Increase in budget shortfall means forced furloughs

In a month, the financial shortfall projected for Denver from the coronavirus pandemic increased more than 25% to a total of $226 million, and drastic steps such as employee furloughs are needed to make up the difference, city officials announced Thursday.

The majority of the city’s approximately 13,000 employees must take eight unpaid furlough days by the end of the year, Chief Financial Officer Brendan Hanlon said during a news conference. About 5,000 uniformed employees — such as police officers and firefighters — are exempt.

Five of those furlough days will be scheduled around holidays, Mayor Michael Hancock said, and the remaining three will be flexible.

The maneuver is expected to save the city $16 million to bridge the city’s budget shortfall, which is a more severe drop than the first year of the Great Recession.

“We have worked to exhaust every other tool we have before taking this step,” Hancock said.

Denver has about $261 million in reserves, Hanlon said, but it must be spent judiciously. He anticipated up to $100 million could be used this year. If spent wisely, the reserves could be used to cushion Denver’s economic blow for multiple years, he said.

Hancock said those millions and cost-saving strategies that were launched early have positioned Denver for a quicker financial recovery than many other cities. The city froze hiring, and departments were ordered to set aside 7.5% of their budgets.

“That has gotten us part of the way there, but the magnitude of the challenge that we’re facing requires multiple solutions, and that’s what we’re looking for here,” Hanlon said.

In 2009, the first year of the Great Recession, the city’s general fund revenue fell 6.4%, but this year the drop is expected to hit 10.5%, he said.

In an even more drastic hit, Denver’s lodgers tax revenue is expected to fall 62.3% this year, Hanlon said, compared with an 18.5% drop in 2009.

Because many people aren’t traveling to Denver, the city’s sales and use tax will drop as well.

The sales tax makes up more than half the city’s general fund, Hanlon said. In 2009 it dropped 10%, and this year it’s expected to fall 16.8%.

Work is underway on the 2021 budget, which begins in January, said city spokesperson Julie Smith. Hanlon said his office will make a recommendation in September whether the furloughs must continue into 2021.

Hancock and the members of his administration also will take eight furlough days, spokesperson Mike Strott said.

In addition, all members of the City Council, except one, will reimburse the city for eight work days in solidarity with city workers. The city charter does not, for the most part, permit the salaries of elected officials to be changed, council administrator Stacy Simonet said in a release.

“Taking these furlough days helps the City by returning our income for those days, but also demonstrates our support for the dedicated employees who continue work hard through the pandemic and now face mandatory unpaid leave,” Council President Jolon Clark said in the release.

Only Councilwoman Candi CdeBaca will not participate in the move, spokesperson Lisa Calderon confirmed. CdeBaca’s move is in part a protest that Denver’s legislative arm already runs on an “anemic” budget, she said in a statement.