Harbison: City of Las Cruces Budget Implications

Jim Harbison

The main topic at this week’s City Council Work Session was the Budget Strategies for Fiscal Year 2012. A lengthy presentation was made by Dick Gebhart, Manager of Management & Budget on developing City budgets for FY 2011-2016. I found it somewhat amazing that the budget forecast for the next five (5) years proposes a budget of $69 million with anticipated revenue of $26.8 million resulting in a shortfall of $42.2 million (annual budget of $13.8 million with revenues at $5.36 million and an annual shortfall of $8.5 million). Obviously, this is a tremendous shortfall which will have to be made up by increased taxes and fees or grants from the Federal and State governments. This is especially scary because the strategy was based on the assumption that there will be no changes to the current tax laws. This seems to be unrealistic since the City Council has already expressed concerns about the next State legislative session considering the elimination of the “hold harmless” provision on taxes on food and medical. If enacted, it would result in an additional loss of approximately $8 million in annual revenues to the City.

Money from Federal and State sources is also tax dollars that have to be taken from the taxpayers. As the saying goes, “there is no free lunch” and every dollar the City of Las Cruces receives from State or Federal agencies has been confiscated from the earnings of workers including those in New Mexico. Under this budget scenario Las Cruces will continue to be a “beggar City” and like so many others will become depend on the State and Federal governments. As a result our policies will be driven by those agencies that provide the funding rather than the citizens of Las Cruces.

With a faltering and struggling economy the Federal government has decided not to provide any cost of living allowance (COLA) to the seniors who depend on social security for their existence for 2010 and 2011. The City government is apparently unaware of the Federal declaration that there is no inflation or increases in cost of living because this budget strategy proposes an annual increase in employee compensation of 8.6% (2.8% salary & 5.8% benefits) each year for the next five years. I do not believe this is fiscally responsible under the current economic conditions.

One of the proposals was to make up some of the shortfall from the City’s reserve fund. It is mandated by the State that the reserve fund be equal to 1/12th of the budget. Due to astute financial management, the City has approximately twice this amount. This reserve is often called the “rainy day fund”. Mayor Miyagishima stated at the work session that “it is now a rainy day” and those funds should be used. Councilor Small thinks the reserves are too large and should be used to mitigate some of the budget shortfalls. Is this truly an economic downturn or rainy day that requires use of the reserve fund or is it the result of too many non-essential programs that we can no longer afford? Has anyone on the Council considered reducing spending?

When asked what caused the greatest increase to the General Fund expenditures over the past five years Mr Gebhart stated it was due to increases in City staffing. The irony is that the building boom that increased staffing ended in 2007 and the workloads have diminished but the City has not reduced the amount of employees. It is time for the City Council to demand a thorough review of the City programs and staffs and to make the appropriate and necessary reductions to both.

Harbison: City of Las Cruces Budget Implications