Richard Pearl commentary: Diving into the 2023-25 city budget

I've mentioned in previous columns that governmental accounting and budgets are frequently complex. The short answer to the question of "Why are they so complex?" is that those documents include not only pure accounting structures but a whole body of governmental regulations to document the ins and outs of the public's money. Historically, municipal budgets were of the one-year variety for general operating expenses and a five-year plan for capital projects … and this was the city of Lincoln's model. Enter new Lincoln city management and we're fast-forwarding to an improved financial model. Beginning July 1, the city has moved to a two-year, i.e., biennium, budget (for fiscal years 2024 and 2025), and a three-year outlook through 2027-28. Why is this important? Because the traditional one-year "stove pipeline" concept only allows the decision makers or the public the ability to look at the implications of decisions made on a one-year-only basis. Two examples will make this perfectly clear: · In the General Fund, which primarily supports our police and fire services, fund balance will slip marginally in the upcoming biennium budget over the current year's estimate, but over the following three years, fund balance will decline by nearly 61 percent to a financially unacceptable level. As shown in the accompanying chart, both revenue and expenses increase over the next five years, with expenses going up faster than revenues and the General Fund balance declining from $18.2 million to $7.1 million by fiscal 2028. Implication: big decisions ahead. Enterprise funds – water, wastewater (sewer), refuse (garbage). The city has just released to the public a "referendum" on utility rate increases. If the community rejects the rate increases – and they haven't been increased (see my last column on this subject) in almost a decade for water and sewer – these two funds will go negative in about a year and the refuse fund will go negative in about 2.5 years. Should this happen, the only practical alternative would be to have the General Fund subsidize these required services. Layering this impact on the General Fund discussion above shows the seriousness of the situation. Bottom line, the General Fund will end this fiscal year in reasonably good financial shape. It's what lies in the future that is more problematical. Over the next few years, we'll reach the limit of the tax sharing agreement with Placer County that has netted $1.5 million per year for the past few years and has been used to add staffing to our police and fire departments. We'll also reach the limit of the COVID relief monies from the federal government that has been used to add staffing to our fire department. When these two funding areas are gone, so will be the added public safety staffing … unless new revenue sources are found. As they say, the devil's in the details, and we'll take a deeper dive into the budget in future columns. Suffice it to say that adding up the entire budget – General Fund, special funds, enterprise funds, capital funds and fiduciary funds, we're talking about $145.2 million. Serious money. Check out the details in the 322-page document, accessible via the city's website (Finance Department > Budget). Richard Pearl is a Lincoln resident and retired consultant to local governments. He is also the elected City Treasurer. This column represents only his personal, and not elected, opinions. The goal of the column is to present issues that impact city residents in an impartial and understandable format. He can be reached at richardpearl.lnm@gmail.com.