The latest budget proposal winding its way through East Grand Forks City Hall would chop the city government’s predicted budget deficit approximately in half.
City administrators on Tuesday presented an $11.86 million 2021 budget that would outstrip the city’s predicted revenue by about $253,000. Before that, they had predicted a budget gap of about $505,000, which city leaders asked to be trimmed considerably. If City Council members finalize the latest iteration of their spending plan later this month, it will mean canceling the once-planned purchases of a police SUV, a parks department pickup truck, playground equipment and more.
“We sharpened the pencils a little bit,” Finance Director Karla Anderson told council members Tuesday, Dec. 8.
The city’s predicted budget deficit started at $638,000, but that assumed wages would stay flat and that income from the city’s property tax levy would increase by 3%. Both of those variables have changed: city officials generally agreed to a 5% property tax revenue hike in September, and administrators last month reached at least tentative agreements on 1.5% raises with the four unions that represent East Grand Forks’ police, firefighters, public works staff and department heads. One constant has been a predicted $88,000 drop in aid from Minnesota’s state government, which doles out “local government aid” to cities based on a formula determined by state legislators that considers housing stock, average household size, population decline and sparsity.
The net result of the cuts to spending, the higher wages for union employees, additional revenue from property taxes and “LGA” reductions means a predicted $253,000 deficit in East Grand Forks that will, presumably, be gobbled up by the city’s relatively large cash savings, which totaled about $6.5 million at the end of 2019, according to an annual financial report for that year.
Heading into a budget year with a deficit isn’t new for the city, either. In 2019, city officials OK'd a budget that meant a $182,000 deficit with similar plans to pay for the difference with the city’s cash reserves. But city staff ended up spending less than anticipated, especially once the COVID-19 pandemic restricted travel, and federal COVID aid boosted revenue somewhat. It means the city could end up more or less breaking even this year, Anderson said Tuesday.