Budget Crisis

Click here to view the Plan to Address 2009 Budget Shortage Due to Anticipated Reduction in State Funding

  

Contact the House and Senate Legislators

Contact your House and Senate legislators and the governor and urge them to support LGA funding. Tell them that police, fire protection, libraries, safe roads, and other city services are essential for your city. LGA allows cities from every corner of the state to provide these services at an affordable price, which is critical to the economic health of the state. Click here to contact your legislator.

Budget Meeting Worksheet

Fact Sheet on Division Duties

State Budget Deficit to Create Long-term Budget Crisis for Red Wing

The State of Minnesota is facing a significant long-term budget deficit projected to be at least $4.5 billion in the 2010-2011 biennium. Although this deficit is similar to the one experienced by the state in 2003, the simple solutions used then to balance the budget were one-time measures such as tapping then-sizable reserves and using revenues from tobacco company endowments. Without this type of solution available, the state has already begun greatly reducing the aids it provides to cities and counties.

2008

With the state’s November budget forecast in hand, Governor Tim Pawlenty announced December 26 that a significant portion of Local Government Aid (LGA) payments would be withheld from cities and counties. For the City of Red Wing, the Governor’s decision created a $568,000 hole in its 2008 budget in the final month of the year. As a result, limited reserve funds were used to cover operating expenses. In addition, the following were placed on hold:

• The hiring process for 12 vacant positions.
• Several planned capital investments such as a significant heating and ventilation replacement project at the library, parking ramp improvements, signage improvements, the acquisition of planned public works equipment, and road and transportation improvements.
• Several projects including conducting a resident survey, revamping the website, conducting a transportation study, and others.

The steps taken to mitigate the impact of the governor’s cuts were not significantly noticeable to the community. Workloads were shifted from the unfilled positions and existing service levels have been maintained, in part, through the use of temporary employees. These actions were one-time solutions that cannot be employed continually to address ongoing budget concerns. “These stop-gap measures were taken in response to the state’s actions to allow the City Council an opportunity to develop a long-term strategy to address service reductions,” said Council Administrator Kay Kuhlmann.

2009 & Beyond

Due to the significance of the state’s budget deficit, state aid cuts are expected to be more severe in 2009 than in 2008 and even greater in future years. Red Wing, in a worst-case scenario, could lose up to $2.7 million in Local Government Aid (LGA), Market Value Homestead Credits and Utility Transition Aid in 2009 and $3.4 million on an annual basis thereafter.

City Council and staff are working to identify areas in which revenues could be increased and expenses could be decreased as plans are being made to prepare for the worst scenario possible with the state’s budget and how it could possibly impact Red Wing.

Like any organization or individual facing a budget crisis, the City of Red Wing must examine its income and expenses to figure out how to make ends meet. City Council President Mike Schultz

The Minnesota legislative session is currently underway. The state’s multi-billion dollar budget deficit is the primary issue being addressed by the Governor and Legislature. Unfortunately, cities won’t know what their fiscal impacts will be until Governor Pawlenty signs a solution into law. This solution may not be known until the legislative session ends May 18 and could, quite possibly, be delayed further if a solution isn’t reached by May 18 and the Governor has to call for a special legislative session to finish the task. Due to this pending legislation, the City of Red Wing is preparing a long-term, strategic fiscal plan to address the worst-case scenario while working with the State Legislature and Governor to produce a more balanced outcome.

 What is Local Government Aid?

The LGA program is vital to the economic health of cities such as Red Wing as it provides property tax relief based on each city’s need and tax base. LGA is paid to less affluent communities so those communities are able to offer basic city services at an affordable price to residents. The LGA amount a city will receive is certified to the city by the Minnesota Department of Revenue (DOR) during the city’s budget cycle. The certified LGA is included as budgeted revenue and then received by cities each July and December. Without LGA, the quality and level of city services provided across the state will vary dramatically along with the rate property owners are taxed at. For more information about LGA, visit www.thanklga.org

Red Wing is certified to receive $1.45 million in LGA annually. A sizable cut to this revenue source will significantly and negatively impact the City of Red Wing’s ability to provide the high quality public services at the affordable cost the community is accustomed to. Marshall Hallock, Finance Director. 

Reduce Expenditures

To adapt to reduced revenues, certain services currently provided by the City of Red Wing are being analyzed, prioritized and considered for elimination or reduction. With these reductions, corresponding positions are being evaluated. The City of Red Wing’s workforce may shrink by as much as 15 percent as services are reduced or eliminated. The Service Evaluation Worksheet Survey lists the services being evaluated and provides an opportunity for community members to assist with prioritizing them. Many of the changes resulting from this evaluation process will be made this year to help cover shortfalls in the 2009 budget. The reductions will also shape the 2010 budgeting process and the service changes should be expected to continue into the next few years. 

Operational Costs

Annual operating costs have already been reduced for a total estimated cost savings of more than $700,000 in the areas including:

• Overtime for hourly employees
• Travel and conference budgets
• Civic Club memberships
• Construction and maintenance materials
• Quarterly training for employees
• Educational Reimbursement Program
• Landscaping materials
• Voluntary days off without pay for all employees
• Consultant services

Capital Expenses

City staff presented several expense reduction recommendations to the City Council in a March 4 workshop. The recommendations include reducing the $2.1 million capital budget. A total of $633,156 in capital projects and equipment was identified for potential deferment including:

• Phase four of City Hall remodeling
• Mississippi National Golf Links upgrades in the clubhouse
• East Fifth Street bridge
• Repair/replacement/construction of parking lot and garage for the mass transit system
• Equipment for various departments

What services will be affected by the proposed cuts?

The City of REd Wing has numerous funds which are used to account for and segregate various financial activities. These include a General Fund, Special Revenue Funds, Debt Services Funds, Capital Project Funds, Enterprise Funds and other fund types.

The General Fund is the organization's chief operating fund.  It accounts for general governmental, public safety, public works, culture and reaceation, and various other services and activies. This is the fund which is reliant on local Governement Aid, Market Value Homestead Aid and the Utility Transition Aid to finance its activities. A reduction in these state-paid aids will, therefore, negatively impact the City of Red Wing's ability to provide those kinds of services and activities.

Special Revenue and Enterprise Funds are not supported by state paid aids and will, therefore, not be impacted by the budget crisis. These funds include ambulance, sewer, water, refuse and recycling, and the marina.

We need to create long-term strategies to sustain us through the challengin economic times that lie ahead. Marshall Hallock, Finance Director.

 Impacting the Changes that Lie Ahead

Red Wing residents and business owners are encouraged to participate in the process of deciding how to overcome this budget crisis in one of the following ways:

• Attend a public forum
• Complete an online questionnaire
• Complete and return the Service Evaluation Worksheet Survey
• Drop a note into one of the suggestion boxes placed around town at the Public Library, Public Works Building, Community Development Building, Law Enforcement Center, as well as at coffee shops.
• Contact a City Council Member or city staff to share ideas and concerns.
• Contact state legislators or the governor to express the need to preserve Red Wing’s state funding.

We anticipate many good ideas and thoughts to be brought forward by the community. We encourage and welcome participation from residents and business owners.
Council President Mike Schultz