MERIDEN – The City Council plans to hold a special Finance Committee meeting to address a projected $3-million budget deficit caused by reductions in state funding and overestimated revenues in the 2018 fiscal year budget.
”Without significant cost cutting measures implemented, it is a definite possibility that a deficit will be run for the year,” said Finance Director Michael Lupkas.
The meeting is scheduled for Dec. 12 at 5:30 p.m at City Hall.
Current projections show the city revenue will fall short by nearly $3 million, Lupkas said, due to a combination of state funding cuts and overestimated revenues.
City Manager Guy Scaife’s 2017-18 budget, his first with the city, went through several iterations during the budget process. Scaife originally proposed a $191 million budget, but $3.5 million in previously uncalculated expenses brought that budget up to $194.9 million.
The Council ultimately adopted a $194.5 million spending plan in late May, making about $400,000 in cuts by eliminating a clerks position and several unfilled positions, including a city attorney. The budget required increasing the tax rate to 39.92 mills, with an inner city tax rate of 42.04 mills.
Shortfalls in the city’s budget are due to a combination of cuts in state aid — the legislature didn’t adopt a budget until October — and overestimated revenues, Lupkas said. While state funding falls about $1.5 million short of the city’s budgeted revenue, Lupkas said the city budget also overestimated some revenues against the advice of staff, including the Special Education funding, which was increased by over $555,000 from the previous year.
Meriden’s budget assumed $1.3 million in aid for special education this year, despite receiving received $744,582 last year. Revenues for the Municipal Revenue Sharing Program were also overestimated, Lupkas said, and predicted revenues overall will fall about $1.2 million short of the budget due to what he dubbed “very aggressive budgeting.”
Scaife did not return a request for comment regarding the budget Thursday.
Lupkas said he informed the Council revenues for special education and the Municipal Revenue Sharing Program were being overestimated during the budget process, and the line items were included in a powerpoint presentation dated March 2017.City staff and the Council will be discussing ways to deal with the projected deficit.
“Due to the finalized state budget, we are anticipating that we will have a shortfall and there’s going to be cost saving measures looked into in the extreme near future,” Lupkas said.
Measures could include increasing the car tax from 37 to 39 mills, or simply running the deficit and taking it from the city’s reserve fund, which was $16.7 million as of June, Lupkas said.
“We have a prudent fund balance policy to cover events such as a sudden drop in revenue,” Lupkas said.
The City Council is expected to vote on leadership changes Monday, which could impact the chairmanship of the Finance Committee. Current Finance Chair Councilor Miguel Castro was vocal about his concerns during the budget process and hoped the meeting would clarify issues regarding overestimated revenues.
“There are areas in the budget that will translate into serious challenges with the budget that we just passed locally,” Castro said. “On the revenue side, there are a number of narratives and line items that should be part of the list of questions on if they were overstated, was that part of the budget discussion, which it was, and why they decided to go in that direction. That is, could we have prevented the deficit and, (if) not, listening to the expertise of the finance department is a part of the reasoning why than that raises other concerns.”
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