance of the budget, below is the annual “budgeting made simple” spot I like to post explaining Oregon’s municipal budgeting practices. Numbers included below are from the FY 2014/15 budget.
Budgeting Made Simple
Putting out the budget is a long process that takes the City anywhere from six to seven months. The end result is a 300-plus page document that indicates where every penny of a roughly $38.2 million budget will come from and how it will be used. When you add in dedicated and discretionary contingencies, the Budget is closer to $64 million. It all gets a little complicated. I also like mentioning that Woodburn’s Budget has won consecutive Government Finance Officers Associations’ Distinguished Budget Presentation Award three years running, which is a nationally-recognized standard for public budgets. We’re very proud of our transparency and this accomplishment.
In Oregon, local government budgets are regulated via state budget law. We have to balance our budget the same way big cities like Portland or Eugene do, or smaller cities like Donald and St. Paul. I believe we have done a good job in Woodburn of using your tax dollars wisely. We have eliminated some 17 positions over the past several years. We held our General Fund costs to just a slight 8.33 percent. This is because of consolidation of Public Works Services Fund into General Fund (Engineering and Facilities Maintenance which was merged with Parks Maintenance). Comparing the previous year without those changes results in an increase of just 0.51 percent. Because of our careful case-by-case approach to belt tightening, the public has not suffered visibly dramatic impacts to City programs. We expect to continue to be successful in managing our limited resources while preserving valuable public services.
Throughout the budgeting process I get a lot of questions about fund accounting principles and why the City cannot be more flexible with its various revenues streams and cost allocations. The answer is simple: most of the City’s budget, and revenues, are legally restricted in their uses. Consequently, I like to say that the City has two kinds of money: restricted revenue and unrestricted revenue. Unrestricted revenue, accounted for in the City’s General Fund, is money the City Council and Budget Committee get to choose where and how to spend. Designated funds are monies dedicated to a certain project or activities as instructed by state law or other rules.
Dedicated funds are still governed by the City Council, but within their respective restrictions. For example, state law prevents the City from using the Wastewater Fund’s dedicated money to hire more General Fund (or discretionary) police officers.
Our General Fund accounts for a little over $13 million of the $38.2 million budgeted for expenditure. Your property taxes go into the General Fund, as do franchise fees, fines, etc. This money is used to fund our police department, parks and recreation, library services, aquatics and many other program areas. To many, the General Fund provides the types of services expected by a local government.
Some people are surprised to learn that Woodburn’s share of property taxes total roughly $7 million annually. It costs $6.7 million to run our police department. So, over 90% of every property tax dollar collected by the City goes towards funding the police department. That leaves about $300,000 of remaining property tax revenue to allocate to other services. Obviously, we would not have our other quality of life services and programs (parks, library, etc.) without additional revenue sources.
There continues to be financial challenges ahead, however. Fluctuations in revenue is a concern. Primary revenue sources continue to be affected by economic conditions, property tax compression and unpredictable growth. In addition, expenditure growth in health care and PERS continue to outpace revenue growth. We have made some changes in our health care benefits, which will hold costs at a slower pace, but they will still rise. The City’s General Fund’s cash reserves will decrease in upcoming years. Unfortunately, we have no control over PERS and as we have seen, those costs will continue to rise.
Your City Council and Citizen Budget Committee has done a great job of keeping the citizens of Woodburn at the forefront of their thoughts as they scour the numbers and do what they feel is best for Woodburn. Nobody likes cuts or layoffs. We would love to have a lot of new industrial construction and provide all the services you want. But this is our reality and given the declining revenue, I believe we are doing a good job with what we have.
The FY 2015-16 Proposed Budget will be available on the City website by April 27, 2015, if not sooner. And finally, you are invited to attend the City of Woodburn’s Budget Committee meeting scheduled for Saturday, May 9, beginning at 9 a.m. The meeting will be held at City Hall. As always, if you have any questions about the budget process, don’t understand the numbers or have a suggestion, don’t hesitate to give me a call at 503-982-5228.