Drastic budget cuts not enough
Dayton has enacted most of the one-time fixes it can. Without federal help, service cuts loom, officials say.
The city of Dayton plans to cut about $10.7 million out of its 2020 general fund budget due to coronavirus-related revenue declines, but the city still needs to figure out how to slash an additional $2.2 million in spending.
Through July, Dayton’s general fund spending has exceeded revenue about $5.5 million, and nearly all of the major revenue categories have seen sizable decreases this spring and summer during the pandemic.
Dayton has instituted a hiring freeze, offered a voluntary separation program, reduced capital investments, limited spending on contracts and materials and has taken other cost-cutting steps.
But many of the cuts are “onetime” budget solutions, and the city will not be able to maintain critical services in 2021 without federal funding support, said Diane Shannon, Dayton’s director of procurement, management and budget.
“Despite our best efforts and early action, assistance is still needed from the federal government because ... so many of our solutions are one-time,” Shannon said.
After the coronavirus started to spread earlier this year, it became clear the public health emergency was going to have a major impact on the city’s budget, officials said.
Between April and July, general fund revenue decreased by about $8 million, or 12.4%, compared to last year, city data show.
The city’s original 2020 budget was $183 million. That has been revised down to $173.3 million, and the city recently projected a $12.9 million deficit in the general fund.
To cut costs, city management decided to eliminate open job positions, furlough employees, freeze hiring, suspend purchases of nonessential and noncritical goods and services and offered incentives for employees to voluntarily resign.
The personnel actions should save about $2.5 million, while the city’s cuts to capital investments will save about $3.5 million, officials said.
Federal CARES Act dollars and FEMA funds are expected to reimburse about $2 million in
coronavirus-related costs. A state workers’ compensation rebate has provided $1.2 million in relief.
But Dayton still needs to cut $2.2 million, and about $6.7 million of the cost-saving measures are one-time and will not help out next year’s budget, Shannon said.
Dayton’s budget woes could deepen if the pandemic worsens, if another economic shutdown takes place or if the city is slammed with bad weather later this year, Shannon said.
Economic conditions also could suffer if enhanced unemployment benefits are not extended, she said.
Until recently, jobless workers received an additional $600 in weekly unemployment benefits. But those expired, and it’s unclear if the enhanced benefits will be restored, either partially or in full.
Dayton Mayor Nan Whaley said she thinks the city’s budget and general fund revenue actually will be worse in the second half of the year because of “inaction” by the federal government to restore enhanced jobless benefits and because small businesses are running out of funding support.
“I think that’s a very big deal,” she said.
Whaley said she worries that without federal money, the city may have to cut its workforce.
Before COVID-19, Dayton had gone through two recessions since the turn of the century.
The city’s general fund revenue didn’t fully recover from a recession in 2001 until five years later, Shannon said.
Dayton’s revenue took more than a decade to recover from the recession of 2007-2008, and the main reason that happened was voters approved an income tax hike, she said.
There is no way to know how long the current economic crisis will last. But the longer it does, the worse off the city’s finances will be, potentially leading to workforce and service cuts, officials said.