Budget Perspective: An Audit, Attrition, and Assumptions

At the end of the week Lakewood City Council wrapped up an extensive series of budget hearings. Council also had a look at the first phase of a performance audit conducted by the Auditor of State.

According to Mary Taylor, Auditor of State, a performance audit is defined as a systematic and objective assessment of the performance of an organization, program, function or activity to develop findings, conclusions, and recommendations.

Phase one of this audit includes reviews of the following: the City’s budget for 2008; the City’s long-term financial projections (2009 – 2013); and the Structural Balance Task Force Report (SBTFR).

Budgets have a starting date and an ending date. The budgeting process, however, has become an increasingly continuous activity. Several years ago at the conclusion of a budget, several council members voiced concern over trend lines showing revenues increasing at a slowing rate while expenditures were in a constant rate of increase. If allowed to continue this would result in a structural or built in imbalance in the budget. Therefore, the George administration in cooperation with council established the task force mentioned above.

This year’s budget was actually part of last year’s mayoral campaign with then candidate, now Mayor Ed FitzGerald maintaining that a deficit of over three million dollars was looming. Despite the fact that a deficit is not possible because a city must balance its budget, the new administration and council proceeded the process using conservative projections. And, the SBTFR continued its work which included in-depth studies of various city departments. Upon taking office, the new administration put in motion efforts to change or modify the direction of several departments.

All of these efforts have not been completed and implementation of any new measures will, consequently, take place in the future. However, the deadline of March 31 for submitting a budget is unmovable.

The Auditor’s report reviewed income sources and projections and confirmed the administration's projections. Estimated expenditures indicated a shortfall of around four million dollars.

In order to meet the deadline, give time for new measures which would restructure imbalances, and allow for recommendations from the second phase of the performance audit, council and the administration have agreed on a budget which relies on a combination of attrition and assumptions to achieve a slight fund balance.

On an average year, 30 – 40 employees leave city employment. This year, none of those positions will be filled. Early in the year council passed legislation at the administration’s behest rescinding performance bonuses to employees who were not represented by bargaining units. Also, those employees were required to contribute more to their health insurance premiums. The administration would like to change the negotiated contracts with the unionized workers to achieve cost reductions or else have to layoff workers to reduce costs. The administration is in discussions with the various bargaining units but is using assumptions of the outcome of those negotiations as a basis for the budget.

So, the budget that will be passed on March 31 will be balanced. But, in the words of Mayor FitzGerald, “this is still a work in progress.”