John F. Schaffner
Atlanta Dist. 7 City Council member Howard Shook, who represents much of Buckhead and chairs the city’s Finance Committee, graciously agreed to sit for an hour-long interview regarding the budget crisis facing the city.
The city has what may be a $70 million deficit in the present fiscal year budget and is facing an anticipated $140 million revenue shortfall for the new fiscal year budget. It was to be presented to city council May 1, just after this edition of the Buckhead Reporter went to press.
Shook already has introduced legislation in an attempt to improve the budget process and ensure that past mistakes do not occur with future budgets.
The following are excepts from the April 24 interview with Councilman Shook.
Budget reform legislation
Referring to the legislation that he personally introduced in city council on April 21, Shook said:
“What I put in will hopefully help to make the process more transparent. The big piece that we need to introduce and pass — that will re-plumb some of the basic components of the process — has yet to be introduced.
“I am working with the internal auditor, the (city’s) chief financial officer and the mayor’s office to try and get on the same page in terms of where the big structural problems are that allowed this train wreck to occur, and what is the best way to close some of these process gaps.
“I don’t think we will be ready to look at legislation for probably another cycle. My intent is to repair the budget process fully in time so that the structural repairs are in place when fiscal year 2010 budget starts to get put together.”
Shook identified one of the major problems. “We got to the place where we were anticipating cash carry forward before we had really closed out the books. That made it harder to detect coming problems.
“The other area of debate is the extent to which we want to keep the 96 percent anticipation formula as the cornerstone of projecting our (revenue) anticipations. Some people think that is conservative and this mess proves that we need to hang onto that. Others say our system is anachronistic and weird and that we need to do what everyone else does, which is rely more on forecasting.”
Shook added, “We need to decide which of several options to pick from as to how we are going to handle reserves. I am beginning to believe we need two reserve funds. One to deal with real emergencies, such as a Katrina or other acts of God. A second reserve fund — a little more accessible through council approval — would be for things you don’t anticipate but are a little more routine, such as a lawsuit that had not been anticipated.
“Those are the outstanding things that are going to go into one big charter change and it is complicated. All of that is still under discussion.
How many will lose their jobs?
“I have no idea,” Shook said. “Ask me after May 1. Hundreds, at least. I believe we will see liquidation of some vacancies.”
Asked if now is the time the city should seriously assess whether it needs 9,400 employees, Shook responded, “The question has been asked as to whether we need all these employees and I think we will see May 1 that the question has been answered by the administration.
“Seventy percent of our budget is people, which is probably rather standard in government. Pensions and other benefits are really the number one [problem]. It certainly is my quaint opinion [that you can’t raise taxes enough to make up for it]. “We will find out where people stand on that when we debate the budget.
“Now is a ripe time from a crass political prospective to introduce the papers I introduced. I’ve had some council people explain nervously to me why they think it is a bad policy idea and I’ve had several, who know they are really going to put on the spot, who kind of let me know it is going to be a big headache.
Legislative ideas explained
“New or higher fees, new or higher ad valorem taxes involving indebtedness would require 10 votes.” (At present, only eight council votes are required.) “I want to make it harder for government to solve problems by reverting to the knee-jerk response of raising taxes and fees.
“It will be interesting to see how some of my colleagues, who typically say council needs to assume more authority and become more aggressive, explain why in this case they don’t think this is a good idea. This is the biggest expansion of authority council has looked at in many years.”
He said both the proposed budget and adopted budget have to be put online. “That is one of those things people are shocked to find out we don’t already do.”
As a third part to his legislation package, “I asked the independent audit commission to sit with the finance committee to review the budget. That is an extra set of eyes of expert accountants who are very familiar with our financial systems. So we will get a lot more help understanding what has been slapped down in front of us and what is a good idea and what is not a good idea.”
He explained that every year by law “we have to hand over the books of the year we have just closed out to the external auditor. As part of that formal back and forth, their response includes what is called a management letter where they point out what they consider to be weaknesses or problems. The government is required to say we agree and this is what we are going to do to address it, or we disagree and here is why.”
“One of my things is to have the internal auditor report on a quarterly basis on the administration’s commitments they made regarding the management letter. We have to clean this stuff up.”
Focus on rising costs of benefits
“One of my pieces of legislation asks the CFO to respond to the finding of a blue ribbon pension advisory committee that were issued in 2005. That is my way of initiating a critical discussion of what are we going to do” about the soaring costs of pensions and other benefits. “Can we go back retroactively to do anything that will keep these numbers from soaring into the stratosphere? What kind of decisions are we going to have to make regarding future employees? The days of doing this the way we have — low pay, nice pension and benefits — are coming to a close.”
He said the city also is going to have to go back to contracting out more services.
Shook concluded by saying: “What is before us is horrific. I have to get through the next 60-90 days. I am really just trying to stay focused on understanding what is going to be put in front of us and do the best I can to identify what’s broken and get it fixed.”