First of all, how did we get in this mess?
Approximately two years ago, then-Mayor Willie Herenton presented his first budget to the then new Memphis City Council. The proposal involved large increases in the city’s budget and a 17 percent tax increase.
A majority of the council voted to cut funding to the Memphis City Schools by $57 million and to use most of these savings to fund the increases Herenton requested in the city budget. This resulted in the city’s budget increasing by $44 million or 7.6 percent. The remaining savings were used to reduce the tax rate by 18 cents.
But then, Memphis City Schools filed suit against the city, arguing that state law requires the city to maintain its funding via a “maintenance of effort” formula. The court ruled for Memphis City Schools, and the Court of Appeals agreed. Several months ago, the city filed a petition with the Tennessee Supreme Court asking it to review this dispute. Last year, however, the Supreme Court agreed to review less than 7 percent of the cases presented to it.
Because two courts had ruled for Memphis City Schools, the city needed to fund the schools in the current budget (2010), but there was nowhere near $50 million available. The money cut from schools had been spent on city government.
As a result, the city’s reserves (rainy day fund) had to be used, and some cuts in the city’s budget were made.
The council has just completed its current budget review, increasing a budget from $577 million in 2008, the year before school funding became an issue, to $623 million for 2011, an 8 percent increase. But these figures did not include school funding. There were not enough reserves to use without risking the city’s bond rating. The Wharton administration suggested refinancing the city’s debt, resulting in a $41 million cut. That much, plus cuts of $9 million in the city’s budget, would yield enough to pay Memphis City Schools, since decreasing enrollment had lowered the city’s obligation to MCS to $50 million.
Several of us on the council have repeatedly tried to reduce spending in the city’s budget but have been unsuccessful for the most part. The refinancing avoided a crisis this year, but the day of reckoning will come soon — no later than 2013, when the margin for ad hoc financing will be long gone.
So, where do we go from here? On the revenue side, we have challenges. The recession has resulted in less sales tax revenue. Memphis is one of two large cities in the country that has lost population during the past decade. (Detroit is the other.) Our economic base has been static. For the first time in history, MLGW has fewer customers this year than it had last year.
On the expense side, the size and scope of city government have expanded. For two years, the city has applied financial Band-Aids — short-term fixes — to MCS.
To address these long-term issues, Mayor Wharton has created the Strategic Business Model Assessment Committee to review city government and determine where savings can be achieved. Several helpful ideas have already resulted.
I have some additional suggestions for the administration, the committee, and the council:
1) Last year, we outsourced four community centers to nonprofit organizations. We should put all of the centers out for bid and see if these or other nonprofits can save the city money and provide better service to the public.
2) We can be creative with city assets while maintaining service. For instance, the Poplar-White Station library sits on highly valued land. We should explore selling the property and either require the purchaser to include a library in the development or move the branch to a nearby, more cost-efficient location. All profits achieved from the transaction should be placed in a trust fund for the library system.
3) We should implement a system of reserve code enforcement officers like the one for reserve police officers. For a salary of $1 per year, the city could benefit from a large number of well-qualified persons to help in our struggle with blight.
We have some long-term challenges with the city-government budget. Meanwhile, I remain hopeful that Mayor Wharton’s assessment committee will provide guidance and challenge us to make the changes needed to survive without increasing taxes.
Jim Strickland is a member of the Memphis City Council.
