Prussing plans $800,000 in budget cuts

URBANA — A week after the city council signed off on a quarter-cent sales tax increase, Mayor Laurel Prussing gave more details on how she plans to close an estimated $1.15 million gap in the city's $34.9 million operating budget before the end of the fiscal year next June.

She said on Monday night that she is planning for $811,500 worth of spending cuts to complement $343,000 in new revenue from the sales tax increase. Her plan includes holding employee health care costs to a minimum and lowering the amount the city planned to pay to police and fire pension funds.

Prussing said now is a good time to hold off on $214,000 worth of payments to those pension funds this year with stocks recovering. In recent years, the struggling stock market hurt the investment returns those funds typically receive.

But while the stock market recovers, Prussing said, the city is able to make the smaller contribution to keep pace with what the city will need to pay out pension benefits in the future.

"As long as the stock market is doing well, I wouldn't expect that we would have to do an increase in our contributions," Prussing said.

She said the city's pension funds are in "good shape." That is because "we keep putting in the money that we're supposed to be putting in," Prussing said, adding that officials will examine how much they contribute to IMRF, too.

She also plans to reduce the $2.5 million employee health care budget by $500,000. She said the city budgeted $2.5 million last year but only spent $2 million, and she is hoping that is the case again this year.

"The biggest single thing that we can do is reduce our increase in health insurance to zero," Prussing said.

Other cuts include a three-month delay in filling three staff positions, which she says will save $56,000. That's in addition to $178,500 in spending cuts the city has already made in the public works and legal departments and at the police front desk.

The city is expecting to lose $1 million in property tax revenue after the state of Illinois approved tax exempt status for Carle Foundation Hospital earlier this year.

City council members on Monday night gave the initial go-ahead to spend $60,000 to replace an air conditioning unit that broke down in the city building in August. Prussing also plans to hire an information technologies director, a position that will cost the city $82,000.

Those contributed to the $1,154,500 budget gap, but Prussing said that issue can be solved between her proposed spending cuts and the $343,000 officials expect to collect from the new sales tax rate, which is effective Jan. 1.

That sales tax revenue is only half of what the city expects to collect in the future, as the quarter-cent increase takes effective halfway through the budget year, which runs from July to June.

"Obviously there are other ways to do this, but this is where my thinking is now," Prussing said.

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EdRyan wrote on September 24, 2013 at 5:09 am

Balancing the budget by skimping on the pension fund contributions is what has gotten Illinois so deep in the hole.

ROB McCOLLEY wrote on September 24, 2013 at 7:09 am
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She spent only a single term in Springfield, but obviously she picked up some tricks there.

Diane W. Marlin wrote on September 24, 2013 at 2:09 pm

The City of Urbana does not "skimp on the pension fund contributions."  The City annually meets its pension obligation.  The reason that we are sending less money into the pension funds than was budgeted this year is that the funds' investments have had a better return recently, thereby reducing the amount needed from the City to adequately fund the pension systems.  The amount owed by the City is determined annually by an actuarial study. 

EdRyan wrote on September 24, 2013 at 6:09 pm

And what are you going to do when that year comes when the investment returns are negative and you don't have the money budgeted.  The other point is that actuarial studies are at least as much art as science and driven by a multitude of assumptions.

ericbussell wrote on September 25, 2013 at 8:09 am

Interesting.  So the amount of funding is determined by short-term fluctuations in the stock market?  By this approach, I would assume municipalities contribute significantly more than budgeted when the market performs worse than expected.  I suppose that sounds logical ... and the city of urbana can demonstrate they have been consistent in the application of this logic. 

Bulldogmojo wrote on September 25, 2013 at 9:09 am

Aren't pensions essentially dollar cost averaging investments constantly buying shares low and high to get consistent returns? I guess they want to keep a lid on anyone actually having a successful pension to fall back on when they retire like the police and fire fighters have nothing else to worry about.

Delaying filling three jobs hmmm, yes why would you want employed people contributing to the local economy.

How about you encourage new business to come to your fair city or didn't they teach new business development at Boston school of economics