Maybe hold back on the high fives for now??
Yesterday, the administration announced its intention to give Metro employees their overdue cost of living pay raise in the upcoming budget. I fully support that. But I think the Metro Council needs to hold back on any congratulatory high fives until the Mayor presents his budget in late April. For now, we don't have any idea about how this is being accomplished.
The press release announcing the pay raise said that revenue is increasing. But, that's sort of a given. The question is how much is it increasing? As data points, remember that the biggest revenue increases ever (without a tax increase) were several years ago and were in the range of $120 million. At the time, this was described as extraordinary. And during last year's budget season, Metro Finance conservatively estimated that revenue growth for the upcoming fiscal year (FY20) would be about $65 million. For the sake of argument, let's assume that FY20 revenue growth will be somewhere between Metro Finance's conservative $65 million estimate and the all time record of about $120 million.
Let's move on and consider what that new revenue will buy. My starting point is the information that Metro Finance gave us last budget season (so, that's 9-10 months ago). We were told that certain FY20 increases in expenses were unavoidable:
Replace one-time sales built into the FY19 budget, $38 million
Known long term debt increases for FY20, $42.6 million
Pay plan for FY20, $24.4 million
Inflation (1.8%) for General Fund for FY20, $20.1 million
Inflation (1.8%) for Schools Fund for FY20, $16.8 million
This means that less than a year ago, Metro Finance expected a total to $142.7 million of new obligations in FY20. Even if we were to pretend there is no inflation, the total is $105.8 million of new obligations for FY20 according to Metro Finance's numbers last year.
So, when the press release yesterday said that revenue is increasing...well, let's hope that the projected revenue increase of $65 million was very, very low. Otherwise, the pay plan promise the Mayor made yesterday doesn't add up.
The bottom line is that you can't tighten your belt and promise new spending unless something really magical has happened with the city's revenue (or you keep selling off Metro assets to make ends meet).NOTES: All the numbers used here came from Metro Finance. My various posts with these numbers from last budget season are here. Also, I wrote this quickly because I need to be in court for a client shortly. Please excuse any typos.