THE BUDGET CRUNCH: A SIMPLE FIRST STEP

THE BUDGET CRUNCH: A SIMPLE FIRST STEP

Postby Nick Della Volpe » Sat Mar 01, 2014 2:42 pm

City Revenues are essentially flat, especially the two dominant elements of real property and sales taxes. As usual, our governmental costs are rising from year to year. The City has to pare back expenses, and make conscious decisions about spending scarce dollars, if we are to avoid tax increases. Many residents are already hard pressed to meet their own bills in the slower economy.

Council needs to consider repealing City Ordinance, Section 2-454 which provides for an automatic 2 1/2% annual pay increase for city employees. Increases don't need to be automatic. That provision costs the city roughly $2M each year in direct costs and additional monies downstream in indirect costs, as the automatic bump increases the "base wage" upon which annual fringe benefits (easily 35% of wages) and future pension benefits are calculated. Such an automatic pay increase is unheard of in private industry. There is no automatic anything in the real world.

The repeal of section 2-454 would not prohibit a wage increase. It would simply enable the administration to affirmatively evaluate the facts, including inflation, budget priorities, and the other costs, and consider what funds are available to pay for one. Our city needs to be able to make conscious, thoughtful and transparent decisions when it spends scarce tax dollars, not simply set the budget on auto-pilot, without regard to the consequences.

Please consider this simple budget liberating step as we move forward.
Nick Della Volpe
 
Posts: 110
Joined: Mon Jul 02, 2012 4:00 pm

Re: THE BUDGET CRUNCH: A SIMPLE FIRST STEP

Postby Nick Della Volpe » Wed Mar 05, 2014 12:24 pm

In order to initiate a reasoned debate on this issue, I have asked our attorney to draft a repeater of the automatic approach. I'd like to think that an informed process that evaluates all the facts, the economic and fiscal climate, and takes a look at areas where wage inadequacy exists would better serve the city and the taxpayers whom we represent.

Let's take a look under the hood.
Nick Della Volpe
 
Posts: 110
Joined: Mon Jul 02, 2012 4:00 pm

Re: THE BUDGET CRUNCH: A SIMPLE FIRST STEP --Facts

Postby Nick Della Volpe » Mon Mar 17, 2014 1:26 pm

INFLATION IS NOT CONSTANT.
It is important to recognize that back in 1981, when this wage adjustment statute was adopted, that our economy was experiencing terrible inflation from the after-effects of the Arab oral embargo. Interest rates went through the roof. Inflation averaged 9.16% per year in the 7 years leading up to the 2.5 % per year increase that was passed in 1981 (inflation actually reached 13.5% in 1980). Pay scale issues were also being reviewed as being out of whack with the marketplace at the time.

By contrast, the city is doing better now in terms of periodically reviewing competitive pay scales. Inflation is much more modest today, averaging less than 2% a year in the 6 years since 2008. It was actually negative in 2009, and averaged 1.5% in 2013.

By making the pay increase process more flexible, council can provide the administration with more flexibility, so it can better match fiscal needs with actual economic conditions.
Nick Della Volpe
 
Posts: 110
Joined: Mon Jul 02, 2012 4:00 pm


Return to City Of Knoxville, Tennessee / City Council Forum

cron