Mayor Rybak: Sound Fiscal Management Allows "Prepared" City to Close $9M Budget Gap without New Layoffs
Mayor relies on non-personnel cuts, cuts made last year and one-time revenues to respond to latest round of State cuts; proposes Innovation Fund to spark future savings; calls for keeping property taxes down
April 8, 2010 (MINNEAPOLIS) — Minneapolis Mayor R.T. Rybak today delivered to the City Council a supplemental City budget for 2010 that closes a $9.18 million budget gap — caused by recent State cuts in aid to local government — without any new layoffs.
In an address to the City Council, Mayor Rybak laid out his proposal to respond to the State cuts by three means:
• $1.1 million in non-personnel cuts,
• $4.5 million in personnel and other cuts that were made last year in order to address likely State cuts in 2010, and
• $3.6 million in one-time revenue.
Mayor Rybak stated that Minneapolis was "prepared" to meet the State cuts without layoffs or cuts to critical services because it had been engaged for years in long-term financial planning, including:
• maintaining reasonable reserves,
• structurally balancing its budgets five years out, and
• paying off $130 million in debt over the last eight years.
Mayor Rybak also credited the City’s ability to respond to the latest State cuts without making layoffs to the decisive action that Minneapolis’ leaders, financial planners and employees took to structurally balance the 2009 and 2010 budgets.
He added that he was "frustrated" that Minneapolis was once again called upon to respond to State cuts "while comments from the State have often criticized this city’s financial practices, including criticism of maintaining the very reserve that is helping us weather today’s storm."
Mayor Rybak "set the record straight" by pointing out that:
• Since 2001, State of Minnesota spending has increased at a rate eight times faster than City of Minneapolis spending. State spending has risen 56% in that period, while City of Minneapolis spending has risen 7%.
• Since December 2008, the State has cut over $30 million in aid to Minneapolis.
• In the last several months, three independent bond-rating agencies maintained the City of Minneapolis’ "stable" outlook, praising the City’s strong financial management and performance, practice of maintaining reasonable reserves and ability to respond to State cuts — while the State of Minnesota’s outlook was downgraded from "stable" to "negative" as a result of its financial practices.
• Today’s supplemental budget proposal represents the third time in recent years that he has had to propose mid-year cuts to the City’s budget to respond to cuts from the State.
Mayor Rybak did, however, thank the Legislature for keeping the cut that Minneapolis has absorbed to just one-third of the cut that Governor Pawlenty proposed earlier this year.
He added, "I hope we can put an end the era in which the State criticizes the City for helping the State balance its budget."
In addition to his proposal for addressing State cuts, the mayor proposed investing $6.5 million in additional one-time revenue — itself the result of careful financial planning — in two initiatives that will reduce future spending and maintain an effective workforce with fewer resources:
• Buying down pension debt ($2.8 million), and
• Creating an Innovation Fund ($3.7 million).
The main components of the Innovation Fund are:
• $1.2 million to complete the City’s wireless network, and requiring all City departments to use it;
• $1.0 million for additional pothole-filling and street seal-coating;
• $1.5 million for business-process improvements, incentives and new technology.
Finally, Mayor Rybak pointed to the budgetary pressures that the City of Minneapolis continues to face. These include:
• The growing State budget deficit, currently projected to be $5.8 billion for the next biennium;
• Increasing pension-fund commitments;
• Rising health-care costs;
• Growing demands on the City’s infrastructure; and
• Unsustainable property-tax increases.
On property taxes, Mayor Rybak said, "We have been able to weather very difficult times because of a partnership between this City government and the residents of Minneapolis. The City is in exceptionally strong financial shape only because of that strong partnership. But we need to focus four-square on the issue of lowering property taxes. Had we not had another state cut, we would have been able to keep property taxes down more. If we get another State cut, that will challenge our ability to keep property taxes down. We have to be four-square focused on making sure we protect the taxpayers of this city."
Mayor Rybak concluded, "We have tough times ahead, but these times would have been dramatically tougher had we not been doing the tough, long-term, fiscally-prudent work that has put this city on strong financial turf."
A copy of the slides that accompanied the Mayors supplemental budget address is available here: Mayor's 2010 Supplemental Budget (pdf).
The overview of the Mayors proposed revisions to the 2010 budget is available here: Mayors Supplemental Budget Recommendations (pdf)
The letter to the City Council that accompanied the Mayors supplemental budget is available here: Mayors Budget Letter (pdf)
Published Apr. 8, 2010