Official Web Site of the City of Phoenix

City responds to worsening economy by proposing $162.3 million in budget reductions, elimination of jobs

• 2009 Phoenix Budget for Community Review
  (contains a summary of the Jan. 6 Trial Budget)
  
• Jan. 6 City Council Report
  (contains more detailed information on the Jan. 6 Trial Budget)

The dramatic economic downturn that Phoenix and the rest of the state and nation saw in 2007 worsened last year, forcing the city to again face difficult budget decisions. A year ago the city responded to the challenge of sharply reduced revenues by trimming spending by more than $89 million and eliminating more than 440 jobs. This year, with projected tax revenues falling even further, the city is looking at a deficit of $269.7 million.

To meet this latest challenge, the city has developed a proposed budget that shrinks spending to match the deficit
by reducing a mix of services to residents, eliminating 1,070.5 positions that are financed with General Funds and
doing away with up to 225 jobs in enterprise and special revenue-funded departments. Executive positions will be
reduced by 9.5 percent, more than twice the amount of front-line employees at 4.6 percent.

The city budget is comprised of three separate categories – enterprise; federal funds and other special revenue funds; and the General Fund. This report will focus primarily on the General Fund because it finances most basic services, including police, fire, libraries, parks, streets, public transportation and many others.

The steps needed to produce a state-mandated balanced budget have been made more difficult this year by the fact that the city has cut its General Fund spending by more than $200 million since the 2002-03 fiscal year.

State Sales Taxes Decline

The major factor in this continuing financial dilemma is declining sales taxes, which are the city’s largest revenue
source. November collections alone were off 20 percent from the same month a year earlier and so far this fiscal
year, they are running 10 percent behind. Although some improvements in sales tax revenues are expected in late
2009 or early 2010, they still are not expected to reach the revenue levels of fiscal year 2006-07.

To help, the city again is proposing to make its cost-saving measures effective in March, rather than in July when the 2009-10 fiscal year actually begins. This action would spread the reductions in spending and services over 16 months rather than 12, which will lessen the impact on the community.

Development of the steps taken to produce the proposed budget has been ongoing for several months. Although faced with a deficit of $269.7 million, the city was able to trim $91.9 million from it by taking a variety of actions, including restructuring its debt and entering into leasepurchase agreements to finance capital equipment. It then cut another $15.5 million through a series of initiatives that will produce new revenues and cut expenses. Middle managers and executives also will give up a 1.9 percent cost of living increase for the new fiscal year.

At the same time, city departments were told to review their current and projected spending and propose reductions for their individual budgets of 30 percent. Public safety departments – Police, Fire, Municipal Court, Prosecutor and Public Defender – were asked to propose reductions of 15 percent. In the end, the city opted to go with cuts of 27.3 percent for most departments and 7.5 percent for the public safety departments.

State Revenue Sharing Critical

It should be noted, too, that the proposed budget assumes no changes to the state-shared revenue formula. Arizona voters approved the revenue sharing measure four times from 1942 through 1972. The process allows for a single entity – the state – to collect taxes and save administrative costs, while returning a portion of the revenues to cities and towns based on their populations.

Currently, the payments from the state, which have been on the decline because of the struggling economy, are the city’s second largest revenue source and make up about one-third of the General Fund. If the State Legislature reduces the funding by changing the formula now used to distribute the money, the impact to the community would be severe.

A reduction in state funding would not only lead to further cuts in parks, library and senior services, but it also would force more reductions in public safety services that would require layoffs of police and fire personnel. A listing of additional potential reductions, should they be required by state actions, can be found on page 15 of the budget document.

Your Phoenix elected officials will continue to communicate their concerns to state legislators and the governor in order to protect the municipal services you use
every day.

Shopping in Phoenix Can Help

As the city faces these budget challenges in the coming months, sales tax revenues are more important than ever. Sales taxes on the merchandise you buy go into the city’s General Fund. One way you can help improve the city’s current budget is by shopping at malls and stores and eating in restaurants that are in Phoenix. When you shop in other communities, the taxes go to the general funds of those cities.

So, shop Phoenix whenever you can.

Last modified on 02/03/2009 17:11:50