What's going on with the budget?

The short answer is, "It's better than last year," but we still have to do more with less.

Even though the City is taking in more revenue, and the economy is improving, we are still faced with the General Fund ‘Gap’ – the difference between income and outgo. The budget process starts with estimating the revenues and expenditures for the coming year. These projections – how much money will come in (revenue) and how the money will be spent (expenditures) – are the framework for every budget.

To prepare a balanced budget we have to make the two estimates match exactly.

The proposed FY2005-2006 operating budget is $468,503,680.

The proposed FY2005-2006 General Fund budget is $288,503,242.

This year each department was asked to reduce its proposed FY 05/06 budget by about 1.5%. Compared to past years, that’s pretty low, but because budgets were stretched so thin during the recession, even this relatively small reduction is a challenge.

There are very few “easy” cuts left.

Revenue

The two-cent general sales tax is the bread and butter of our funding.

That revenue makes up 53% of the General Fund, which provides core City services.

What about property tax?

It’s 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 property taxes 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.

What about other sales taxes – like MAPS for Kids?

All sales taxes must be approved by voters. In the past, voters have approved temporary sales taxes dedicated to a specific purpose, such as the MAPS Sales Tax and the Police and Fire Equipment Tax. Those ran a specific length of time and then expired.

The “MAPS for Kids” penny sales tax is the only temporary tax of that kind currently in effect. It expires January 1, 2009.
Oklahoma City also has two permanent dedicated sales taxes:

• The ¾ cent Public Safety Sales Tax pays for Police and Fire improvements, including more personnel. This tax is in addition to the portion of the General Fund budget dedicated to Police and Fire.
• The ⅛ cent Zoo Tax is dedicated to upkeep of the Oklahoma City Zoo.

Expenses

The cost of providing the same level of service goes up every year.

The same pothole costs more to patch. The same fire costs more to put out. The same permit costs more to process.

Revenue may go up, too, but in recent years it hasn’t gone up as fast as the costs. So the City has to keep reducing costs to keep ‘the Gap’ closed.

What is our biggest expense?

If you break those costs down further, you’ll see that in most cases, the biggest part of the cost is the City employee doing the work.

Our business is service and providing service takes people.

We spend 66% of our budget on salaries, insurance and retirement benefits. By comparison, we spend only 5% of our budget on the supplies we use, from asphalt to ammunition.

Why do we need such a large workforce?

It takes a lot of employees to provide services in the wide open spaces of Oklahoma City. Even though Oklahoma City is medium-sized in population, at 621 square miles, it’s one of the five biggest cities in the country, geographically. Tulsa, by contrast, has a population similar to ours but geographically is more comparable to Norman. We need many more employees to make sure our citizens get the service they expect and deserve – no matter where they live.

We must also operate a much bigger fleet – more squad cars, fire apparatus (and stations) plus trucks and heavy equipment in other departments. And we drive more miles, which makes soaring fuel costs a major budget consideration.

But can’t we increase revenue, too?

That’s exactly what our economic development projects are about. Every time the cash register rings at Bass Pro, that’s more sales tax revenue going to our General Fund. Every time an employee at the new Dell Business Service Center shops at an Oklahoma City mall or store, it will mean more revenue for our day-to-day operations.

We have other sources of revenue, too. None of them come close to what we get in sales tax, but every little bit helps. A task force organized by Mayor Cornett looked at ways of getting more revenue from those other sources and developing new sources.

City staff will follow up on the task force’s recommendations.

So is the budget just about closing ‘the Gap’?

The budget is a plan for funding City Council and citizen priorities. It is more than just closing the General Fund gap. Each year we also have to consider redistributing what we have so the budget can be a tool to meet those needs and priorities:

• Maintain basic City services
• Promote economic development and Downtwon revitalization
• Invest in the City’s infrastructure
• Enhance community appearance
• Strengthen revenue base
• Improve operational effectiveness

We have to put our money where it is needed to achieve Council priorities and address changing circumstances. For example, this year we propose restoring some positions cut during the recession. We’ve found some service areas are too understaffed to maintain basic City services, one of our top priorities.

We also have to look to the future, which is why economic development and infrastructure investment are priorities.

The budget is not final until it is officially adopted by City Council.

The budget process has several levels.

1. The Budget Office analyzes department submissions and makes recommendations.
2. Departments and the Budget Office staff meet with Assistant City Managers to discuss the budgets and decide what to recommend to the City Manager.
3. The City Manager then goes over the entire budget and prepares a proposed budget to present to City Council.
4. The City Council holds a public hearing and makes its final decisions before adopting the budget.