Economists say the recession is over but we are having a slow recovery with continued high unemployment – what they call a "jobless recovery." Plus, 70 percent either doesn't know or doesn't believe the recession is over. Consequently, retail spending nationally remains at a standstill – or worse. That is why we are under such pressure to cut the General Fund. The two-cent General Fund Sales Tax is the bread and butter of our operational funding – and if people don't spend, we don't get sales tax. |
It is a common misconception that property taxes help finance local government. This is true in many states, but cities and towns in Oklahoma cannot levy property taxes for day-to-day operations. Property taxes do finance General Obligation bonds voters approve for specific capital projects, but can't be spent for operations.
The bottom line is the City's primary source of General Fund income is the two-cent sales tax.
All sales taxes must be approved by voters. These other City sales taxes were earmarked on the ballot for a special purpose. The MAPS Sales Tax has expired, but all the proceeds remain in a special fund. Another dedicated tax, the Police and Fire Equipment Tax, has also expired. The MAPS for Kids tax – which can only be spent for schools as described on the ballot – will stay in effect until January 2009.
Oklahoma City also has two permanent, dedicated sales taxes:
We get some General Fund revenue from other sources – fines, permits, franchise and other fees, use tax and interest earnings. Interest rates are at an all-time low which is good for consumers, but hard on earnings. The City can raise some fees. Rates for use tax and franchise fees are pre-determined.
We did find one new revenue source – court costs. The City had been subsidizing court costs with General Fund dollars. Council recently approved a significant increase to bring our court costs in line with what other courts charge.
The higher court costs, along with some additional fee increases proposed for next year, will bring in about $6 million in new General Fund revenue. These measures reduce next year's projected budget gap from $18 million to $12 million.
We have, in fact, already budgeted some reserves and delayed certain capital spending to help close the gap, but this is not a long-term solution. Using one-time funds to pay ongoing expenses is not good management and ultimately compounds the problem.
The projected budget gap is $12 million. All General Fund departments had to cut budgets. Police and Fire were required to cut 2% of their budgets and the other General Fund departments had to propose budget cuts of 11% – the biggest reductions we've had in years.
The best we can. Our budgets are always tight due to employee costs – even when revenues were growing 5% a year. But the level of cuts necessary next year will affect our core services – parks, animal control, street maintenance and public safety. All these services depend on workers.
Why do we have to cut jobs?
About 80% of the General Fund budget goes for employee-related costs. Direct annual costs such as pay and benefits alone account for 68%. Other expenses (ongoing retiree health insurance subsidies for example) increase employee General Fund expenditures to approximately 80%.
Cutting training and office supplies won't close a $12 million gap – we have to cut positions.
Public safety is our highest priority. More than half the General Fund goes to public safety. A 2% reduction is an incentive for improved efficiency without taking uniformed officers off the street.
The 3/4 cent permanent Public Safety Sales Tax for new or expanded police and fire services is budgeted in separate funds and kept in separate accounts.
The budget process has several review levels. The Budget Office analyzes department submissions and makes recommendations. Departments and the Budget staff meet with the Assistant City Managers to discuss the budgets and decide what to recommend to the City Manager.
The City Manager then goes over the entire budget and prepares a proposed budget to present to the City Council.
The City Council holds public hearings and makes its final decisions before adopting the budget.
FY 2003/04 Budget Calendar |
|
| Departments meet with Assistant City Managers: | March - April |
| City Manager submits budget to City Council | May 13 |
| City Council holds public hearings | May 20 & June 3 |
| City Council scheduled to adopt budget | June 10 |
| FY 2003/04 budget takes effect | July 1, 2003 |
For more information on the City's budget and how to participate in the process, call the Budget Office at 297-2257.
The General Fund is 54% of the Operating Budget. *Operating Revenues by Fund Category Total Operating
|
 |
The General Fund pays for day-to-day operations. *General Fund Expenditures by Functional Category |
 |
We must invest in economic development to keep sales tax revenue growing.We must be creative, willing and prepared to invest in economic development. Even more so in bad times than good. A good example of this is the Bass Pro project. We estimate the project will bring in approximately $24.6 million in direct revenue and $129.9 million in indirect revenue over a 20-year period. There has been a lot of misinformation about Bass Pro. To set the record straight, we are NOT taking, borrowing or spending from the MAPS Sales Tax or any other restricted fund. Dedicated sales tax revenue must be kept in special, separate funds. These funds are audited – internally and externally – every year. So how are we paying for the building construction? We are borrowing from three Use Tax reserve funds established by Council resolution: the MAPS Operations, City Schools Use Tax and Public Safety Capital Equipment Use Tax Funds. Borrowing Use Tax is not only legal and above-board, it actually benefits the three funds because the loans will be repaid at above-market interest rates. Our City Council was not unanimous in voting for the project – that's what representative government is about. But even those opposed to the project will confirm that neither MAPS Sales Tax or General Fund money is involved in constructing the building we'll lease to Bass Pro. The Skirvin Hotel renovation, another economic development project, enjoys unanimous support. The General Fund also has nothing to do with this project. Incentives will come largely from federal programs. We can't use money associated with projects like these to balance the budget for three reasons. First and foremost, the projects aren't paid for from the General Fund. Second, these projects are one-time expenses, not ongoing operating costs. And third, we depend on sales tax to pay our employees and provide ongoing services. – City Manager Jim Couch |