FLINT, Michigan–The City of Flint on Monday (March 2, 2020) proposed a FY 2021 budget that invests in retiree pensions, maintains departmental funding, and ends a longstanding practice of transferring dollars from the Water Fund.
“This is a clean budget that accurately reports our revenues and expenditures while also fulfilling the requirements of the new city Charter better than ever before,” Mayor Sheldon Neeley said. “While we face funding challenges, we are responding with a calm and calculated approach. We cannot afford to slash our budgets: We must continue to maintain city services while continuing strict spending controls in all our departments.
“Residents of this community deserve so much better and we are working very hard to provide that. I am hoping for partners who are willing to work together to move this community forward,” Neeley said.
And while Flint faces structural funding shortfalls, this budget also shows that the community is continuing to grow and thrive. The budget projects continued revenue growth of 3 percent per year, driven in large part by increased property values (which are up 12 percent this year).
Key elements of the 2021 proposed budget include:
— After years of declining rate of investment into the retiree pension system, the City of Flint will increase its annual contribution. The City of Flint is currently in violation of state law by paying just $24 million of a $39 million annual obligation. The proposed 2021 budget increases the city’s annual investment by $10 million, and in the following year increases the investment again to fully meet the $39 million obligation.
— Stops past practice of transferring millions of dollars from the Flint Water & Sewer Fund to boost general fund dollars. This longstanding budgeting shell game is in violation of the Charter, Sec. 7-106(B).
— Re-establishes the City of Flint Civil Service Commission, a previously unfulfilled mandate of the Flint Charter, Sec. 5-101.
The balanced budget shows total revenues of $56.9 million and total expenditures of $71.3 million, using city savings from its previous general fund balance to make up the difference.
One core issue in Flint, like all Michigan cities, remains a lack of adequate state funding. In just five years, the state has underfunded Flint by more than $44 million dollars (2013-2017, the most recent year available. Source: Michigan Municipal League at savemicity.org). Since 2003, Flint alone has been shortchanged by more than $101 million in state revenue-sharing.
“There needs to be a dramatic change in state funding in the very near future for us to maintain our financial stability,” said Eric Scorsone, a municipal funding expert who helped guide the administration’s budget process. “This is not a typical budget, but traditional budgeting models and budget cuts simply won’t work here. This is what it really costs to run the City of Flint. Now, we have to look for solutions to create a sustainable funding model moving forward.”
According to the 2019 audit, the city claimed a general fund balance of $24 million. However, approximately $2 million of that is being spent in the current 2020 fiscal year budget, which was set by the previous administration.
After paying $10 million into the retiree pension system as required by law, stopping transfer of funds from the Water Fund, meeting charter obligations, and making basic capital repairs, $7.8 million is expected to remain in the general fund balance.
In reality, the city only was able to build up a “general fund balance” in prior years because it had not fulfilled its financial obligations.
“It’s easy to look like you have money if you don’t pay your bills. The shell game has to stop,” Mayor Neeley said. “Even emergency managers repeatedly just took out loans to make it appear as if the city had balanced its budget. There remains a structural funding problem that must be addressed. All of us are going to need to do our part to bring longterm financial stability to our city.”
The budget was presented to the City Council on Monday as required by the City Charter. Additional adjustments are likely in the coming weeks and months as the city continues to cleanup financial records at City Hall.
“While we know there will need to be additional adjustments throughout the budget process, I am proud of this budget created by the team at City Hall,” Mayor Neeley said. “We are tackling our problems and working to move our community forward now and for the long term.”