Kirkland’s Budget Woes
The City of Kirkland is facing extremely difficult budget choices ahead. Kirkland is in a situation in which revenues are declining at the same time expenditures are rising. Expenditures are out of control, yet discretionary spending is limited to only a fraction of the total budget. The cause of these problems is three fold:
- The slowing economy is limiting how much revenue the City takes in.
- The structure of the City’s budget is inflexible. Costs for services continue to rise at unsustainable rates. Each year, more of the City budget is consumed by the costs of running the government, leaving less money available for the programs the citizens cherish.
- The City has a bad habit of creating new programs with one-time revenue streams. When these revenue streams run dry, the programs are left without funding.
The current economic climate has exposed the weaknesses and deficiencies of Kirkland’s budget process. Over-spending with one-time revenue streams has become a bad habit. Every year expenses grow at a far greater rate than do tax revenues, thus contributing to what we have today: a budget that is less responsive to the needs of the citizens, and delinked from any measurable performance criteria. This is not the fault of any single Councilmember or other individual, rather it is the accumulative result of years of budgeting under our current system. The culprits are the ever increasing levels of service, ever increasing wage and benefits costs, and a lack of leadership and discipline from those in charge to change the system. During good economic times these issues go largely unnoticed, yet they continue to consume the budget until bad economic times expose the truth: the City of Kirkland needs to overhaul its budget and in doing so, restore confidence in the process.
Looking at the Numbers:
This past Summer, the City distributed the Kirkland City Update (Special Budget Edition), a colorful newsletter to explain the budget crisis in which we find ourselves. The numbers given in the Update are now out of date as the then projected $13 million revenue shortfall is now projected to top $19 million. This shortfall is winsomely called, “the gap.”
On one side of the budget equation we have sales taxes and other revenue sources shrinking with the economy. On the other side of the equation we have expenses such as City wages and benefits costs rising. A bad set of circumstances, indeed. The City cannot afford to maintain the current levels of service with projected revenues.
So what is the solution? The City Council has decided to increase taxes and lower service levels. The government will cut back in many service areas in an effort to curtail spending.
But wait a minute. The City reports that the General Fund will increase by 8.4% next year. How can this be? The answer lies in the employment contracts which include cost of living increases and benefits increases for the people who supply all of the services for the City. Wages and benefits costs constitute almost 70% of the general fund.
Note that wages and benefits costs represent nearly 70% of expenditures and they will increase by a projected 8.4% in 2009-2010. City employees — those who provide the services we need — are by far the City’s largest expense. This leaves very little discretion in allocating the remaining resources. Reserve accounts are being drawn down and supplies are being frozen to help balance the budget.
To a large degree, the hands of the City Council are tied by the system in place. The Council just completed several Executive Sessions on the subject of labor negotiations – no word on how those negotiations went. Much of the problem with the budget lies within its fundamental structure: the cost of running the government is growing faster than the governments ability to increase tax revenues.
One-time revenue streams should never be spent on ongoing programs and services.
To make matters worse, the City has a habit of spending one-time revenues for ongoing expenses. During good times, the City brought in more tax revenues than it had planned and then the City spent that money (one-time revenue streams) on new programs and services. This practice has been a disaster because when the economy slows, the revenue streams dry up. We end up being hit harder by economic downturns than we would have otherwise because of how the City budgets. One-time revenues should be put into reserves for rainy days like today. They should never be spent on new programs.
The system of budgeting we have in place now is clearly unsustainable. At the November 18th City Council meeting, Councilmember Dave Asher suggested it may be time to change our system of budgeting to something more transparent and effective like Performance-Based Budgeting, a system he favors.
According to Wikipedia, “The key to understanding performance-based budgeting lies beneath the word “result”. In this method, the entire planning and budgeting framework is result oriented. There are objectives and activities to achieve these objectives and these form the foundation of the overall evaluation.”
Mr. Asher also noted that the City of Redmond might be an example of alternative approaches to budgeting. Redmond has enacted a new way of funding City services called Budgeting by Priorities with the following objectives:
Align the budget with citizen priorities- Measure progress towards priorities
- Get the best value for each tax dollar
- Foster continuous learning in City government
- Build regional cooperation
The topic of the City’s progress on performance measures was also brought up by Councilmember Asher at the City Council meeting. The City of Kirkland Performance Measures Report is available for download here. It shows a historical performance record of Police, Fire, Public Works and other government departments.
Kirkland has no plans to change the way in which the City prioritizes services funding, yet we need to consider alternatives. However, overhauling the system of budgeting will not be put on the agenda at this time, as the City Council is focused on the immediate budget crisis. The Council’s plan to get us through this budget cycle is basically this:
- Increase property taxes
- Increase utility taxes
- Increase business taxes
- Cut service levels
- Use reserves
It is Time to Change How We Budget
The budget crisis we are in is due in part to the macro economy and in part to our own City policies. This didn’t happen over night and there is no easy fix. The City Council has been well aware that the course set long ago for the City budgeting process would oneday lead us to disaster. Spending one-time resources on reoccurring expenses has been the accepted policy of the City Council for years. Now we are paying the price.
Change is necessary with regard to how the City of Kirkland deals with its budget. Redmond has a model which is popular with its citizens, transparent and performance is measurable. It will take strong leadership and political will to enact change. Let us hope this budget experience will persuade our City Council to change course and put some common sense back into our City budget.
Posted by Rob Butcher on Friday, November 21, 2008 at 9:24 am
Filed under Editorial · Tagged with Budget, City Council, Documents, Government - State / Local
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The article is on the money. We need more people who provide an oversight of the budget from another point of view.
The cause and effect of the budget gap stems from habitual over-spending. One only has to look at the adopted budget versus the end of year budget to discover just how bad the budget process has been.
Even in hard times with a $19 million dollar gap, the general fund will increase by 8.4%. The city is still over-spending. Clearly the city budget is more important than the family budget.
I’ve been tracking the city budget since 1993. Rather than list the budget surplus year by year, it’s enough to know the average surplus (adopted budget vs end-of-year budget) is $11,984.555. That surplus is what’s been feeding the council’s glutinous appetite for over-spending. Rather than saving the money or reducing taxes, the city found new ways to spend it. The one-time expenditures benefited the most that eventually became a long-term liabilities.
From my point of view and having experienced many spins to the budget, the core of the problem is not how to account for the money; it’s the greed and political ploys used to justify increases in fees and taxes only to redistribute the funds to special interest, mostly those that have political clout. John-Q public and the average citizen end up paying for it.
The best way to solve the problem is not to change the budgeting methods. The best way is to get rid of elected official who insist on doing business as usual.
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“The best way is to get rid of elected official who insist on doing business as usual.”
We need names of the people on the council to remove and – more importantly – the names of the people that will replace them.
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