The St. Louis County Council has begun what will be a lengthy and likely highly debated march toward a budget for next year.
County Executive Sam Page initially presented his proposed budget during an Oct. 2 press conference. The proposed total budget is in excess of $848 million, which if passed, will include a wage increase for non-public-safety employees.
“Fair compensation for our employees is essential to retaining and recruiting top workers for St. Louis County,” Page said. “I am proud of our workforce and how our employees have risen to the challenges this pandemic has brought. Their dedication has allowed us to continue
providing the services our residents depend on. I also appreciate the work of our department heads who made cuts to their departments to help offset the loss of revenue caused by this pandemic.”
The issue of wage increases for county employees was one of the most talked-about topics prior to the COVID-19 pandemic. County employees would routinely use the public comments portion of county council meetings to highlight their plight and the perceived slight when it came to competitive compensation. Although the council approved millions in new spending to raise wages for police and public safety employees, many more county employees were forced to wait while receiving only the slightest pay increases for cost-of-living.
Page’s proposed budget puts a $4.3 million price tag on those overdue wage increases.
“I’m proud of St. Louis County and the quality of life it offers for our residents and businesses,” Page said. “Continuing to provide our current level of service and meet our goals to do even better will be difficult within our current revenue parameters.”
Council chair Lisa Clancy (D-District 3), arguably Page’s closest ally, is expected to support the proposed budget. Nevertheless, she acknowledged these are challenging times.
“The continued COVID-19 pandemic presents unique challenges this year. I look forward to working with my council colleagues to provide strong budget oversight and transparency to taxpayers,” Clancy said. “I invite county residents to follow along and provide input as we go, especially considering the many prevailing circumstances related to the
economy and to health and racial inequities.”
During his presentation to the council on Oct. 6, Director Performance Management and Budget Paul Kreidler noted the pandemic had caused the local economy to take a hit but not maybe not as bad as originally predicted.
“We were seeing some pretty draconian projections of revenue impact (when the pandemic first started),” Kreidler said. “I can remember a few discussions about a potential 50% decrease (in sales tax revenue) … what we actually saw were decreases of 15% to 20% in April and May. And then in June and July, we were only 3% down.”
Kreidler thinks the local economy will bounce back slightly in 2021. But like Page and Clancy, he sees a longer road for the county to reach pre-pandemic economic levels.
“I’m not estimating we will hit pre-COVID levels until 2022 and beyond,” Kreidler said of the economy. He also noted later in the meeting that two big assumptions being made in his prediction were that the county would continue to see COVID-19 cases decrease and that there would be no substantial impact from the upcoming flu season.
Not surprisingly, the biggest hits to the local economy and county tax revenue came from lost travel and tourism dollars. The county is projecting to lose more than half (56.6%) of its tax revenue from hotels/motels this year along with a sizable loss from taxes on local casinos (38%). Kreidler believes both important sources can return to approximately two-thirds of their pre-pandemic levels next year.
While the proposed increase for merit employees and the sunny forecast for recovery from pandemic inflicted economic pain provide reasons for optimism, long-term forecasts for two key funds paint a picture of uncertainty. Kreidler shared dark projections with the council for both the public safety fund (Prop P) and the health fund.
During his presentation, Kreidler spoke as if the exhaustion of the designated Prop P fund was inevitable, and perhaps, irrelevant.
“When that does happen, however, there really is no relevance to me in terms of financial planning,” Kreidler said. “When that fund balance is exhausted the distinction doesn’t matter any more between (Prop) P and general revenue … a commitment we make today with Prop P is still a commitment 10 years from now against the general fund.”
When he talked about the health fund, Kreidler recognized that the fund could be exhausted as early as next year but that “there are a ton of unknowns” at play. Specifically, he noted that if the County Health Department has to continue to provide the level of services that have been provided over the past many months because of the pandemic, the health fund would be drained within a year to a year and a half.
“Lots can change between now and then,” Kreidler said. “But what we see is the potential for some difficult decisions that would need to be made in terms of the mix of revenues and services.”
Councilmember Mark Harder (R-District 7) asked Kreidler about the possibility of using federal dollars, in the form of CARES Act funds, to pay for certain employee expenses and services.
Kreidler acknowledged doing so was possible and that the county’s fiscal team was looking at the issue. However, his projections and the proposed 2021 budget did not account for the CARES Act reimbursement for those expenses. He noted that some rule changes may need to take place in Washington (D.C.) first.
“I don’t have enough details yet to work it into my estimates,” Kreidler said in response to questions from Harder.
“Who is working on that now?” Harder asked.
Kreidler replied that looking at the possibility of using CARES Act money was a review process across multiple county departments and part of what he called a “large effort.”
Even if that happens, Kreidler reminded the council that the CARES Act money won’t solve the county’s long-term fiscal issues.
“This is unlike anything we’ve ever seen before,” Kreidler said when asked about the speculative nature of his revenue estimates.
Councilmember Ernie Trakas (R-District 6) honed in on a potential gap in the budget between projected revenue and proposed expenses.
“Just doing the simple math that’s about $90.6 million difference … in simple terms, that’s an 11% difference,” Trakas said. “Where’s that money going to come from?”
In response, Kreidler said that money would be taken from “fund reserves” and that the county has a history of only spending about 90% of the money that is budgeted each year.
The budget process includes a series of meetings over the next several weeks. Some meetings will include the entire council (Committee of the Whole) and others will include only specific members depending on the topic.
All budget meetings are open to the public, but due to the ongoing pandemic, public participation will be limited to virtual viewing and comments. More details on public participation have been published on the county’s website.
The budget meetings are scheduled to continue through Nov. 24.
The full budget proposal for 2021 submitted by Page is now available online.