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State Aid CutDate: January 18, 1982 To: Mayor Council From: William P. Craig, City Manager Subject: 1982 State Aid Cut The bill officially cutting the state aid to local governments has been passed, without the Governor's signature. The cut in state aids (LGA) computes to 11.2 or approximately $97,125. In addition, and not well reported in the public media, the state will reduce the amount of home- stead aid granted. Since tax bills are essentially already computed, this will come out of our hide rather than be reflected on property taxes. The effect of this is to cut our levy income so that it will be less than the 8% increase allowed by law. The loss here will be approximately 2% of an estimated $290,000 revenue item, or $5,800. This means we have an imbalance of $102,925 in our adopted 1982 budget. In my earlier memorandum, written prior to the bill's passage, I noted that we had two items of underbudgeted revenue (license fee increases and police insurance income) that reduced the problem by $14,600. In addition, I advised one year moratoriums on payments for concrete alley cosntruction subsidy ($5,000) and Storm Sewer Fund ($65,000). It was also noted that the forced deferral of the hiring date for the clerk/ dispatcher at the new garage would save approximately $3,500. These actions, jointly, reduced the magnitude of the problem by $88,100, leaving what we now know to be a gap of $14,825 ($102,925 minus $88,100). For the balance of the problem, I would suggest that the Council consider two steps. First, recall that you specified that $10,000 of the Burnes Park play equipment expense be taken from Park Board funds, only to be charged back to the General Fund if the state released all "embargoed" 1981 LGA funds. It appears they will do this, but cut the 1982 monies: Therefore it might well be appropriate to move to make your previous transfer permanent, for a $10,000 benefit to the General Fund. Secondly, we have a long -time employee, Lawrence Olson, on 90 day unpaid leave of absence due to health (heart) problems. By not employing a temporary employee to take his place, approximately $6,200 will be saved from the funds budgeted. To recapitulate: THE PROBLEM $102,925 in aid cuts POSSIBLE SOLUTION- License Hikes Insurance Receipts Storm Sewer Fund Cutback Alley Subsidy Cutback Defer Clerk /dispatcher hire New Income Expense Cuts $8,600 6,000 $14,600 $65,000 5,000 3,500 o 7 e a 11� The pairs is spread, to some degree, across Public Works and the Parks Division, with no reduction in the public safety services. I will be, as usual, available to discuss any alternative methods of budget alter- ations to meet the state cutbacks. Respectfully submitted, t William P. Cr City Manager POSSIBLE SOLUTION Play equipment bond fund Personnel vacancy New Income Expense Cuts 10,000 6,200 $89,700 Total new Income Expense Cuts $104,300 DATE: January 12, 1982 TO: Mayor and Council FROM: William P. Craig, City Manager SUBJECT: 1982 Budget Reduction Due to State Aid Cuts The Finance Director and I have closely reviewed the adopted 1982 budget for potential adjustments (both to revenue and to expense) which could offset the large predicted cuts in the state aid amounts previously certified to us. An exact assessment of the situation is impossible, because the final numbers will be based more on politics than on economic conditions. However, the League of Minnesota Cities has advised all municipalities by letter to "plan on a cut of at least loo in what had originally been expected for 1982 LGA (local government aid) and should immediately start taking necessary budget- cutting actions Consequently we have prepared a plan to deal with a cut of 10% in our $867,187 promised aid figure. We started by examining the books for unanticipated 1982 revenue. We ascertained that the two most substantial amounts were the increased 1982 license fees ($8,600) and the proceeds from police and fire insur- ance payments, which should aggregate $6,000 more than previously estimated. The next review was of capital expenses and transfers. It was noted that few unimproved alleys remain, and that no one has to date petitioned for a concrete alley for next season. Therefore, tempor- arily suspending the 20% city subsidy policy would probably not cause anyone difficulties, and might be moot anyway if no petitions are received. It was also noted that the Storm Sewer Fund had the respect- able balance of $244,652 at the end of November 1981, prior to adding the 1981 contribution of $65,000. The largest pending encumbrances on the Fund are the county jobs for Blake Road (less than $50,000) and County Road 18 (extimated at $125,000). Therefore it would be possible to forego the 1982 contributions to the Fund without facing fiscal problems; I'm reasonably sure that if any large petition for storm sewers is received in 1982, the petitioners would understand that the state money crisis makes necessary a delay in the work. The next review personnel rosters, showed that funds were allotted for a clerk /dispatcher at the new garage structure effective April 1 (the original opening date). However, since the garage cannot open until at least July 1, the savings (including fringes) will be at least $3,500. Thus the recommended adjustments would be: Revenue: Increased license fees Police /Fire Insurance Increase Expense: Alley Subsidy Cut Storm Sewer Fund cut Clerk /dispatcher deferral $8,600 6,000 5,000 65,000 3,500 $88,100 cont. i .Memo to Mayor and Council cont. page 2 s It is recommended that the above adjustments be approved by motion whenever your review is complete, with the proviso that the entire package be resubmitted when the actual state aid shortfall numbers have been completed.