The city floated a proposed $95 million budget last week for the 2018-19 fiscal year that includes a 12.3 percent tax increase amid a fiscal crisis and potential layoffs and service cuts.
The proposed spending plan, which the City Council will vote on next month, is 1.86 percent larger than the current one, and would pierce the 2.64 percent state tax cap. Under the proposal, taxes on the average home would increase by $33 per month, or $400 per year.
In a letter in the budget, Acting City Manager Mike Tangney cited a fiscal crisis that the Democratic administration inherited in 2012 “that hasn’t gone away,” as well as pending reimbursements from the Federal Emergency Management Agency and state for costs associated with Hurricane Sandy, which have led to a $2.6 million drop in revenue.
Public safety and employee benefits represent more than 45 percent of the budget, Tangney said, and the city is facing rising health care and pension costs, contractually obligated salary increases and legal judgments.
Tangney added that only non-union management employees — less than 1 percent of the city’s workforce — and new Civil Service Employees Association members pay a portion of their health care costs.
“That is simply unsustainable,” Tangney said. “We need all of our unions to continue to follow management’s lead. If there is not a substantial contribution from employees toward their health care coverage, personnel reduction and service cuts will eventually be a necessity.”
The spending plan, which was released on April 20, was drafted before the council voted 3-2 on April 17 to reject a $2.1 million bond measure to make up for separation payouts made over the 2017-18 fiscal year for police, firefighters, Civil Service Employees Association members and exempt employees.
Council members John Bendo and Anissa Moore questioned payouts to former City Manager Jack Schnirman, who began his term as county comptroller in January, and other exempt employees, particularly those who remain on the payroll.
City officials said that without borrowing, the city would be broke before the proposed spending plan is voted on next month and could result in layoffs and service cuts because the planned borrowing had been included as revenue in the 2017-18 budget. The city announced last week that weekend bus service had been suspended because of the failure to pass the bond.
“We have two issues before us right now — one is a funding issue that we have to rectify so we can pay all or employees, and not cut service for our residents” City Council President Anthony Eramo said. “I’m confident that the entire council will come to an agreement on a plan. The second issue is what I’d like to call earned leave obligations for union and non-union employees, and how they are calculated. Based on [the April 17] meeting, I’m certain all five council members want to reform that process.”
He told the Herald on Tuesday that the council had met on April 20 and asked Tangney to come up with a list of options to decrease expenses or increase revenue in order to make payroll by June. No decision had yet to be made on layoffs as the Herald went to press on Wednesday.
“The council will weigh in, but ultimately it’s the acting city manager’s decision on how we proceed,” Eramo said. “The CSEA and the police union have come to the table with different ideas to get us through that hurdle. We’re also talking to our vendors — the city’s monthly healthcare bill is nearly a million dollars — to see if there’s a way we can decrease or delay payments.
“A lot of those ideas are just kicking the can into the next budget cycle,” Eramo added. “They’re not necessarily a fix, but it buys us some time so we don’t have to lay off employees. Eventually, it would be an automatic $2.1 million hole in next year’s budget, which begins July 1.”
The budget is subject to an annual review by State Comptroller Tom DiNapoli’s office, which recently re-categorized the city’s level of fiscal stress from “moderate” to “significant,” the highest level under DiNapoli’s Fiscal Stress Monitoring System, citing short-term borrowing, a deteriorating fund balance and increased operating deficits for fiscal year 2017.
Officials attributed the level change to the reimbursements that the city has yet to receive from FEMA and the state for Sandy rebuilding costs, saying it is still owed $7.6 million.
Bendo said the city has been on an “unsustainable borrowing spree” that would burden residents in the future.
“I’m waiting to see what options are available so we can discuss them as a council,” he said. “Something had to be done to get the finances under control. We had some frank discussions and came to an agreement that we have to work together to try to fix the problems.”
In an April 20 YouTube video, Moore called for more accountability and “budget reform.” She accused officials of threatening layoffs to “intimidate” the city’s workforce.
“I voted no . . . because it’s time for an independent forensic accounting process to take place,” she said. “I voted no because the entire budget process from 2016 to the present is now in question. The residents can no longer be asked to bail out a city government which exercises poor fiscal management.”
On Monday, Eramo said he spoke to DiNapoli about the city's fiscal status and the council's concerns, and requested a thorough audit.
"I requested a discussion between the council and his team on the ground in Long Beach," he said on Facebook. "It is important that all parties work together ... and ensure our budget protects the future of our community."