Town Manager Debra Galbraith Tuesday recommended that the Payson Town Council slash overall spending by 15 percent, in addition to canceling most capital improvement projects, freezing salaries, banning overtime, not filling vacant positions -- and perhaps shutting down popular programs like the swimming pool and help for community groups.
The draconian budget cuts hit the newly seated council members, still wearing their swearing-in smiles.
The council facing a tight, three-week deadline asked town staff to provide more information to help prioritize the proposed cuts, with emphasis on protecting the budget for essential functions like police and fire. Most councilors said they were uncomfortable with the idea of a proposed 10 percent cut in every department without information on possible impacts.
Town finance staff said the specific cuts presented to the council this week will be reworked before the next study session, slated for June 5. The town is supposed to adopt a tentative budget by June 19 and a final budget by early July.
Proposed cuts included a nearly $1 million hit on both police and fire. They are also scavenging the budgetary spare change out of the sofa through things like shutting down the town pool for the summer, cutting off the $69,000 subsidy for the chamber and curtailing payments to a host of community organizations, who are struggling with a decline in donations brought on by a slack economy.
The depth of the budget hole into which the town has slid came as a public surprise, since the council does not get monthly updates on the budget status and Galbraith has canceled two previous budget study sessions, while waiting for year-end numbers from the state and unraveling the town's accounting system.
The rumor of a budget problem has seeped into council deliberations for months, but didn't visibly affect decision making until about a month ago when Galbraith reported the projected $30 million in revenues for the current year had come in closer to $25 million. But at that budget session, the council received no figures on spending.
The figures finally presented to the new council on Tuesday were bleak, with major impacts on every department. Galbraith's proposal would avoid layoffs, but since salaries represent the bulk of town spending the proposed 10-percent department cuts could result in 20- to 30-percent reductions in discretionary spending for most departments.
Overall, the 2008-2009 budget would fall to $33.4 million from this year's $39.2 million, a nearly 15-percent decline. The budget includes a razor thin contingency fund of just $300,000, about one half to one third of what it should be for that sized budget, newly hired Finance Director Doug Hill told the sobered council.
"A lot of department heads have understandable concerns about running a balance with these figures," said Hill.
He said despite the likely impact of the across-the-board cuts, the Town had few options for less painful cuts. "We're getting into bottom of the barrel stuff," he said.
Mayor Kenny Evans said the town has largely spent its financial cushion. In addition to the projected shortfall in the upcoming budget, the town outspent its income in the current year by about $1 million.
"The fact we have continued to spend has left us with that million-dollar shortfall -- plus the projected shortfall for the coming year," said Evans.
The proposed cuts would have a significant impact on police and fire departments. The fire department currently racks up considerable overtime, partly because the department routinely calls in off-duty firefighters to respond to major fires. The police department would likely leave three empty positions vacant, struggle to eliminate overtime and not replace $100,000 worth of aging police cars.
Major cuts under the 10-percent plan include $700,000 from police, $690,000 from fire and $877,000 from parks and recreation, according to budget documents.
Capital improvements could be cut by $2 million
The capital improvements budget would take a $2 million hit, after major increases in the past two years. The plan calls for canceling about $3.1 million worth of street and other projects previously approved, but unfunded. It does include about $7 million worth of projects mostly financed by state and federal grants or previous bond issues.
Unfortunately, the town spent most of its $2.7 million rainy day fund just to get through the current fiscal year, since the full extent of the shortfall didn't become evident to the council until the very end of the fiscal year.
Many cities provide council members with regular monthly summaries on the pace of both spending and revenues, but councilors said they have received only vague updates suggesting that sales tax and building permit revenues were lagging behind projections. In fact, the town has been about $500,000 short every month for eight months or so.
As a result, the contingency fund has evaporated and the council has little carry-over cash to buffer what town staff now projects to be another bad year in terms of permits and sales tax.
"One of the challenges we face is we have a fairly short timeline -- this was not something we could tweak a little bit here and a little bit there. Still, staff has done a good job of saying this is the size of the pie -- now how do you want to slice it?" said Evans.
Councilor Su Connell said, "Budget cuts are a very scary thing and it's something that makes us a little sick to our stomachs. I truly believe we can make some systematic changes that will make us very proud. As much as it's a frightening proposition, if we all work together we can make this happen."
Mayor Evans agreed. "This is a significant challenge that will require some significant belt tightening -- and thinking outside the box."
Newly seated Councilor Michael Hughes observed, "the first priority is to provide the vital services," including police and fire.
Councilor John Wilson questioned the across-the-board approach. "The 10-percent cut is regardless of what the services are and how vital they are. It's like in many businesses, when your sales are down -- you don't cut advertising because that's how you get sales back up."
"So I guess all we have to do is leave all ‘these' departments alone and take it out of the ‘other' departments," joked Evans.
Evans then summarized the sense of the council that it needed more detail on the potential impact of recommended reductions. "We would like to see a little discretion from staff, instead of the numbers you're throwing at us today."
The council spent much of the meeting grappling with the implications of the budget cuts, including a list of potential reductions to close what amounts to a continuing $2 million shortfall.
For starters, Galbraith recommended not filling $400,000 worth of currently vacant positions, including three police officers, a permit technician, a finance manager and a records clerk.
Other potential cuts included eliminating about $46,000 in money used to promote the town, $135,000 to operate the pool during the summer, reconsidering an $80,000 contract awarded to the Payson Senior Center, $69,000 for the Rim Country Chamber of Commerce, $53,000 allocated for economic development, $28,000 for the open space and trails program and cutting off small grants to a host of community agencies including Literacy, Big Brothers Big Sisters, Payson Helping Payson and St. Vincent's Food Bank. All told, those cuts amounted to another $439,224.
The budget presented to the council already included all those cuts.
"Just remember that anything you add back in, you have to subtract something," said Galbraith. Be very careful with that -- some of that in the past has gotten us to where we are now."
The only member of the public who rose to speak was Robert Henley, a former councilman. He urged the council to reconsider the across-the-board department cuts and to protect the money allocated for the struggling community organizations.
"You can better serve the town by prioritizing until you run out of money and then what isn't funded isn't funded. A 10-percent cut is a blind cut. This might require looking at employee head count. It's going to be a tough decision on your part. But just realize, when economic times are tight -- it's extra tight for the nonprofits trying to serve the community."