Saginaw controller: City needs to address deficits now to prevent emergency financial manager
By on January 26, 2013 at 5:00 PM, updated January 26, 2013 at 5:01 PM
View full sizeCarl Johnson, city controller from Plante Moran, speaks to the Saginaw City Council about, among other things, the city deficit during the council's strategic planning session on Saturday, Jan. 26, 2013, at the Castle Museum. But Johnson said that could happen eventually if city leaders do not act immediately address the government's structural budget deficit.
"You have to have whatever plan you are looking at in place, ready to go, on July 1," he said. "It's just so key that you be as proactive as you can. The consequences are so devastating if you don't do it. It's twice as bad."
Johnson said the cause of the gap between revenue and expenditures in Saginaw ranges from the rising cost of retiree pensions and health benefits to serious decreases in revenue sharing from the state. The bottom line, he said, is that Saginaw is spending more than it is taking in.
And there is not enough left in the general fund balance to cover that shortfall.
"You have to live within your means and you need to prioritize," Johnson said.
City Manager Darnell Earley said city staff has already implemented cost saving measures across many city departments.
The way to close an expected $3.2 million budget gap for the upcoming fiscal year, Earley says, will include staffing reductions in the fire department and outsourcing police services to the county. If a contract cannot be agreed upon with the county sheriff, he said, staffing reductions will also need to be made in the police department.
That backup plan would mean a reduction in force to 55 police officers and 35 firefighters, if city council approves the measure.
Johnson said one thing city leaders cannot do is refuse to act, which could mean the city would start digging itself a financial hole that would become increasing difficult to get out of.
"You have to address the systemic problem of the operating shortfall," he said.
Councilman Norman Braddock said he agrees that the assignment of an emergency financial manager, which would take power out of the hands of elected leaders, would not be good for Saginaw.
"That's something I don't think any of us want to see," Braddock said.
But the councilman said he thinks the city needs to move forward with the removal of a cap on property tax receipts as well as looking on the expenditure side of the budget.
Earley said he thinks the city should not return to voters with such a request until after leaders have done the "heavy lifting" of balancing the budget now with spending cuts.
The city manager said his staff plans to continue pursuing a contract with the county and other alternatives to the staffing cuts before presenting city council with a draft budget sometime before the end of April.
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