The Payson council held an emotional, emergency budget session on Tuesday to grapple with a projected $721,000 deficit for the fiscal year that starts in July.
Continued raids on local funds by the state Legislature and rising employee benefit costs could force a fresh round of layoffs and a reduction in many programs. That would include slashing town payments to the Rim Country Regional Chamber of Commerce from $36,000 to just $11,000.
The plan also calls for the cancellation of almost all capital improvements and big increases in employee costs for health care. The renewed budget crisis also means the town can’t fill five patrol officer vacancies or end its reliance on two-man crews on fire trucks on many shifts.
The possibility of three fresh layoffs at one point left Town Manager Debra Galbraith choking back tears, as the town headed into a fourth year of cutbacks.
Town Councilor Su Connell lamented that the town has been cutting staff and services ever since she came on the council. “It’s always been cut, cut, cut and it hurts, hurts, hurts.”
The session amounted to an early warning of a serious problem, but the council made no decisions on Tuesday.
Town officials have ridden a gut-wrenching fiscal roller coaster for months as they have anxiously watched the budget standoff between Republican Gov. Jan Brewer and the Republican leaders in the Legislature.
The governor’s office this week announced a breakthrough, which briefly gave town officials hope they could at least avoid layoffs. The announcement indicated the state budget deal would restore $36 million to local government funds the Legislature swept to balance its own budget.
Payson Mayor Kenny Evans said that on Wednesday, town officials calculated that Payson would get another $100,000 or so.
However, hopes sank on Thursday when analysts for the League of Arizona Cities and Towns notified Payson it would likely only get an additional $15,000 as a result of the state budget deal.
“We are sitting here most confused this afternoon,” said Evans on Thursday. “The initial claims from the governor’s office suggested we’d get about $6 per resident. So we were gleeful Wednesday. But Thursday morning we got an estimate of $15,000 so we’re sitting here scratching our heads saying, ‘What the heck?’”
The Legislature has repeatedly gobbled up funds that had traditionally gone to cities and towns, including money from the gas tax, the Department of Motor Vehicles and even a new $6 million fee imposed on local water departments to fund the State Department of Water Resources.
“I don’t know how we went from $6 per capita to 50 cents,” said Evans, “but we’ll find out.”
Town councilors expressed dismay about the prospect of layoffs, which could include three mid-level clerical and administrative staff.
“Those of us who were sitting there in the budget committee sessions were just bleeding,” said Connell. “It’s nothing you want to do. Laying off is the very, very last thing we wanted to do.”
Councilor Fred Carpenter, himself a former Payson town manager, urged Galbraith to consider the human cost of layoffs in making her budget recommendations.
That drew an indignant response from Galbraith. “Everybody on that committee takes to heart everything we have to do,” she said, her voice choked with emotion. “I hope you’re not insinuating we didn’t do that.”
“I’m not pointing fingers at anyone,” replied Carpenter. “I just wanted to make sure that we consider the human cost of everything we do. You’ve all done yoeman’s duty so far — I’m just hoping there’s some way we can squeeze out a little bit more” to avoid layoffs.
Chamber manager John Stanton said he had no idea the council planned to discuss a $24,000 cut in the amount the town provides to help the chamber operate a visitors center. He said running the visitors center consumes about $38,000 of the chamber’s $105,000 annual budget.
If the town does cut its contribution to $11,000, it will force drastic changes in the operation of the visitors center in a town almost wholly dependent on tourism.
One of the biggest budget hits came from increases in retirement and medical costs over which the council has little control. The state Supreme Court recently overturned efforts to require retired municipal workers to share in the spiraling cost of health care benefits. Instead, towns must pay all of the increase in retiree health care costs. For next year, that adds up to about $9,000 annually for each of 41 retirees.
The town spends nearly $700,000 annually in retiree health care costs — or about $17,000 for each retiree.
In the past several years, the town has adopted new policies that will allow more flexibility. As part of its budget plan, current employees must pay nearly $200 a month more for health care.
State formulas also forced the town to substantially increase its contributions to retirement plans for police and firefighters. The town had to shell out an extra $85,000 last year and faces a $130,000 increase in the upcoming year.
Retirement contributions for police and firefighters will total about $474,000 annually.
All told, the town expects to take in $12.8 million — more than half of it from sales taxes. However, projected expenses topped out at $13.9 million, even after eliminating most department requests for budget increases and almost all capital spending projects.
Town officials assume that Payson will limp through another year of virtually flat sales tax collections, after finding their hopes for even a modest increase this year dashed by an economy that stubbornly refuses to rebound.