TUF

Franklin Cuts into Surplus to Meet Budget Cap
September 30, 2008

Franklin's budget is headed for significant problems in two years. The issue is that the Township is operating in a deficit in that we are spending more than we are earning. To cover the difference we are spending down the substantial surplus that we amassed over the years. Of course this can only last for so long and eventually the money will run out.

The numbers are a little complicated but here they are. The Budget for 2009 is projected to be about $59M of which $29M will be paid in property taxes. From other sources (state, hotel fees, federal, etc) we will receive another $15.4M leaving a deficit of about $14.6M or about 25% of the total budget. This will be paid for by spending the entire surplus. We are however expecting $8.2M in surplus next year so the practical consequence is we are using $6M of the surplus to make ends meet. Keeping all things equal we can only do this for one more year and then the we will not have enough surplus to cover the short fall.

Even increasing taxes will not solve the situation because the state limits increasing property taxes to no more than 4% a year. That would make up less than $1.2M. The only way out, barring a change in the law, is to cut and cut dramatically. Unfortunately this will not save a dime of taxes and will result in sacrifices from both the taxpayers in the loss of services and sacrifices from Municipal employees possibly in the form of lost benefits, raises or even jobs.

One place to make up the money is in the health care plan for employees. Looking at the prescription plan, Township employees have no formulary (insurance companies with use this method to limit the use of more expensive drugs when cheaper ones will work as well). In addition there is no co-pay for generic drugs and $4 for brand name. It is difficult to estimate but my industry sources inform me that increasing the co-pay and adding a formulary would save the township about $1000 an employee. The Township employs 291 people full time including 123 police officers.

Of course the $300,000 saved would only be a drop in the bucket to what needs to be saved and contracts prevent this from changing immediately. For instance the police contract was recently extended for 2 years and expires at the end of 2009.

Some money can be saved with economy of scale by letting the county take over some tasks. This will mean a loss of autonomy for the township and the potential for saving is limited because the law requires that no one be laid of in the process. It also provides a shell game. If we aren't paying of for a service then there is more room in the budget thus allowing the Township to make fewer "real cuts". All the while the county increases their expenses so our county taxes go up.

Perhaps outsourcing some jobs will help. Often the private sector can do things more efficiently but other times it can make things worse.

Whatever the solution, there will be pain on all sides. I suspect in a year department heads will be told to cut their budgets by an amount that will require them to decrease their staff. TUF suggests that the unions begin to work with the Township now even if their contracts are not up yet. The more we can agree on now the less pain and fewer layoffs will occur later.

Phil Kramer