The City of DeKalb got rid of 30+ employees at the beginning of FY2011 in order to balance its budget. There followed a year of quiet, but now we’re in the midst of a hiring spree.

YoY Comparison of
Full time Equivalent
Employees (FTEs)
FY2012FY2013FY2014+/- Over
FY2012
Administration17.52022.25*+4.75*
Police
80.0786.0787.57+7.5
Fire
545358+4
Public Works434444+1

Here is what it has done to personnel expenses.

Selected
Personnel
Expenditures
FY2012FY2013FY2014+/- Over
FY2012
Salaries12,614,05413,301,20714,163,263+1,549,209
Health Ins3,320,7253,746,7403,810,939+490,214
Pensions/FICA4,466,7794,199,3244,870,100+403,317

And here’s what the FY2014 budget narrative (PDF p. 29) says about the increases:

Total Personnel Services reflect an increase of 4.5% percent over FY2013. Most of this increase is attributable to a 15% percent increase in pension costs. Wages reflect increases based on collective bargaining agreements. Our insurance consultant informed us in March that the City’s health insurance premium will increase by 4.5% percent[.]

The latest pension cost increase is distressing, but in terms of dollars it is neither the only source nor the primary source of rising personnel costs, which make up some 83% of the General Fund budget.

So we’re looking at these expenditures going up $2.4 million over a two-year period. However, personnel expenses as a whole are expected to rise only about $1 million. In my opinion, this has given council and others a false sense of security that our revenues are naturally growing to cover the ongoing, rising expenses — so let’s try to tug the curtain away.

First, some news on the expense side:

– The annual transfer from General Fund to the Workers Comp Fund decreased by about $1 million in FY2013 with the introduction of insurance coverage.

– Overtime (much of it used to train new fire fighters last year) will be reduced by $507,000 this year.

On the revenue side:

– New housing registration fees of $227,000 have been introduced.

– Transfers from the Water Fund and the two TIF funds will rise $210,000 this year.

Also, we have seen some growth in our four core revenues, which typically cover 95% or more of the personnel expenses — but they need some explaining.

Taxes that make
up 79% of Gen
Fund revenues
FY2012 FY2013FY2014+/- Over
FY2012
Property (14%)4,107,8064,171,6524,244,648+136,842
Sales & Use (41%)12,167,12212,101,29812,571,861+404,739
Utility (11%)3,788,9533,575,7913,520,715-268,238
State Income Tax (13%)3,745,2983,685,7534,200,462+455,164

The increase in sales taxes comes from the elimination of the “sales tax TIF,” meaning these revenues are not new, just going to be funneled into a different fund now. The budget narrative says $500,000 now goes into the General Fund that previously went into a TIF fund. The net is lower than that because we lost more than $100,000 in local sales tax last year.

Meanwhile, the finance people raised the income tax projection 11% because the Illinois Municipal League (again, according to the budget narrative) said so. That’s an awful lot of faith, considering DeKalb’s current rate of employment as well as the state of the state.

Let’s say everything pans out as projected. Will we be in trouble in FY2014? No. But, what do we do for an encore if core revenues continue the essential flatness of the post-recession economy and/or DeKalb continues experiencing population shrinkage?

We’ve also foolishly become very dependent upon temporary revenues for operations. Within a few years, large TIF transfers to the General Fund (currently $942,600) will be a thing of the past, and TIF “surplus” revenues ($533,000) will go away, too. Growth will not just have to cover rising wage and pension expenses, it will have to make up for future known, significant revenue losses as well.

My crystal ball says it won’t be long before we find ourselves in financial straits again and the administrators must know this because EPI is here. As in FY2010-11, they may very well decide to let go a bunch of Public Works employees — only this time, I fear our water utility could go with them for the worst of reasons, which is to say short-term solvency.

My sole source for the numbers is the FY2014 draft budget.

Related post: DeKalb’s Budgetary Reserves Do Not Mean What You Think They Mean

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*Admin absorbed the full-time deputy clerk’s position so it is not a new hire. That makes the total (assuming hires matched those budgeted) 16.25 full time equivalents (FTEs) over the two-year period.