House and Senate proposed budgets show clear trends in expected impacts to cities

This past week was marked by a succession of proposed budget releases. The Senate’s proposed 2009-11 operating budget was released on March 30, 2009. The House released its version of the operating budget the following day on March 31, 2009. Then, on April 1, both the Senate and the House released their proposed capital budgets.

For quite some time it has been clear that the state’s growing budget deficit would require significant cuts. When the Governor wrote her budget in December 2008, the state was facing a $5.7 billion budget shortfall. After steady economic decline over the past several months, the budget gap has grown and the Legislature now faces a $9 billion deficit.

There were similarities in how each chamber chose to tackle balancing the 2009-11 budget. Both the House and Senate’s proposals implement significant budget reductions and efficiency measures, change pension funding methods, use about $3 billion in federal resources (the majority of which are from the American Reinvestment and Recovery Act) and transfer funds from the capital budget.

Impacts to cities

Many of the funds cities rely on from the state for general operating purposes remain intact in the proposed budgets. However, significant state resources for local infrastructure projects are transferred to the state general fund or reduced.

Some differences and similarities between the proposed budgets as listed below. Please use these items as talking points when communicating with your Legislators.

• Full funding for Streamlined Sales Tax mitigation is provided in both budgets – please retain this vital funding to support the previous policy change.
• A higher level of funding for public health is in the Senate budget (which retains the core backfill of $48 million, most of the $20 million allocated during the previous biennium and the Local Capacity Development Funds) – please provide the Senate funding level.
• A transfer of several important infrastructure programs to the state’s general fund (including the Public Works Assistance Account and Local Toxics Control Account) and reduction of other important infrastructure programs in both budgets (read more below).
• Continuation of the City-County Assistance Account, with the Senate proposing an additional $10 million for distributions during the next biennium – please provide the additional resources allocated in the Senate budget.
• A directive in the House budget for state audit costs to be reduced by 5% for the upcoming biennium for local governments – please retain this House budget language in the final budget.
• An expansion of liquor sales resulting in additional state revenues, with some of the additional profits in the House budget allocated via the Liquor Revolving Account to cities and towns – please use these formulas and continue the allocation of liquor profits and taxes to local governments.
• Funding to train law enforcement officers to meet state mandated requirements in the House and Senate budgets – please retain funding for this training, it is imperative we are able to put new officers on the street as quickly as possible.
• Funding in the House budget ($10 million) to continue to verify the address and residency of all sex offenders and kidnapping offenders – please include the House budget appropriation in the final budget.
• A reduction of resources for auto theft prevention in both budgets, we need at least $10 million – please retain at least $10 million in the account to adequately fund the new program that is proving to be effective.
• A reduction of resources targeted for Growth Management Assistance, Urban Forestry or Buildable Lands programs particularly in the House budget – please delay or place on hold the corresponding obligations until adequate resources can be appropriated.

As noted, both budgets eliminate the Public Works Trust Fund and allocate $368 million for other purposes. The Local Toxics Control Account and Community Economic Revitalization Board (CERB) also experienced significant reductions. We are extremely concerned with this reduction in infrastructure funding that directly translates into jobs, tax revenues for state and local governments, and is used to meet state and federally imposed environmental regulatory requirements.

The Senate did allocate some of the resources otherwise dedicated to the Public Works Trust Fund to specific capital programs or projects that include some city projects. We prefer the allocation of these funds to local capital programs or projects given the decision on using Trust Fund resources for other purposes appears to have been made.

For an analysis of funding levels and cuts to other city funds and programs, including public safety, land use and the environment, visit AWC’s website, www.awcnet.org.

Next steps

It would be unrealistic to assume that a budget deficit of this magnitude wouldn’t significantly impact cities. There are obvious direct impacts through the loss of important infrastructure resources as well as cuts to some criminal justice program, land use programs and other areas. Additionally, there will be significant indirect impacts in terms of the cuts to health and human service programs and the burden this will place on cities to provide more assistance.

The last day of the regular legislative session under the state constitution is April 26, 2009. Although there are trends in how cities will likely be impacted by the final budget, the work is far from over. Typically, the budgets are the last piece of legislation to pass the House and Senate. Please take a moment over the next week to contact your legislators and express support for those specific budget items listed above.

Finally, we have been working with other local government associations and key legislators on SB 5433 in an attempt to provide cities more flexibility with existing revenues, retain existing revenues and create limited new revenues. Your help on this bill will be critical in the coming weeks (see the Municipal Finance section of this Bulletin for more details).

Thank you.

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