Originally created 05/16/04

Despite change, deficit still rises

The promise of consolidation was that it would streamline local government, reduce the number of employees and, in the end, save money.

But promises are often hard to keep.

Eight years later, the city's general fund expenses have increased by $40.4 million to a projected $118.3 million this year. There are 263 more employees now than in 1996, the first year of consolidation, with the largest increases occurring in the judicial sector and public safety.

And the payroll, excluding fringe benefits, also has grown by $11.3 million to $72.6 million this year while the tax base has eroded, creating a projected $3.9 million deficit this year.

These figures weren't adjusted to include inflation, but City Finance Director David Persaud said that doing so "would be very insignificant" to the increase in the general fund, which pays for things such as administration, law enforcement, recreation and public works. It does not include 1-cent sales tax projects, utilities or fire districts.

Since 1996, the amount of tax money flowing into the general fund increased from $43 million in 1996 to a projected $70.3 million this year, according to city records.

With the exception of a few years, the consolidated government also has brought in less revenue than expenses, according to city records. The gaps were filled in part by an annual average of more than $2 million being taken from the city's reserve fund since 1999. On a brighter note, that fund still has more than $20 million, but Mr. Persaud has warned against using that fund because it would be a short-term solution to a long-term problem.

"The tax base is not growing proportionately to the increase in expenditures," he said. "And since expenditures are growing based on the service delivery and the tax base is flat, you have a budgetary gap or tax gap that needs to be filled. We need to bring up our tax digest to stay constant with the growth in service delivery."

A 12 percent to 13 percent increase in health insurance for employees has contributed to the problem as has a slow sales tax growth of only about 1 percent or 2 percent, Mr. Persaud said.

Such a problem with cities bringing in less revenue than expenses has become a nationwide trend in the past two to three years, said Chris Hoene, a research manager for the National League of Cities, an advocacy organization that represents more than 18,000 governments across the country.

"It's primarily a response to the recession," he said.

Currently, Columbia County's finance department is projecting a 4 percent increase in its expenses during the 2004-05 fiscal year. However, the county also projects a 6 percent growth in its tax digest for 2004, a far cry from Augusta's tax digest, which is currently flat.

Before 2001, Mr. Hoene said most cities were not having a problem with deficits, which doesn't explain why Augusta was having problems at that time.

"On the whole, the situation in the mid to late '90s was a pretty good one for cities," Mr. Hoene said.

Mr. Hoene said a survey recently conducted by his organization determined average revenues for cities this year are expected to grow only about 1 percent while expenditures are projected to grow an average of about 5 percent. Augusta's projected $3.9 million deficit this year is 3.3 percent of the city's budget, which was predicted last year to include a 4 percent revenue growth - 3 percent more than what the League of Cities has projected.

Mr. Persaud says part of this year's budget problem also is that it included a $4 million manpower savings plan, which isn't producing the result commissioners had hoped for. City Administrator George Kolb has said he recommended against the manpower management plan, but commissioners approved it anyway, altering his budget. That claim has some commissioners upset, saying they have been good stewards of taxpayer money.

Now, the manpower plan, which was to keep vacant city positions open for 120 days, is projected to save the city only about $917,000 by the end of 2004. Mr. Persaud said money being saved from vacant positions was being spent on other things. Mr. Kolb has said the $4 million projection was overly optimistic.

Then, there's the issue of the flat tax digest. Even if it increased by 3 percent as originally predicted, it would only generate about $800,000, leaving the city still with a $3.1 million deficit.

In a memo Mr. Persaud recently gave to city officials, he said Augusta's problem isn't only based on an economic downturn but also with how the government operates, calling the situation a "financial crisis" in his report. Deputy City Administrator Fred Russell recently told commissioners he disagrees, calling such language "inflammatory."

Mr. Kolb says there's no need to panic, but he said there is a systemic problem with the city's financial setup.

"And it's not going to go away unless we face up to it," he said.

That's exactly what city officials say they're now doing, asking all city department heads to try to cut 6 percent from their budget and report back to commissioners June 1 about how it would affect their services. But Mr. Persaud says that would only solve this year's problem and still leave about a $4 million deficit for next year.

The answer, he says, is not only to raise the mill rate but also to look at scaling back services. Many department heads have said a 6 percent cut in their department would spell layoffs.

And a good chunk of the city's growth in costs since consolidation - from $77.8 million in 1996 to an unaudited budget figure of $118.3 million this year - has been employee-based. According to city records, the number of general fund employees has increased from 1,672 in 1995 to 1,935 in 2004, a 263-person increase.

Sheriff Ronnie Strength said his department has actually decreased in manpower from 750 in 1997 to 715 this year. He said 97 employees were added for the creation of the Phinizy Road jail, which was opened "because of the number of inmates." But after that in 2001, he said 34 street officers were cut.

Still, when considering all public safety offices, which includes the 911 center, Marshal's Department and school patrol - all of which the sheriff said do not fall under his authority - there has been an increase in personnel of 243 employees, from 664 in 1995 to 907 this year, according to city personnel records.

Judicial employees also have increased by 63 since consolidation. Additional expenses have come about in part because of growing indigent defense costs.

Reach Preston Sparks or Sylvia Cooper at (706) 724-0851.


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