Letter: City needs to return to conservative budgeting practices
The revenue decrease tied to the Great Recession of 2008-09 drove Steamboat Springs City Council to adopt a conservative budget process to guard against unexpected events. The city assumed a revenue growth of 3% over the previous year and then budgeting 95% of that figure for spending.
In 2018, faced with rising personnel costs, City Council abandoned that tried and true methodology and began assuming 4% growth (rather than 3%) and then budgeting 100% (rather than 95%) for spending. Instead of facing their problem of growing personnel costs, they simply changed their assumptions concerning revenue.
If only budgets actually worked that way. Here we are three short years later, with rising personnel costs (go figure). Rather than fix the personnel problem, council asks for a property tax to Band-Aid their problem again, all in the name of fiscal sustainability.
Personnel issues are fairly simple to understand. Once you’ve established what percentage of your budget you can spend on personnel, you need to make a choice between the number of employees you hire and the level of pay and benefits they each receive.
To put this in context: Between 2014 and 2019, the General Fund increased by $10.3 million or 32%. Across those same years, personnel costs went up by 43%. Personnel costs increasing faster than revenue growth is simply unsustainable.
As a father who spent this semester helping my son learn graphing, I can promise you the revenue line and the personnel cost line are going to intersect when personnel costs are 100% of the budget. The only way to avoid that is to change the slope of either line — the rate at which those two numbers increase. There are two ways forward, either hold personnel costs in check or increase revenues significantly.
Between 2014 and 2019, the city of Aspen hired 34 full-time employees on a $38 million revenue increase. Between 2014 and 2019, the city of Steamboat hired 30 FTEs on a $10.3 million revenue increase.
We have a clear and present danger. Despite council’s focus on “fiscal sustainability,” council continues to ignore sound fiscal policy and allows personnel costs to compound and skyrocket.
Between 2014 and 2019, 70% of the $10.3 million revenue increase went to personnel costs. It’s time we asked council to fix the real problems: unconstrained personnel growth and overly optimistic budget forecasting. Tell your council member to establish limits on personnel spending. Tell them to return to conservative budgeting.
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