Strains on its budget may mean the city has to cut about six positions in the next fiscal year, a move that could be marked by additional upcoming belt-tightening, city officials said.
The decision comes as the city’s facing increasing costs from the police pension and the employee health plan, and as cities prepare a state-impose cap on property tax revenue collections. This financial situation is likely to affect the city’s five-year planning, city officials said.
The positions the city cuts will likely consist of some that are already vacant or which won’t reduce services to residents, City Manager Brian Maxwell said.
The city won’t cut sworn personnel from the police or fire departments, Maxwell said. The positions the city does eliminate will come from those paid for through the general fund, he said.
“It could impact streets,” Maxwell said. “It could impact traffic. It could impact parks. Until we know better what positions and what we’re dealing with, we don’t know what those impacts will be.”
There are 814 employees of the city, but only 504.8 are funded through the general fund, according to the city budget. Some positions are partially funded through the general fund and others are paid for through grants and money dedicated for specific uses.
Excluding sworn police officers and firemen and women, departments with the most employees paid for out of the general fund include streets and traffic, parks and recreation and civilian police employees, according to the budget.
About 65 percent, $39.2 million, of the $60.3 million appropriated to the 2019 general fund is used for personnel costs, according to city budgets. The city’s total 2019 budget is $240.2 million budget, according to the city budget.
The city’s been feeling financial pressure from multiple sources, Mayor Pro Tem Craig Brown said.
“I think there’s a lot of things in play,” Brown said.
The Galveston City Council will likely need to make recommendations to city staff about ways to reduce costs in the upcoming budget season, he said. There could be across the board departmental cutbacks, Brown said.
The new budget year begins in October.
The city was already expecting to incur additional costs associated with an agreement struck with the police pension board to fund the ailing police pension fund, Maxwell said.
In new state legislation, which aims to move the plan back into state compliance, the city agreed to increase its contribution to the plan to 18 percent from 14.83 percent.
This will cost the city between $400,000 and $500,000 more each year, city officials have said. The city now contributes about $1.77 million a year and the increase will push that to more than $2 million, city officials have said.
But the city wasn’t expecting increased costs from its employee health plan, Maxwell said.
“It has to do with claims,” Maxwell said. “The health insurance costs have been trending upwards. We’ve had a high utilization year.”
In the 2017 to 2018 fiscal year, which starts in October, the employee health plan costs totaled almost $9.1 million, city spokeswoman Marissa Barnett said.
By the end of April this year, the plan had already cost the city $5.8 million, she said.
At this rate, the city expects much higher costs by the end of the fiscal year in September, Barnett said.
“Health fund increases are from higher claims, increased utilization and medical inflation of about 8 percent,” Barnett said.
The total difference between contributions and costs was $911,804 for the entire fiscal year last year. By April of this year, the difference was already $898,263, Barnett said.
There are other components adding to the city’s financial constraints. This is the last year since 2013 the city will contribute to an infrastructure fund that takes 1 percent of the general fund operating budget for capital improvements, a hit that this year will remove about $700,000 from general spending, Maxwell said.
The city will also need to plan ahead in anticipation of state legislation that prevents cities from collecting over 3.5 percent more property tax revenues than the previous year without a vote from the voters. City leaders have decried the legislation as one that would hamper growth.
It’s not something that will affect the city this year, but something the city must plan ahead for, Maxwell said.
“We’re trying to get as efficient and as lean as we can,” Maxwell said. “Our main goal is not to reduce service. This is just a bad year.”