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It became clear in December 2012 that our net county tax revenues for fiscal year (FY) 2013 would be about $9 million less than initially projected.
We can make up half of that shortfall by economizing on county operations.
The county has maintained reserves of 25% of yearly revenues, about $15 million, to deal with such problems.
So why not go ahead with our original spending plans, and just dip into reserves for the other half of the shortage?
The answer is that this is potentially not a single-year budget problem.
Estimated revenues for the next few years are at best flat, so a substantial part of this year’s shortage is likely to continue.
Going farther into reserves in coming years would put us at a serious disadvantage if revenues drop still further.
Federal sequestration cuts, or a federal deficit-reduction deal that involves unknown spending cuts, are quite possible.
The national security and science roles of LANL will not disappear, but we can’t assume that the Lab will be immune to the budget pressures on all parts of government.
Some re-evaluation of our county’s spending priorities is clearly in order.
In 2012, the county council made plans to spend $33 million over the next four years on eight new Capital Improvement Projects (CIPs).
In addition to finishing previously contracted projects such as the Golf Course Community Building, six of the eight new projects were to be started in FY13, with a price tag of $21.6 million.
In the present revenue situation, we cannot afford to execute these projects on the original schedule, without increasing taxes by FY15.
We do not want to add to the cost burden of the lab or other local businesses by increasing our gross receipts tax (GRT) rate. Our property tax rates are quite low by state or national standards, but do we want to give up the incentive of low taxes for people to buy homes and business property here?
I am pleased that the community recently voted in favor of the LA Public Schools bond issue, but I doubt a tax increase for these new CIPs would pass a public vote.
We can and should maintain good county services and continue CIP improvements to our community, but we should do this at a pace that is in balance with present tax rates and revenues.
We can do this if we phase the new CIPs over the next four years.
Delays are frustrating, but a year or two delay is better than the waste involved if we start projects and then have to cancel some in a worsened budget situation.
Under the present estimate of flat lab budgets for the next few years, I estimate that we can afford without new taxes to go ahead with $15 million in new projects this fiscal year, and a total of about $27 million over the next four years.
As the situation unfolds in the next year or two, we will have a much better idea of whether we can truly afford the $33 million in work originally planned.
I am committed to working out a balanced budget that is progressive yet prudent in today’s uncertain situation. Good CIPs will help make this town more inviting to everyone, from students and single people, to families with children, to retirees.
We can still afford a good list of CIPs for our community, but we have to do this in a fiscally responsible way.