Budget proposal flat for 2009

By SCOTT SMITH
Tribune staff writer

August 07, 2008 11:03 pm

— As expected, Kokomo Mayor Greg Goodnight proposed a net spending cut for the 2009 city budget, issuing a $54.8 million proposal Thursday that city director of operations Randy Morris dubbed “lean and mean.”
Whether the city can hold Goodnight’s proposed course, however, will depend on both the will of the Kokomo Common Council and the outcome of negotiations with the three city unions.
The key issue, as it has been for the past four years, is the ever-increasing cost of health care for about 500 city workers.
This year, as in 2007, the city has been forced to dip into cash reserves to cover unbudgeted health-care costs.
Last month, city controller Jim Brannon told council members they would need to appropriate an additional $1.6 million to cover those costs. Brannon’s request came as no surprise; council members said last September they knew the budget they’d passed wouldn’t be sufficient to cover those costs.
Factoring in the additional spending this year, Goodnight’s 2009 general fund budget proposal represents a spending cut of just under 1 percent.
Local units of government, including the city of Kokomo and Howard County, have already been operating under state-imposed spending restraints for several years.
But the passage of state property tax reform last year further tightened those restraints.
Goodnight, citing figures from the Indiana Department of Local Government Finance, has said he has no choice but to cut city spending by $2.2 million over the next two city budgets. Howard County is faced with about $770,000 in required cuts over the same period.
Morris said the city has already cut $600,000 worth of manpower through layoffs and attrition, including six city employees laid off July 25. Non-contractual employees have already been told they won’t receive raises next year, he said.
“We’ve aggressively been looking at manpower and combining job responsibilities,” Morris said.
“We have three main issues: the additional cost of insurance, the additional cost of fuel, and then you have cuts in revenue because of [property tax reform],” he said. “These are the three major issues we’ve addressed in [the 2009] budget.”
Whether the city will have to go back to the council next year and ask for more money depends largely on the outcome of contract talks with the city’s police, fire and AFSCME unions.
Last week, city officials confirmed all three unions appear headed toward arbitration over insurance, after talks stalled. AFSCME union president Jesse Dixon said Goodnight is asking for concessions, including increased employee contributions, removal of some caps on out-of-pocket costs, and doubling employee co-pays and deductibles.
Morris said the city’s proposed 2009 budget provides $15,000 per employee in health care benefits. While that figure is $1,500 per employee more than the 2008 budget, Morris said the city is expected to spend $17,500 per employee this year. That’s why Brannon had to ask council for additional funds.
Morris said the 2009 budget proposal also contains funds for increased fuel costs. The 2008 budget funded diesel purchases at $2.40 per gallon. The 2009 budget funds diesel at $4.40 a gallon, he said.
Annexation and the budget
No money is included in Goodnight’s 2009 budget proposal for annexation costs, a fact Brannon attributed to the fact the annexation isn’t final.
“It hasn’t passed, and we can’t put a budget in for those expenditures when [the annexation areas] aren’t in the city,” Brannon said. “We will do some things [next year] if the annexation goes through.”
Goodnight’s fiscal plan for annexation includes significant spending in 2009, but hardly any of it would come from property-tax-supported funds. The largest of the annexation expenses — building two new fire stations — was to be paid with borrowed money.
Goodnight’s plan called for tapping economic development income tax funds, gas tax funds, and loaned revenue to pay for the first wave of annexation expenses.
Even so, Brannon confirmed no money has been budgeted for annexation. Brannon said the city will try to save EDIT funds next year, as that money will be needed for the annexation.
Morris said the city continues to hope a partnership can be formed with the Taylor and Harrison township volunteer fire departments, which would allow the city to forego building the new stations.
Morris also said any new firefighters or police officers won’t be hired until the end of 2009 at the earliest.
Scott Smith may be reached at (765) 454-8569 or via e-mail at scott.smith@kokomotribune.com