It's The New Fiscal Year

FossilMedic sends you a big: 

WELCOME TO FISCAL YEAR 2009

Most municipal budgets run from July 01 to June 30th, so this is the first column published in Fiscal Year 2009. FY09 starts in a recession, just as FY02 (March to November 2001) and FY 82/83 (July 1981 to November 1982). This recession may last more than a year, with indicators that fire department budgets will shrink during FY09 and FY10.

MUNICIPAL BUDGETING 101

The majority of a jurisdiction’s income comes from three sources: property taxes, personal income taxes and general sales/gross receipts taxes. The United States Census says that these three sources represent two-thirds of total revenues collected by local government.

A recession means businesses close, as demonstrated by the announcement of the closing of Home Depot and Starbucks stores. Empty stores do not generate sales taxes and unemployed workers have no reportable income to tax. The Labor Department reported that non-farm payrolls contracted by 62,000 in June. Since January there are 438,000 fewer jobs in the United States.

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For FY09 there is a complicating factor of the collapsed housing market. I have a house in the epicenter of foreclosed properties in northern Virginia, the result of the recession and a high-profile local government response to undocumented immigrants. There are hundreds of townhouses and single family homes for sale in that zip code. There are dozens more that are abandoned, where the owners walked away from the house. Power is disconnected and the yard has not been mowed.

The average value of a house in my community plummeted $123,000 in assessed value since last year. FY09 will see a 20% increase in the number of properties that fail to pay the county real estate taxes.

There is also the impact of what will probably become $5 a gallon gas before the end of this recession, affecting the cost of almost every good sold.

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PUBLIC SAFETY REPRESENTS A LARGE GOVERNMENT EXPENDITURE

Schools account for about half of a municipal budget, the next largest group is public safety. Most of the public safety budget covers salaries and fringe benefits, representing 80 to 85% of fire department budgets.

Each recession brings about an effort to reduce the expense of fire protection. We have seen Vallejo, California, declare bankruptcy in May in order to break their existing police and fire labor contracts.

East Point, Georgia, closed two of five fire stations and laid-off about 50 firefighters – perhaps related to the closing of the nearby Hapeville Ford plant that employed 2,500. East Point has to return funding from a 2005 SAFER grant.

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Milwaukee IAFF Local 215 is fighting a proposed reduction in 39 positions by reducing aerial staffing from five to four. Administration is saying that NFPA 1710 only requires four on an aerial.

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MFD Eng. 32 – Ladder 9

The Prince George’s, Maryland, County Council approved two-year police and fire labor contacts and, at the same July 01 meeting, the county executive asked the unions to give back some of the negotiated raises to avoid potential layoffs. During the 1982 recession, Phoenix Fire Department agreed to an across-the-board salary reduction to keep a truck company, and 15 employees, on the job.

YOUR IMPACT WILL VARY

In normal years, the municipality will revise the budget at the January mid-year review and, if needed, make end-of-year adjustments at the April third quarter review. I predict that you will see changes in FY09 municipal budgets at the October first quarter review, with significant reallocations in January. The second half of the budget year will be focused on minimizing avoidable or deferrable expenses. Fellow fossils may remember bringing toilet paper to the fire station and participating in near-felonious acquiring of first aid supplies from emergency departments in 1983.

Don’t forget to pay attention to your retirement programs, a source of emergency funding in 1983 that was never replenished in many cities. Financial pundits are as accurate as weather-guessers, but many are saying that this recession will last almost as long as the 17 month FY 82/83 recession.

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Good luck!