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2012-13 Budget Deliberations

A view of the budget situation for the City of Farmington for the 2012-2013 fiscal year.

It is budget time for the city and within the next month City Council will approve the 2012-2013 budget, which begins on July 1, 2012.

We still face the challenges of declining property values reducing our revenues while the costs of healthcare for active, and retired employees, continue to increase.  This budget includes a slight increase in State Shared revenues from last year. 

The overall toughest challenge in the budget continues to be the future obligation for health care insurance for current and future retirement commitments.  While the city’s pension obligation is almost 100% funded the retiree health care obligation is less than 10% funded at this time.  Over the next two decades this obligation is over $20 million dollars, and we currently have a balance in the Retirement Healthcare Fund of $2 million to offset it. 

A fair question is how did this gap come to be?  Three factors have contributed to it.  First, the dramatic and unforeseeable increases in the cost of health care insurance over the past ten years are a huge factor.  Second, pressures on the budget over the past five years have reduced the city’s ability to set aside extra funding to meet the obligation.  Third, over the past couple decades prior to 2008, as revenues grew, city officials made commitments that seemed reasonable at the time, but in fact were very difficult to measure out in the future.  Today’s environment requires that these types of gaps be identified.   While, to me, our gap seems large, it is not as large as the gap of many other cities in southeast Michigan.  Unfortunately, that does not make it any easier to manage. 

This gap is on the radar screen of our City Manager and Treasurer and they are working diligently to develop solutions.  As you are aware many cost cutting changes have been made over the past few years, include a 5% wage sacrifice by all city employees, and benefit cuts.   The city’s staff has been reduced by over 10%.  More will need to be done to address the gap.  Some of the strategies being explored include consolidating the numerous existing retiree health care plans into one plan to achieve administrative efficiency, evaluating self-insurance pools along with alternative health care providers, closing the pool of active employees eligible for retiree health care through the collective bargaining process, utilizing Medicare coverage to provide more cost effective coverage without a loss of benefits and, once the gap is down to a manageable level, evaluating financing alternatives to provide a consistent annual contribution.

I am very confident that the strategies being developed will contribute to resolving the gap and returning the City of Farmington to full financial health over the course of a few years.  One questions in my mind is will we learn the long term lesson of matching our revenues to our obligations?  I believe the lessons of the economic collase have taught us all to be careful about our budgets, our savings and our obligations.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Darren Whittaker June 09, 2012 at 07:37 PM
And yet we read, right here on the Patch, that the city is contemplating a substantial boost in salary for the manager of the Civic theatre. This is in spite of the fact that his current salary is quite a bit higher than similar positions in the private sector. This announcement seems incredibly tone-deaf to the legitimate concerns of the taxpayers of Farmington, and flies in the face of all the talk about declining revenue and belt-tightening that we are hearing from our elected officials. Something's wrong here...

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