Budget Puzzle

Three years removed from a city budget shortfall that led to worker furloughs and other cuts, Mayor Dewey Bartlett is careful not to sound too bullish with his proposed budget for the upcoming fiscal year, which begins July 1.

"Do we see rainy days ahead? I wish I could stand here today and paint a more sunshiny picture," Bartlett told city councilors in April. The group must vote to approve the budget for it to be enacted.

Spending in Bartlett's proposal is based on a projected 3.7 percent increase in sales tax revenue for the city's general operating fund for the upcoming fiscal year. To fund the Fix Our Streets initiative, the city's sales tax rate increased in October to 3.167 percent from 3 percent, with the money raised from the tax hike funneled to the city's capital fund, which is not a part of the city's general operating fund. (Other portions of sales tax go to the state and county.)

Bartlett went on to say, "I will always approach this job with a realistic and conservative point of view," listing economic unknowns that loom large for Tulsa, including the American Airlines bankruptcy that could potentially eliminate more than 2000 jobs.

Overly optimistic sales tax projections can cause serious turmoil. Bartlett added that making decisions based on a "moment in time" has caused "serious heartburn" for the city in the past.

In November and December of 2009, for example, sales tax revenues declined by an "unprecedented" 14 percent compared to the previous year, according to city finance documents.

This shortfall led the city to shed more than 350 positions, though some have been restored.

In presenting the budget to city councilors, Bartlett cited oil prices as an economic stabilizer. But economic forces can be fast-moving and unpredictable. Earlier this month, oil futures fell to an eight-month low, according to Bloomberg News, with analysts describing a global economic slowdown causing a lack of demand. This would have been difficult to predict back in April, when gas prices statewide were near a peak of about $3.65 a gallon; statewide gas prices have since fallen from peak prices by roughly 30 cents.

For the city, "revenue projections are prepared by a professional staff in the Finance Department and reviewed by my management team," Bartlett wrote in an email response to questions from Urban Tulsa Weekly about sales tax growth.

He noted that the finance professionals "spend a lot of time reviewing revenue collections and the detail behind the numbers as well as economic trends that impact taxes."

The predicted growth rate is "prudent and reasonable given all of the data we have about recent collection trends, the sluggish national job growth, and potential negative events in the local economy," Bartlett wrote.

But what gets left out or underfunded when Bartlett touts a $2 million payment to the city's new rainy day fund and $17 million in operating reserves?

For this budget cycle at least -- with the result of union negotiations not yet known -- no dollars have been built into giving across-the-board raises.

Bartlett noted that personnel costs consume 71 percent of the city's general fund and 42 percent of the city's total operating budget

He told Urban Tulsa Weekly that he's recommending the city hire a consultant to study worker pay issues.

"I am asking the City Council to approve $325,000 to pay an outside consultant to review all civilian jobs to make sure they are classified at the right level and the related compensation is in line with the local market." Bartlett wrote. "The results will be used to make adjustments as needed. I wanted to complete this effort before deciding upon across the board increases in FY 13."

Bartlett wrote that the city is now funding positions previously paid for by expiring public safety grants, and that costs are rising for employee health insurance. He also noted increases in workers compensation rates -- a hot-button issue, with the city hiring a consultant in February to study why injuries to city workers have increased sharply.

"So it is not as if we are not spending dollars on our employees," Bartlett wrote. He added: "Additional allocations impact our ability to deliver the services needed by our local residents. It is all a balancing game among many important priorities."

The latest sales tax reports show revenue increasing at a rate greater than 3.7 percent. On June 7, for example, the state released information showing a 10.8 percent increase in sales tax revenue for Tulsa, though that also reflects the higher tax rate this year.

But in a public statement after the announcement, Bartlett again sounded a note of caution.

"The more recent growth rate is less than what it has been and is also trending toward the rate assumed in the FY '13 projection of 3.7 percent," Bartlett said. The city noted that, for the most recent month, sales tax going to the general fund increased by only 4.1 percent.

Still, if Bartlett's budget team has erred on the side of caution, there seems to be a reasonable chance for a surplus next year. If pay for city workers doesn't seem to be much of a political issue this budget cycle, that may change a year from now.

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