Birmingham Mayor Randall Woodfin says his proposed FY 2020 operating budget represents a “fundamental shift” in how the city thinks about spending, with an increased focus on fulfilling his administration’s “moral obligations” — prioritizing city employees and neighborhood revitalization.
That means that even though the city’s projected $451 million budget is the largest to date, it’s also “as lean as they come,” he says, focusing on “needs, not wants.”
The budget still has to be approved by the Birmingham City Council, which received a full copy Tuesday morning. Because it is such an austere budget — addressing longstanding issues such as the city’s unfunded pension liability and putting significant funding toward neighborhood revitalization projects such as street paving and weed abatement — Woodfin says that negotiations may be difficult.
“There’s not a lot of wiggle room in this budget for people to tinker with it,” Woodfin says. “If you tinker with it, (funds) can only come from paving or the pension, because we took (that money) from everywhere else.”
In a meeting with reporters on Friday — during which he shared “highlights” of the budget, but not the entire thing — Woodfin said that he expected the budget to be approved quickly, following in the footsteps of last year’s budget, which was the first in years to be passed on time.
“Well, I want it to pass quickly,” Woodfin added. “I’ll commit to what I’ve always committed to, which is engaging this council.”
At a projected $451 million, the FY 2020 budget, for the fiscal year that begins July 1, is a marked increase from the previous year’s final total of $440 million. That’s due in part to an increase in revenue from taxes and license fees, which are up $6.5 million from the previous year.
“That means there’s some vibrancy in the city,” Woodfin says. “Occupational taxes are up, sales taxes are up, business licenses are up. That’s encouraging for us.”
The city is also expected to receive roughly $1.4 million as a result of the recent increase in Alabama’s fuel tax — although, because the tax will not go into effect until October, it’s projected to have only a $1 million impact on the FY 2020 budget — all of which will go toward street paving.
Even so, says Finance Director Lester Smith, creating “this budget was not easy.”
“You want to be lean as it relates to your budget,” he says. “You don’t want to be anorexic. You want to cut fat, so to speak, but you don’t want to get into muscle and you definitely don’t want to get into bone, because then it starts impacting operations negatively.”
Perhaps the most significant part of the FY 2020 is that it addresses the city’s unfunded pension liability — a looming crisis that Woodfin vowed last year to confront. The city has been underfunding its retirement and relief pension system for city employees since 2002. By the time Woodfin took office in 2017, its unfunded pension liability stood at roughly $330 million — which meant that the city would eventually be unable to afford retirees’ pensions. The unfunded liability also could lead to credit downgrades and potentially devastating budgetary shortfalls.
“It’s kind of scary,” Woodfin told reporters last year. “I don’t think we can kick this issue down the road anymore, and that’s a tough conversation, man.”
The FY 2020 budget looks to be a major part of that conversation, increasing the city’s contribution to the pension fund by $5.8 million. That’s in addition to the $2.9 million increase to the pension fund that Woodfin’s administration put into the previous year’s budget, and means that the city will fully meet its obligation to the pension fund “for the first time in more than a decade,” Woodfin says.
That increase does come at a cost — employees will not receive a cost-of-living pay adjustment for this year (that accounted for $2.8 million in the FY 2019 budget). “That doesn’t mean we’re not doing a (cost-of-living adjustment) next year,” Woodfin says.
Finance Director Lester Smith stresses that the city meeting its pension obligations does not mean that the overall problem has been fully solved. “When we say we are fully funded, there is a plan that is currently being worked on between the city and the pension board,” he says. “There is a two-step process to that plan. The first step was the city coming forward to fund what its portion would be… There is still a second step to this plan that we still have yet to complete.”
But the FY 2020 budget marks a significant step, Woodfin says. “The city’s done its part,” he says. “That’s the main thing we want to stress.”
“Equally important” to the pension in the FY 2020 budget is another moral obligation, Woodfin says: neighborhood revitalization. “The short and very direct version is, neighborhood revitalization has been a priority, and money talks,” he says.
The FY 2020 budget allocates $8 million for street paving — “we haven’t had this much in a very long time,” Woodfin says — and puts $4.7 million toward weed abatement and demolition of dilapidated housing.
Regarding the latter two, Woodfin says, “You have to make those investments because no one else is responsible for that … which means that by moral obligation and fiscal obligation, they’re the priority.”
The city has also added $700,000 to its funding for the Land Bank Authority, bringing its total to $1 million. The Land Bank was created in 2014 with the goal of acquiring and selling abandoned, tax-delinquent properties with the stated goal of reducing community blight and stabilizing neighborhoods. It’s an independent public corporation, but it receives its funding primarily from the City of Birmingham.
Some councilors have called for the Land Bank to have more financial independence from the city; Woodfin says that the increase in funding will help to “kickstart” the floundering organization.
“Let’s be honest: The Land Bank hasn’t worked, and a portion of it is how it’s been functioning from a financial standpoint,” he says. “A portion of this money allows us to put a team in place. If we expect only one person (administrator Eric Fancher) and a board (of directors) to make it function and move the way it wants to, that’s not fair or realistic. In that regard, would we like to see our Land Bank be a standalone and not be 100% dependent on city resources one day? Absolutely. But in the meantime, you’ve got to get there.”
The budget also allocates $300,000 for a new recycling pilot program. Woodfin says the recycling program will initially exist only in one area of town — he has not yet specified where — “to see if it can work.” Funding the pilot program will also allow the city to pursue grand funding “to do a recycling program on a more scalable level (with) a larger footprint in this city.”
“This $300,000 is a start, but then I want to show results that recycling is actually working in this city, and then move toward increasing it every year,” Woodfin says.
The budget’s increased funding for the city’s pension and neighborhood revitalization has a cost, though — and there will be some areas of proration. “If there’s a squeeze somewhere, it’s going to be on things that aren’t the priority and that aren’t the moral obligation,” Woodfin says.
The proposed budget will scale back funding for nonprofits. “Nonprofits are not a priority this year because there’s not enough money,” he says.
The budget also will see councilors’ pet projects removed as line items; instead, their individual discretionary funds will be increased from $50,000 to $100,000. “I think it’s fair to say realistically that we cannot give each individual councilor a $50,000 line item… it’s not fiscally sound,” Woodfin says. “(With) the general fund, we will focus on public safety and public infrastructure, because that’s what we have to do.”
Woodfin says that, despite this change, he doesn’t “expect too much pushback from the council.” Many of the decisions relating to the general fund, he says, came from councilors’ stated priorities for their districts. “For example, paving streets was one of the top three priorities in six out of nine councilors’ districts,” he says. “That’s how you get to $8 million in paving streets.”
“We’re not increasing the mayor’s budget, but the City Council’s seeing an increase, so I feel like I’m extending an olive branch,” he says. “I think I’ve overextended myself as far as the olive branch for working with this council for this budget. So no, I don’t think there will be too much pushback, because I’ve been intentional about listening to them and showing them via tax dollars that I’m putting money toward what they’re saying their priorities are in their individual districts.”