The budget cuts which cities are going to have to make this year are a hot topic, both in the council room and in the coffee shop. From the conversations I have heard - in both of those locations - there is a lot of confusion about what it all means.
Even those in charge of deciding on the cuts are confused.
Most of the confusion deals with the unknown.
The state cuts the Local Government Aid to cities, but doesn't tell them until the last minute how much they are going to slice off, from what they have already said they would send.
The whole manner in which this is done stinks - for a variety of reasons.
Let's see if I can explain this at all.
Cities set budgets for the calendar year. The budgets are usually good faith estimates of what the city thinks it will get in during the year, and what it will have to spend during the year.
However, cities don't get their revenues each week like you get a paycheck. If they did, things might be easier to budget for.
Instead, cities, for the most part, get their money in two big chunks each year. After citizens pay their property taxes in May and October, the city gets their share. And the state sends them their LGA in June and December, after the state gets it collected.
One city administrator told me one time that there always is this pile of money in the city coffers. Twice a year it becomes a huge pile of money, which over the next six months or so, shrinks down to a little pile of money. Then the next wheelbarrow full of cash gets dumped on it, to replenish the pile.
However, budgets don't really follow the cash pile. They follow the calendar year. That can cause a lot of confusion.
Lets take a look at this last LGA cut from the state as an example of this.
It came at the end of December. That is the end of the 2008 budget year. In theory, the city has already spent that money which the state is giving it. That budget has run its course, things have been paid for - out of the big pile of cash. The big pile of cash is now a little pile of cash, and needs to be replenished.
It does get replenished, but not by as much as was thought.
So what this means is this. The state cut its money to the cities for 2008, but it is going to be felt in 2009. That end of 2008 money is actually going into the coffers to keep the city operating for the first six months of 2009, until the first big pile of 2009 money comes in, to be added to the pile.
It will be a pretty small pile by that time.
The problem gets compounded because the cash to add to the pile in 2009 is going to be smaller than was thought, when the 2009 budget was prepared.
In the case of Blue Earth, this continuing smaller cash pile is what has the city administrator looking at trimming nearly $300,000 from the 2009 budget. That number includes the missing cash from 2008, because it was too late to trim it from the 2008 budget – the year was over.
That is just one of the ways this whole situation is unfair to the cities – and counties – which are getting their funds cut.
It is true we all need to share in the pain of the financial cuts from the state. Even though we think the legislature needs to overhaul the whole revenue system so they can have a firm handle on what is coming in, they didn’t do so. This means everyone is going to suffer.
However, telling someone they are getting a certain amount of money and then cutting it back just isn’t fair.
Making them submit a budget based on the higher amount, then giving the lesser, is just not right, either.
Someone in St. Paul needs to get a grip on this state budget situation. There is just no way the state should be operating with billions in surpluses one biennium, and billions in shortfalls just a couple of years later.
(For more comments, read the editor’s blog each week on the Register’s web site.)