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Community Corner

Show-Me Spending: Tracking Local Government

When is a budget surplus not a surplus? Figuring out spending on a local level can be a complicated matter.

When is a surplus not a surplus?

City council members in University City passed a $36.8 million budget this week for next fiscal year, set to start July 1. In a summary sent out before the meeting, the city reports a $404,702 surplus for the final budget.

The city’s proposed budget had a surplus of $1.2 million. Where did all the extra surplus money go?

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First, it is important to note the surplus is the difference between an estimate of revenue and expenditures for the upcoming fiscal year. Second, a budget is an estimated plan for how much to spend. A budget is not an account of how much money was spent during any given time period. Third, all estimates are built upon assumptions.

Is there more information available concerning the final budget passed by the city council members than the provided summary? No, according to Brandon Drake, administrative analyst with University CityJanet Watson, deputy city manager, is revising the proposed budget with the final budget approved by the city council.

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Will University City spend $36.8 million, equaling approximately $1,051 for each of the city’s 35,000 residents, next fiscal year? To answer that question, one would need to predict a result without sufficient information.

How much did University City spend this fiscal year, set to end June 30? It is too early to know the answer. The final budget passed by the city council last year for this fiscal year predicted the city would spend $43.3 million.

To get a more accurate amount, it is important to examine the city’s audited financial report. The most recently audited financial report, for fiscal year 2010, shows University City spent $32.7 million during the fiscal year.

Is University City comparable to other cities in Missouri? It is next to impossible to know. Each city often uses different accounting methods and terminology. For example, a surplus, is sometimes referred to as a reserve.

How much are cities and counties spending each year across Missouri?

A previous column.  Now, imagine trying to track the spending for 114 different counties and nearly 1,000 cities across the state.

Missouri alone is set to spend around $23.3 billion next fiscal year, starting July 1. As reported by Missouri Watchdog, if the state decided to hand out the same amount of cash to every resident next fiscal year, instead of parceling the money through the state budget, everyone in the Show-Me State would receive nearly $4,000.

USGovernmentSpending.com attempts to calculate local, state and federal spending by aggregating government data. The estimated total for Missouri in 2011, including local and state, equals $46.3 billion, according to the website. Local spending equals $24.1 billion, according its “guesstimated” projections.

There are plenty of other things to keep in mind when examining city and county budgets. Since budgets do not equal expenditures, “budget cuts” are often not real. A city or county, for instance, could cut its estimated budget for any given year without reducing spending by simply cutting positions or programs that do not exist.

Also, budget shortfalls are not actual budget deficits. Instead they are the difference between what lawmakers want to spend and the revenue forecast. Plus, revenue is a projection over the next budget, not actual revenue.

As reported by Missouri WatchdogMark Levin, city administrator for Maryland Heights, presented an introduction to budgeting on Thursday at a conference sponsored by the Missouri Municipal League in Jefferson City. He warned the section of the presentation on rules for budget makers at the end was offered tongue-in-cheek.

In my opinion, however, the ending guidance was the most helpful:

  • There are no magic beans
  • 2 + 2 = 4 (no matter who’s asking)
  • The answer sometimes depends on what you want to know
  • There’s more to government than what you see

Personally, my favorite analogy is to compare the budget process to a household budget. Let’s say I budget $1 million next year. Then, I remember that I will not be making anywhere close to $1 million. Therefore, I would declare it is time to make budget cuts. First, I would need to fire my non-existent maids. Second, my capital budget will need to be cut, meaning no new mansion. This, of course, translates into a loss of construction jobs.

A colleague, however, one upped my analogy comparing the budget process to taking out a home equity loan to pay down credit card debt, replace the leaky roof, get new wiring and send the kid to college. However, you instead decide to blow the money on a big party. Now you still have the mortgage and home equity to pay off.

Don’t forget about the leaky roof and the kid’s college tuition, plus throw in a pay cut for good measure.

Now, try telling the bank you are going to get 8 percent interest on your savings account, which you have not been paying into, and everything will be OK in the next 30 years. See what the bank says when you ask for another loan. And keep in mind, the bankers will demand to see all of your pertinent financial information.

Maybe, as a first step, we as taxpayers should demand that the government make it easier to access financial data. Then, the numbers need to be presented in an accurate and uniform fashion. Until then, we will not know whether our money is being spent wisely and we will have to trust the politicians. Show me the spending!

By Brian R. Hookbrhook@missouriwatchdog.org, (314) 482-7944

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