The Ghosts of Surplus Past

Hard as it may be to fathom now with the City and the college community locking horns over the "Fair Share" tax and "voluntary" contributions to the City’s finances, but just a few short years ago the City was flush with cash as represented by its fund balance. The high point in the last few years came in 2007 when the total (reserved plus unreserved) general fund balance reached $89 million. That was up from a scant $14 million in 2004, prior to the Act 47/oversight board era, and the rise was due largely to the new taxes created by the state Legislature.

At the time the administration seemed bullish on the size of the surplus (the Finance Director noted in August 2007-just two years ago-that "we are positive that the fund balance is going to continue to grow as is did through 2006 and 2007") while the Controller’s office was not so sure (‘this is the high point and then [the City’s finances] are going to go down").

The Finance Director also noted in the same article that "there are long-term problems out there" referring to the legacy cost problems. These problems have come much faster than exuberant city officials believed or wanted the public to believe. With the City trying to pay for infrastructure needs without adding to the massive debt load and no strict controls placed on the growth of general fund spending (in 2004 the City spent $375 million and is expected to spend $446 million next year, a 19% increase) the City predictably began looking in other places for additional funding to meet the Act 47 requirement of putting $10-14 million additional money into pensions annually. Thus the turn to the tuition tax, which may be a moot subject very soon.

Going forward the fund balance is projected to be $26 million in 2014-higher than the low point of 2004, but much lower than the high point of 2007. And of course that is just a forecast, something the City’s prognosticators have not been very good at.