The Budget Committee is recommending that Lee’s Summit cut the city employee raise pool to ease pressure on its general fund budget.
The committee finished its work Monday, May 12, mostly endorsing City Manager Steve Arbo’s proposed $184 million budget. The budget goes to the full council in June for a public hearing and possible amendments.
The committee voted 3-1, with Chairman Bob Johnson voting no, to recommend accepting Arbo’s budget but proposed the council amend it to cut the raise pool.
Arbo said in a May 12 email, responding to the Journal’s questions, that he intends to modify his budget to reflect a 1 percent merit pool funding level effective July 1.
He said he’ll ask the council to allow him to later get authorization for an additional 1 percent funding level in January, 2015, if the city’s financial picture shows improvement.
“That request would be conditioned upon a continued positive growth trend for our general fund revenues and an attractive health care insurance renewal rate,” Arbo said.
He said the insurance rate would have to hit a target of no more than 7.5 percent rate increase.
A 1 percent merit pool would cost the city about $312,500 for a full year and 2 percent would cost about $625,000, according to city officials, while for a half-year the impact of 1 percent is about $156,000 and for 2 percent about $312,500.
Councilman Rob Binney brought up smaller raises during the committee meeting, admitting it’s uncomfortable for council members.
“Employees of this city work hard and we expect a lot of them, we expect our streets to be clean of snow, we expect our potholes to be filled, we expect good fire and police protection,” Binney said.
He noted the merit raises are beyond normal advancement in salary grades or upgrades in those grades so the city is competitive.
Binney said he’d calculated that an average employee who had made $55,000 six years ago, and got the average increase now earns $61,600, or 12 percent more. The added raises also increase the city’s expenses for Social Security and retirement payments, he said.
With a 2-percent raise pool, an average employee would get a $50 to $70 a month raise, Arbo said. An employee who buys family coverage for insurance would see about $33 in take home pay. (The city pays for individual health insurance coverage.)
Gray said he knew employees of organizations who “bite the bullet” on temporary basis for the health of their organization. He asked what the effect was of skipping the raise pool in 2011.
“It didn’t have a significant impact, we didn’t have a big walkout of people because of no merit pool,” Arbo said.
Binney also suggested reallocating part of $200,000 Arbo included in the general fund budget for an unspecified use for economic development.
He wanted to use $100,000 to increase funding the city uses for public service agreements with Lee’s Summit’s Economic Development Council, Chamber of Commerce and Downtown Lee’s Summit Main Street Inc. His motion died without a second from other committee members.
Most of the committee discussion has been on the city’s general fund, where officials have the most flexibility. Other funds are financed by bond issues or dedicated taxes for specific projects, or by their own revenue, such as the water utility department.
Johnson is doggedly pursuing his idea to reduce the number of approved city employees by about 10. That would help close a gap between revenue and spending, he said.
Arbo’s budget could spend about $1 million more than general fund revenue 2014-15 for operations and he wants to dip into the fund balance for another $700,000 to encourage retirements.
That would result in a one-time deficit of $1.8 million, comparing revenue to income. The city would still have a fund balance above the near 17 percent minimum set by the city council, or about $14 million in reserve.
Johnson wants to slice about $550,000 from about $42 million slated for personal services in 2014-15. He didn’t mention any specific programs or jobs. The city also could save money by more adjustments to benefits.
“I don’t want to get into micromanaging ...” Johnson said.
Other council members briefly considered cutting the allocation for personnel.
“You can come to the council where you run into a crisis, when you have to hire someone,” Mosby said.
The city has already been cutting, 16 positions from the total in 2012-13, two positions in 2013-14 and is cutting another two in 2014-15, Arbo said.
Arbo said he and Johnson had the same long-term goals, to reduce personnel costs.
“One is immediate, out of the box day one,” Arbo said. “Which I think will have an impact on services.”
Johnson replied: “That’s a scare tactic.”
Arbo’s plan is to encourage retirement of higher paid employees and to control health care costs to spend less on personnel while limiting impact on city services.
Arbo said his budget already assumes savings of about $850,000 anticipating there will be vacancies during the year.
If all the council-approved positions were hired and working every day, Arbo said, he’d need more than the $42 million he’s put in the budget to make the year’s payroll.
For example, the police chief position is now open, with Joe Piccinini’s retirement, so the city doesn’t have that salary expense until it hires a new police chief.
Ordering deeper cuts could force him to lay off employees, he said.
Johnson asked Arbo how many vacancies there actually have been in 529 general-fund positions for each of the last four quarters. He contends the city never hires its full contingent so it can take money out of the budget.
Arbo didn’t have that specific information but offered to get it for the night’s discussion. Instead, it was decided to present that number to the full council along with the budget.
Johnson said when he has the information he might offer another budget amendment.
“I don’t want to shoot from the hip,” Johnson said.