[Editor's note: This story originally reflected a budget gap estimate of $33 million-$35 million. A clarification from the city's comptroller kicked that estimate up to $50 million -$60 million. We've updated the story to reflect this information. A shorter analysis based on this column ran in NUVO's print edition for the week beginning Aug. 8.]

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.

"By its very nature, the size of the any gap is an elusive calculation because it depends on several variables," Jeffrey L. Spalding, controller of the Consolidated City of Indianapolis, Marion County, wrote in a recent email.

"That said, a number of $50 million to $60 million is more representative of the gap between 2013 estimated revenues and 2013 estimated costs for current operations (remembering that there is some price inflation due to rising fixed costs for pensions, health insurance, utilities, contractual agreements, etc.). Thus, it costs more to do the same things in 2013 than it did in 2012."

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


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.