City addresses budget crisis, pension shortfall

City Finance Director Mary Mannix-Decker said during a Feb. 26 presentation that the city’s fiscal 2007–08 sales and use tax revenue, which was estimated to be up 3 percent from the previous year, is actually down by nearly 1 percent through February. That’s a serious problem for the city’s general fund, which receives 60 percent of its money from sales taxes and is the only fund the city is allowed to spend as it sees fit.

The problem is not unique to Springfield – statewide sales tax revenue was down 4.7 percent in January, and 1.7 percent for the three months ending in January.

Though the latest figures show flat revenue growth for Springfield, compared to 2006–07, Mannix-Decker expects projections to be met by year’s end.

Still, she said the city will not have money for additional personnel or pay raises next year.

“If we do experience a shortfall from what we estimated, we can begin to tighten our spending,” Mannix-Decker said. “The city also maintains a 10 percent reserve fund that we can dip into to fund that shortfall.”

The sales tax issue, however, is compounded by a growing shortfall in the Police and Fire Pension Fund. The city is contributing $7.3 million – about 29 percent of total department payroll – into the fund in 2007–08.

The fund actuary recommends the city increase its contribution to 50.21 percent, or $12.5 million.

Mannix-Decker said the issue is more urgent because a state law passed in 2007 requires cities with under-funded pension plans to contribute the full actuarial recommendation at least once every five years or have state funds withheld. Springfield’s Police and Fire Pension Fund is at 50 percent.

The $5.2 million gap between current and recommended contributions has led the city to ask all departments funded by general revenues to submit a budget exercise detailing how each would cut 7 percent from their budgets.

A second option would be to ask voters to approve a reduction in pension benefits, though Mayor Pro Tem Gary Deaver said that idea is not being considered.

The city does, however, have a third option. At the same time the state legislature passed the new rules about pension funding, it gave cities the option of requesting up to 1 percent in additional sales tax from their citizens to fund law enforcement issues, including pension plans.

While Deaver said council has not discussed a possible sales tax ballot item, Deputy City Manager Evelyn Honea said a 1 percent sales tax increase would generate an estimated $41 million annually for the city – more even than St. Louis city, which only generates about $38 million per 1 percent.

“When it comes to sales tax, Springfield gets a lot of bang for its buck,” Mannix-Decker said.

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