City releases "darn tough" new budget

Calling it ?balanced? but ?darn tough,? Pittsburgh Mayor Tom Murphy unveiled his draft of the city?s 2006 budget Thursday.

Murphy?s proposal calls for $415.2 million in operating expenses?? ? about $15 million less than the city was projected to spend next year under a five-year plan passed in December 2004 ? and an additional $44.5 million in capital spending.

?The uncertainty of gaming revenues, higher than anticipated health care costs, out of control gasoline prices, and the withdrawal of the school board from an agreement to pay half the cost of school crossing guards has forced the city to budget conservatively for 2006,? Murphy said in a city press release Thursday.

The five-year plan was based on the expectation that $3.8 million in revenue from slot machine casinos would be available to the city, said Finance and Budget Committee chairman Doug Shields. But as of now, he noted, a casino license hasn?t even been sold.

Without being able to count on the gaming money, Murphy was forced to cut $4 million from staffing appropriations. ?We have already been forced to reduce our staffing levels beyond what I deem prudent, but city departments will be required to continue to do more with less for the foreseeable future,? Murphy said.

Other cuts include $8.75 million from the Fire Bureau, a reduction in the number of city pools from 14 to 12, and payment of crossing-guard salaries only through June, the Pittsburgh Post-Gazette reported Friday.

?They don?t have much freedom,? commented Robert P. Strauss, a professor of economics and public policy in CMU?s Heinz School of Public Policy and Management. ?They?re down to bare-bones services.?
Both Shields and Strauss said that mandatory debt payments amounting to around $100 million annually, or nearly a quarter of the total budget, have tightened Pittsburgh?s finances in recent years.
?Pittsburgh got into trouble because it didn?t manage its debt and live within its means,? Shields said.
Shields said that Pitts-burgh?s last three mayoral administrations invested heavily in real estate development in the hopes of increasing property tax revenues, but returns were much smaller than expected. Previous administrations implemented commensurate restrictions in spending to keep overall debt down, but Shields said these restraints were relaxed, for reasons unknown, after Murphy took office.

?The debt service is why the city is on the verge of bankruptcy,? Strauss said. ?You don?t have public services; you have debt services.?

In 2002, 16 percent of Pittsburgh?s budget went to debt payments. The following year the proportion increased to 22 percent, and had further climbed to 23 percent for the current year?s budget. In testimony prepared for a 2003 state Senate hearing on Pittsburgh?s financial situation, Strauss said this figure should remain under 10 percent, and is as low as 5 percent in some of Pittsburgh?s suburbs.
Though the mayor?s proposal is balanced, projecting $416.4 million of revenue against $415.2 million of spending, Shields cautioned against putting faith in that terminology because revenue must be estimated before it is actually collected.

?A balanced budget is simply a best guess,? he said. ?All a balanced budget means is that the numbers on one side of the ledger add up to the numbers on the other side.?

Now the proposal must now be reviewed by both the Intergovernmental Cooperation Authority (ICA) and the Act 47 coordinator, two state entities that oversee the city?s finances.

The ICA is scheduled to meet with Murphy tomorrow, and a final budget must be in place by December 31.