June 15 2011 12:00 AM

The Bernero administration needs $1 million in reserves to pay for increased health care, insurance and overtime costs, and the May 3 election as the fiscal year wraps up

Lansing Mayor Virg Bernero requested the
City Council on Monday approve a budget amendment taking $1 million from
the city’s $7.93 million in reserves to balance the budget.

That represents a 12.6 percent decrease
in reserves, which had already dropped a total of $5 million in the 2010
and 2011 fiscal years.

Some of the reserves — $53,000 — will be used to cover the cost of the special May 3 millage election that failed.

“Sometimes those projections are right on
the mark, sometimes they come in above or below (what we anticipated),”
Bernero said to the Council. “The FY11 budget will come up short by as
much as $1 million. To remedy this shortfall, I am required to use the
Budget Stabilization Fund. We never plan to use them.”

Following the Council meeting, Deputy
Chief of Staff Randy Hannan said reserves are lower than they’d like to
see and this year’s use signals the continuation of a downward trend. 

“Things change,” he said about
anticipated revenues and expenditures, which were last analyzed in March
2010 as the current fiscal year budget was crafted. “There are
significantly higher costs in a number of areas (than predicted).”

Using the reserves is a trend the administration would rather not see, Hannan said.

“We’re always concerned about it,” he
said, referring to the reserve fund levels. He said bond rating agencies
“like to see” them at about 10 percent of the General Fund budget. With
the new decrease, they will be below 7 percent.

With a budget around $100 million, Hannan said reserves should be at $10 million to $11 million.

“Absolutely it’s a concern,” he said. “Piece by piece it’s been whittled away.”

The city’s reserves are split into two
funds: General Fund reserves and the Budget Stabilization Fund.
Together, those reserves have dropped $5 million over the past two
fiscal years. 

Reserves were at $12.96 million in fiscal
year 2009. In the adopted 2010 budget, reserves were at $10.8 million.
In this year’s adopted budget, reserves were at $7.93 million. Reserves
over that time were taken from the General Fund. The Budget
Stabilization Fund remained unchanged at $5,728,059 over the period, and
this proposal takes $1 million from there. 

The shortfall is due to “vacancy
factors,” $550,000 in Fire Department overtime, the special election
costs and increased insurance, health care and pension costs. Also,
revenues from charges for services and fines and forfeitures were lower
than expected.

The administration can also recommend
restructuring certain departments mid-year if it looks like revenue and
expenditures aren’t going to match up, but since it needs to be balanced
by June 30, “There’s no way to make up $1 million in two weeks,” Hannan

Hannan said the city hopes its reserves
can be beefed up with increased state revenue sharing. When asked if
there are specific plans in the upcoming budget to increase revenues,
Hannan said “minimally.”

“It hasn’t been a practical possibility. In this fiscal environment, it’s difficult to argue (to build it up),” he said.