$800,000 in Expenditure Cuts? Lol. Try $2.3M in Increased Personnel Costs

One argument in favor of hiking property taxes in City of DeKalb is that the city has reduced general operations (General Fund/GF) budgeted expenditures by $800,000 from last fiscal year to this one, which ostensibly shows that DeKalb has already cut expenditures to the bone.

Hogwash.

The fact is, DeKalb has a runaway spending problem, budgeting $2.3 million more for personnel this fiscal year than in FY2014.

Read through to see how this was done.

Sure, on the surface it looks like they’ve slashed expenses:

Total GF expenditures, FY2015 budget: $35,216,110
Total GF expenditures, FY2016 budget: $34,415,937
Difference: -$800,173

But slashing is not what happened. In FY2015 the city made a transfer from the GF to the Airport Fund of $730,000 and another to the Health Insurance Fund of $350,000.* The transfers were one-time decisions. In FY2016, they are planning to transfer $0 to these same funds. The transfers created the appearance of savings for this fiscal year over last, but do not reflect actual cuts to general operations by any stretch of the imagination.

Let’s go back an additional fiscal year, a more normal year transfer-wise, to see what happens with our calculations.

Total GF expenditures, FY2016 budget: $34,415,937
Total GF expenditures, FY2014 budget: $30,866,323
Difference: +$3,549,614

Budgeted general operations expenditures have increased $3.5 million over two years.

I’ve been able to determine that roughly half of the above increase is due to a) the city’s inclusion of expenses that were never accounted for in the GF before (costs of tax-sharing agreements, expenses covered by administrative tow fees) and b) restructuring (Community Development Department absorbs Economic Development Fund, etc.). These “new” expenses are offset by revenues that have also now been pulled into the GF.

But when it comes to actual net budget reductions, the equation under this city manager equals zero.** Covering the same two-year time period as we worked with in the above examples, GF net growth in revenues is currently projected at $2.4 million. Of the expected increase, $1.8 million*** will go to increased personnel expenses, primarily in the forms of wages and pensions. The rest of the net growth is planned to be “saved” as “surplus.”

What’s being sacrificed to the gods of burgeoning bureaucracy this year are infrastructure and other capital needs. In short, the hiring of expensive administrators has left us without the means to fix our streets****.

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*There was also a larger-than-usual transfer from GF to Fleet Fund last year. I believe that was for a fire truck, but don’t remember the details so left it out.

**I analyzed the FY2014, FY2015 and FY2016 GF budgets to see which budget categories saw reductions over the past year and past two years. There are five expense categories in these budgets, not including transfers: Personnel, Commodities, Contractual Services, Other Services, and Equipment. Only the Other Services category has seen a reduction, in FY2016 over FY2015, of about $1 million. But are they actual cuts? The reduced line items in this category are as follows:

— Reduction in tax-sharing costs of $440,000. This is a passive reduction in costs due to built-in phaseouts of these deals over time, and matched by increases in local sales tax revenues.

— A $150,000 reduction in the line item for contracted services. Most of this came about because a couple of contracts, including the city attorney’s, were moved from this line item to one in the Contracted Services category.

— Reduction of $240,000 in the line item for contingencies. This is the one actual, actively-made cut to the Other Services budget category, and probably related to elimination of capital projects.

***the $1.8 million is just the portion allocated in the GF. Another $500,000 in personnel expenses was moved this year from GF to the Water Fund, an enterprise fund separate from the GF. I did not mention the move in the body of the article because the city eliminated the same amount in annual transfers from Water to GF, so it was a wash for the GF. But the total budgeted increase in personnel expenses, GF plus Water, is a very real $2.3 million over our two-year period.

****Transfers from GF to Motor Fuel Tax, Capital Projects, Public Safety Building, Fleet, and Equipment funds have been eliminated.

Sources: City of DeKalb adopted budgets