City may face $2.6 million budget gap in 2012

Wauwatosa anticipates facing a $2.6 million budget gap in 2012, but the numbers are changing daily as legislators make changes to Gov. Scott Walker's proposed state budget.

"No matter who is the governor, that's never the budget that's adopted," Finance Director John Ruggini said.

Last week, Ruggini gave the Budget and Finance Committee a synopsis of the city's budget picture for 2011 after crunching the numbers for the first quarter. He also made projections for next year's budget.

The state budget likely will limit the city's ability to increase the tax levy other than to account for new growth. That is expected to keep a levy increase in Tosa to about 0.05 percent, or $200,000. Beyond that, other sources of revenue are projected to increase 1.26 percent next year, and that just won't keep pace with expenditures that are increasing by 4.3 percent, he said.

Simply doing business another year will bring with it cost-of-living salary increases that will trickle down to increased overtime, Social Security and pension costs. Inflation of medical costs likely will drive up the city's health insurance costs about 9 percent.

State numbers changing

Deliberations in the last week by the state Legislature's Joint Finance Committee reinstated some aid to local municipalities.

Wauwatosa received a $225,000 recycling grant in past years, which was reduced to $170,000 and then eliminated in the governor's budget. The funding has been returned to $170,000, Ruggini said.

State shared revenue that was cut by 50 percent and transportation aids reduced 15 percent now look to be down 15 and 10 percent, respectively.

Ruggini has not yet determined how those changes would impact the city's budget because he's waiting for analysis from the Legislative Fiscal Bureau. In addition, those changes still face the hurdles of Senate and Assembly approval.

If the budget repair bill goes into effect, it would bring with it a 5.8 percent pension contribution and 10 percent health care premium contribution from city employees not working in the Police and Fire departments.

Looking for solutions

The key to meeting the expected shortfall will be looking for "sustainable reductions" rather than drawing down fund balances that are meant to be held in reserve for emergency use. For the 2011 budget, the city took $1 million from the fund balance to pay health insurance costs.

As an example of a sustainable reduction, Ruggini pointed to a recent Fire Department proposal to restructure management by eliminating a deputy chief and two lieutenant positions, providing about $180,000 in savings, while maintaining adequate service levels.

More revenue could be found by strengthening ambulance bill collections. Wauwatosa likely will write off $400,000 of debt accumulated over several years because people have not paid their bills for services provided by the Fire Department. The collection rate hovers near 50 percent, which is pretty typical - but could be higher, Ruggini said.

Alderman Brian Ewerdt encouraged city staff to look into the performance of the third party hired to collect ambulance debts. During contract negotiations, company representatives said they would strive toward a collection rate of at least 60 percent, he said.

"That's a pretty glaring number. I would definitely dig into that," Ewerdt said.

As for this year's budget picture, it's still early but it looks like the city by the end of the year may need to take about $500,000 from the fund balance. However, Ruggini said he's not too concerned because the city has been able to maintain a healthy fund balance during hard economic times.