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By RAELYNN RICARTE
News staff writer
Mayor Arthur Babitz’ has been concerned all year that the city
budget is in worse shape than suspected and he has been proven
right.
An independent audit of fiscal records for the past two years
has revealed a deficit in the general fund of about $250,000.
Babitz said the final numbers won’t be known until the audit is
complete in December so the negative balance could rise even
higher.
“We haven’t slid back into a deficit because we never left,”
said Babitz.
He said auditors have found that the fiscal year 2007-08 ending
balance was erroneously stated as $387,000. He said that figure
was based on anticipated revenue for ambulance receipts and
parking meter collections that did not materialize.
In reality, Babitz said the city had a $150,000 shortfall in the
2007-08 budget. He said the deficit increased another $100,000
in fiscal year 2008-09 due to lower-than-budgeted revenue
collection and overspending appropriations.
“Budgeting hopeful revenues just lets you spend money you’ll
never have. Cutting expenses without cutting programs sets you
up for failure,” said Babitz.
He said revenues for fiscal year 2009-10 were budgeted
conservatively because the financial situation was still
unclear. The city’s budget committee will convene on Monday to
determine whether the right steps have already been taken to
keep the budget on track or if further reductions are necessary.
For example, the city reduced its workforce by six individuals
this year, froze wages for the remaining employees and reduced
their benefits.
“The budget committee is going to decide whether these cuts were
enough,” said Babitz.
“They will be answering the question, ‘Are we digging out of the
hole fast enough or do we need to dig faster?’”
The budget committee, which includes council members, will
convene at
6 p.m.
Nov. 9 in the municipal courtroom at the junction of Second and
State streets.
Lynn Rasmussen, the city’s new finance director, has been
working to straighten out past recording practices that have
made it difficult for the city to know exactly what lies in its
fund balances.
For example, she said the audit report for 2007-08 had not yet
been inputted into the computer system that tracks financial
data when she took the job in July.
Rasmussen reported the situation to the city council and was
given the go-ahead to make whatever changes she deemed necessary
to remedy the problem.
Even before taking office in January, Babitz was studying past
city accounting records with a critical eye. He wanted to
understand how the city ended up with a $1.2 million deficit by
2006. His goal was to get the city budget firmly in the black by
build up reserve funds to ward off future shortfalls.
“I think the city has been sending out the message, ‘Don’t
worry, everything is under control,’” said Babitz in the fall of
2008.
“I don’t think having everyone think the problem is solved (when
it may not be) is in our best interest.”
Although past city finance directors claimed the deficit was
paid off in 2007, Babitz could never get the revenue and
expenditure figures to reconcile. As an engineer, he was
accustomed to mathematic equations that added up and found the
accounting discrepancies unsettling.
“It doesn’t much matter if the numbers are positive or negative
if you don’t believe them,” he said.
“It’s hard to do anything about a missed revenue or overspent
appropriation if you don’t know about it for a year.
“The work Lynn’s doing to get us timely and accurate reports
gives us a fighting chance to get this under control.”
Rasmussen has listed her overall accounting goals as follows:
n Shift from a one-year budget model to a sustainable multi-year
approach that better accommodates long-term planning.
n Create user-friendly reports that foster openness and
transparency in government activities.
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