Agenda - Council - 02/25/1986 - Laserfiche WebLink

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impact of this is to remove the "grandtather" provision which provided that no city could get less 3.GA than it had received in the previous year. Each city's homestead credit payments from the state would decrease by 8.78 percent. While cities vi21 not receive full reimbursement, individual property tax bills will not change in 1986. When will the cuts be effective7 Unfortunately, they would be effective for the current calendar year, 1986. This makes it very difficult for cities to absorb these cuts. We are already veil into the budget year and do not have the option to levy additional taxes to offset this decrease in revenue. Doesn't the state realize that cities are experiencing tou~h times and that any cuts in the current.year viii be very difficult? Unfortunately many state decision ~akers do not have a good understanding of city finances or the fiscal stress that cities have been experiencing year after year. Cities have tended to do what they had to to cut budgets without keeping the public or legislators informed. Cities have been very creative in making efficiency improvements and very frugal in salary settlements, particularly when compared with other units of local government. Unfortunately, many state lawmakers hold wrong impressions. Many legislators do not realize that cities would have to make the cuts in 1986, the calendar year we are already partly through. They tend to think in terms of the state's fiscal year which runs from July 1 to June 30. While state agencies and others will be able to stretch their cuts through June 30, 1987, cities must balance the books as of Dec. 31, 1986. Many state decision makers do not realize how dependent cities are on state funds. On average, local government aid and homestead credit combined account for one-half of cities' total current expenditures. While cities vary widely from that average, state funding is very important to almost all cities. Enclosed is a printout of projections, by city, of the amount of funds they would lose under the governor's recommendations. Communicate those amounts to your legislators and let them know if the cuts will be forcing you to lay off staff or cut services. Cities are under tremendous fiscal stress right now. This is the result of cuts in federal revenue sharing of one-third to one-half in the current year, other federal cutbacks, skyrocketing insurance rates, declining tax base, the costs of complying with mandates such as comparable worth, and inflation. While the consumer price index (CPI) is near three percent, actual inflation for local government purchases is about six percent according to the implicit price deflator for state and local government purchases. This is because cities do not purchase housing or food, two significant components of the consumer price index that are declining or showing no significant increase. Legislators must understand that for most cities, not a single major source of revenue (federal funds, the local taxbase, or state funding) is growing at the rate of inflation. And, worse yet, most are declining. -2-