Purpose
The purpose of our budget review was to provide an independent evaluation of the City’s proposed budget for 2021-22.
Background
Chapter 531 of the Laws of 2019 authorizes the City to issue debt not to exceed $8.3 million to liquidate the cumulative deficits in the City’s general, transportation, sewer and recreation funds accumulated as of June 30, 2018. Local Finance Law Section 10.10(d) requires all municipalities that have been authorized to issue obligations to fund operating deficits to submit to the State Comptroller each year, starting with the fiscal year during which the municipality is authorized to issue the deficit obligations, and for each subsequent fiscal year during which the deficit obligations are outstanding, their proposed budget for the next succeeding fiscal year.
Key Findings
- Based on the results of our review, we found that certain significant revenue and expenditure projections in the 2021-22 proposed budget are not reasonable and other matters that require City officials’ attention.
- The proposed general fund budget includes estimated revenues of $975,000 for Federal aid anticipated to be received by the City through the Federal American Rescue Plan Act (Act) of 2021. At this time, the timing of receipt of funds from the Act is uncertain. Once received, the funds will come with restrictions on what they can be used for.
- The proposed budgets for the general and recreation funds are not structurally balanced because they include subsidies from other funds to finance their operations.
- The proposed budget includes inadequate appropriations for debt service and appropriations for health insurance and Social Security and Medicare taxes that may not be sufficient.
- The proposed budget includes allocations of appropriations for personal services, contractual expenditures and employee benefits between the operating funds using unsupported allocation methods.
- The proposed budget does not appropriate enough money for contingencies in the refuse and recreation funds to provide adequate flexibility for unanticipated costs.
- One of the City’s seven collective bargaining agreements (CBAs) has expired and another four will expire at the end of 2020-21. The CBAs cover the salaries and wages of approximately 100 City employees. The City faces potential increased salary and wage costs when these agreements are settled.
- The City’s proposed budget includes a tax levy of $6,059,017, which is within the limit.
Key Recommendations
- Be mindful of restrictions when budgeting and planning for the use of the Act funds.
- Develop a plan to balance the budget in the event revenue projections are not fully realized.
- Continue to evaluate and explore ways to make the general and recreation funds self-sufficient.
- Closely monitor appropriations throughout 2020-21 and modify the budget as necessary.
- Develop an allocation plan based on detailed analysis that ensures costs allocated to each fund are directly related to its operations.
- Consider the potential financial impact in the event that any of the CBAs are settled in 2021-22.