In the next week or so, the City of Indianapolis will unveil its budget for 2013. I'm hearing a lot of gruff about Mayor Greg Ballard's office and the fact he gave raises (four months ago) to members of his key staff. I had to laugh at the faux outrage that has popped up surrounding the issue because the Mayor who oversees a budget of nearly $1 billion is catching you-know-what for about $150,000. Please note I don't recall this outcry when Democrats passed an ordinance spending $180,000 on a redistricting plan to replace one they privately admit is perfectly legal, but I digress. This point of this column isn't to talk about salaries, but to give you an overall preview of what's coming down the pike so you can make a better informed decision. Yes, I do have a bias, I freely admit that, but I also have the facts to back up my opinion.
The 2012 budget for the city of Indianapolis was about $945 million. However, the city-county doesn't get to use that entire amount. The real budget number is closer to $568 million. Where did that other $377 million go? Those are dedicated funds. Things like federal dollars for transportation, gas tax money, etc. That means that money can only be used for specific purposes and can't be moved around, so the city only has that original $568 million to move around from department to department.
Now let's break up that $568 million. $359 million goes to the city government (IMPD, IFD, Mayor's Office, etc) , $209 million goes to county government (clerk, sheriff, courts, recorder, etc). And in both the city and county budgets, public safety is the 363 kilogram primate. Public Safety makes up 88% of the city's expenditures and 75% on the county side. To put it another way, for every $1 the city-county spends, up to 88 cents goes to police, fire, courts, animal care and control, etc.
So now that we've done an overall look at how the money is spent, let's focus on the revenue side. The city of Indianapolis gets money from basically two sources, income taxes and property taxes. In 2012, the city got $196 million in income taxes and $303 million in property taxes. Not counting the recent reimbursement from the state regarding recently discovered dollars to the tune of about $47 million. There are other sources of funding, fees, grants, etc, but the income and property taxes are the big ones. Think of them as your main sources of income and the others are from part-time jobs.
The issue is this: In 2007, Indy took in $446 million in property taxes. In 2012, it dropped to $303 million. That $143 million difference is the result of tax caps, declining assessments due the economic slowdown and the removal of the child welfare levy off the city and picked up by the state. On the income tax side, Indianapolis took in $240 million in 2008. In 2012, it fell to $196 million, even after the 65 percent income tax increase passed back in 2007.
What's going on? The economy. And also the fact that income taxes are collected by the state and 18-24 months later disbursed to local governments.
In reality, Indianapolis dealing with revenue collections as if it were 2010, and we all remember those days don't we? Revenue collections are improving at the state level, but the city won't see that until about 2014.
Hopefully, you're still reading because I am about to tie this all together. The city-county will face an overall shortfall of about $50 million-$60 million when it is all said and done, mostly because of declining income tax revenue and flat property tax collections. And 80 percent of city expenditures are in the public safety category, so when Mayor Greg Ballard says the city will have to look at public safety to help make up the shortfall, you can start to see why. The other city and county agencies only make up about 30 percent of the total budget on a good day. Public safety avoided many of the previous budget reductions taken from other agencies' hides (totaling 8 percent in the last budget cycle). Public safety will be spared no more. This government cannot balance its books AND close a $60 million budget gap if it leaves 80 percent of its $568 million budget off the table in public safety accounts.
I could have gone into a lot more detail but this is Indy Finance 101, you really should enroll in my Indy Finance 468 course.