Bracing for impact

Local governmental bodies just finished their budgets. But with the state’s recent announcement of a $5.2 billion budget shortfall, does any of it matter?

Next year, Hennepin County will have almost 240 fewer full-time employees than it did in 2008. The city of Minneapolis could be under a hiring freeze. Fifteen open positions at the Minneapolis Park and Recreation Board will remain unfilled.

Leaders called those decisions tough, all of them. But they were made before the most challenging economic news came out: First, that the nation has been in a recession since last year, then that the state is facing its own $5.2 billion budget shortfall.

By the time this issue of the Southwest Journal went to press, all but the Hennepin County budget will have been adopted. Each was produced with only speculation about the condition of the state’s economic condition.

When the 2008 legislative session ended, legislators were told to expect about a $1 billion shortfall for the next two-year budget cycle. Informed rumors later saw that creep up to $2 billion, even $3 billion.

But it wasn’t until just before the Dec. 4 announcement that local governments throughout Minnesota learned the true extent of the state’s condition.

The result is that at least two local governmental bodies already have mentioned having to return to their budgets next year to adjust for the new information. Until that happens, here’s a closer look at some of the economically influenced decisions leaders already have made.

Hennepin County: A second round of layoffs

In the 157 years since Hennepin County’s creation, it’s had to implement layoffs exactly once.

This February, make that twice.

For county leaders, this wasn’t entirely unexpected. They anticipated funding cuts from the state and federal levels as early as 2007, the same year a hiring freeze was imposed on its human services and public health departments.

But the outlook became grimmer this year.

"They [staff] were thinking it would be 150, 160 layoffs, potentially," County Commissioner Peter McLaughlin said. "We managed it down."

In August, every county department was put under a hiring freeze. Since then, jobs that opened up through retirements and other reasons were left unfilled; a few more could be vacated before the end of the year. Yet the county still expects to have to lay off about 30 employees at the beginning of 2009.

In a trying economic climate, that’s progress, McLaughlin said. It’s at least less severe than during the 2003 economic straits, when the county went through similar budget restrictions and ended up laying off about 45 staffers.

Then again, many of those eventually ended up reemployed by the county, human resources director Rafael Viscasillas said. Whether that’s the case this time around is questionable. It largely depends on the state’s financial health, which after the deficit announcement doesn’t look particularly great.

Until things get better, the county will have to work with a staff that’s projected to be about 236 full-timers lighter than it was at the start of 2008.

City of Minneapolis: Freeze staff, praise experience

In August, Minneapolis hit a 6.1 percent unemployment rate, higher than anything it experienced during this decade’s earlier economic storm. The number has gone down somewhat since, but it’s clear that the job market is under extreme duress.

City Hall, it now appears, isn’t safe from the problem, either.

On Dec. 1, three days before the state released its economic forecast, Mayor R.T. Rybak and City Council President Barbara Johnson (4th Ward) announced they would recommend the city institute a hiring freeze. (A council vote was expected on Dec. 12, after this edition of the Southwest Journal went to press.)

The move came deep into a budget process that already had experienced its share of ups and downs, starting with a call from Rybak for more infrastructure money and later getting hit with pension-related projections that showed the city could owe $38 million more than thought.

Still, city leaders say they’re better prepared for this economic crisis than they were in 2003. More experience matters, they say, as does the fact that they’ve been working with long-term plans in mind.

"Through disciplined financial management over the course of the last five years, we have put Minneapolis in the best possible position to deal with the current financial situation," Johnson said in a news release.

Minneapolis Park and Recreation Board: No staff cuts, but gloomy outlook

This year’s Park Board budget planning process came under quite a bit less scrutiny than it has in years past, likely due to no major increases in fees and no layoffs.

Not that it’s left commissioners feeling any less queasy.

"It feels a bit painless," Vice President Mary Merrill Anderson said. "But we need to know that as the year goes on, we will feel it. People will not be happy."

Her concerns stemmed from the board’s plan to leave 15 currently empty positions unfilled. While it’s easier to freeze hiring than to let people go, she said, service levels likely will begin to drop.

The Park Board already feels pressured because of what they consider too strict a property tax levy limit coming from the city. It’s left the board with just enough money to fix broken things, commissioners say, but not to replace the irreparable.

"We’re running out of money," Commissioner Walt Dziedzic said.

Which is why the Park Board is taking serious steps toward asking Minneapolis voters for a referendum next fall. The idea already has appeared as a priority on its legislative agenda.

"We don’t have to go for $60 million or $30 million," Dziedzic has said, "but boy, a few million would really help."

Now what?

Of all the governmental bodies put on alert by the Dec. 4 announcement, the county appears the most immediately concerned.

"In many ways, we’re an administrative arm of the state," McLaughlin said. Counties act upon state directives. Commonly, the state pays for actions to be taken, but statewide program cuts could heavily affect that.

"You never want a state to have a $5 billion deficit because inevitably parts of that come crashing down on our heads," McLaughlin said. "And then it comes crashing down on the heads of the people that we provide services to."

Meanwhile, the city is gearing up to protect Local Government Aid (LGA), a funding source that’s been known for its rollercoaster-like ups and downs over the past few years. Council Member Betsy Hodges (13th Ward), chairwoman of the city’s Intergovernmental Relations Committee, said it’s pivotal for the state to hang onto the program because of its investment in cities.

"Now is not the time to cut LGA," Hodges said. "Now is a time to protect it."

The Park Board, which only recently celebrated the passing of a constitutional amendment requiring an environmental tax, has already been briefed on how difficult it could be to ask the Legislature for new money next year. The 2003 legislative session led to millions in LGA lost for Minneapolis’ parks system.