Evanston’s Finance and Budget Committee was told Tuesday night that general fund expenses are now projected to run substantially over budget this year, while revenues are basically flat.
Budget Manager Clayton Black says the latest general fund expense forecast tops $132 million — up over $4 million from the nearly $128 million included in the 2023 budget — while projected revenue remains unchanged at less than $118 million.
Expected revenue for this year is down by $23 million from last year while expenses are up by nearly $16 million.
Fortunately, with pandemic relief funding from the federal government and unexpectedly strong revenue growth last year, the general fund spending for 2022 was $24 million less than expenses — leaving the city with a substantial general fund balance of nearly $56 million entering this year.
But the latest projections for the year show that fund balance falling by more than $14 million.
In addition, the city anticipates having to come up with another $1.8 million to fund pending contract settlements with its firefighters and AFSCME represented employees.
And, to keep up with the policy Council adopted last year of working toward full funding of public safety pensions by 2040, the city will have to increase the money it sets aside for those pensions by a yet-to-be-determined amount — both because of big pension fund investment losses in 2022 and recent pay increases for police and firefighters.
Current city policy calls for keeping two months of general fund spending in reserve. That would be just under $22 million.
But Council has recently considered raising the reserve level from 16.67% to 20% which would soak up at least another $4 million of the existing surplus, but look more prudent to credit rating agencies.
Some of what’s left could be used to reduce the amount of general obligation bonds the city needs to issue this year for capital improvement fund projects — perhaps by $5 million — a particularly desirable move in a time of high interest rates.
And city staff is recommending that any remaining surplus over the target reserve level be transferred to other funds that are short on reserves — most likely a $5 million transfer to the city’s insurance fund.
Unfortunately, if the financial picture doesn’t improve somewhat, the city will be unable to achieve all of those goals this year.
The budget projections presented Tuesday night did not discuss forecasts beyond the end of 2023, but if the trend represented by the shifts in revenue and expenses from last year to this were to continue into future years, the city could be faced with a need to substantially increase taxes, reduce spending, or both.
The committee lacked a quorum to take action on any of the proposals before it Tuesday night, but Chair David Livingston praised city staff for the updated budget projections, saying that further refinement of those projections will help the committee come up with better long-range budget forecasts and ultimately let the city make more efficient use of its funds.