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City of OKC preparing budget cuts as COVID-19 economic crisis expected to have long-term effect
The City of Oklahoma City is preparing annual budget cuts of 3.3% for the Police and Fire departments and 11.25% for all other General Fund departments because of the expected long-term effect of the COVID-19 economic crisis.
City Manager Craig Freeman will formally propose the cuts in the proposed budget presented to the City Council on May 26 for fiscal year 2021, which begins July 1. The Council is scheduled to adopt the budget in June.
Sales tax is by far the biggest source of General Fund revenue, and pays for day-to-day operations. The Finance Department’s current estimate is General Fund revenue will be about $35 million lower than originally expected in FY 2021.
“The COVID-19 pandemic’s economic effects have already been substantial. It’s the start of a very difficult period for our local economy,” said Budget Director Doug Dowler. “Departments are working on revised budgets until later this month, so we don’t have a clear picture yet of the impact on staff or services. We’ll do the best we can to limit the impact on services we provide as we prepare for a new economic reality.”
Oklahoma is the only state in the U.S. where state law prohibits cities from using property tax for operations. Property tax revenue is a more stable revenue source than sales tax. One of the City’s top priorities for the current session of the Oklahoma State Legislature is for a new law allowing municipalities to partially fund public safety operations with property taxes.
Departments had already been asked to propose much smaller budget cuts for FY 2021 because of anticipated slower growth for the local economy before the pandemic. The City Manager directed departments to propose much larger cuts as the financial damage from COVID-19 quickly mounted.
The City is in a strong financial position to manage the effect of the global economic crisis, with a top-notch credit rating and strong reserves of about 20% of annual operational expenses. In accordance with the City Council Priorities, City management has for decades practiced careful financial planning and budgeting.
The City Manager ordered a hiring freeze on March 23 to help control costs, and department directors are looking at programs and staffing levels to determine how to revise budgets.
The cuts of 3.3% and 11.25% are based on the fiscal year 2020 budget, plus increases for inflationary costs of labor, goods and services.
City management will secure Oklahoma City’s share of any federal or state emergency relief funds to further protect services as much as possible.
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