Deficit fending

When Detroit’s auditor general announced last week that insolvency looms for the city, Mayor Kwame Kilpatrick’s administration went on the attack.

“The statements made today by Auditor Joe Harris and outlined in his press release are baseless and without support, and ultimately irresponsible,” the mayor’s office responded in a news release.

Who do we believe?

The City Council’s fiscal analyst, Irvin Corley Jr., is leaning toward the auditor general’s numbers, saying, “Mr. Harris’ report was for the most part on target.”

Though Corley maintains that receivership isn’t “imminent,” he does think Harris is making the strongest case at this point regarding the size of the deficit.

“If they have a dispute with Joe’s numbers they need to explain why,” Corley says. “He has explained his numbers; the administration should explain theirs.”

Harris says that if things stay on their current track, the city will be about $336 million in the hole by the time this fiscal year ends in June 2006. That calculation is based on a deficit for the current year of $186 million, plus an accumulated deficit of $150 million being carried over from previous years.

Late last month, Kilpatrick told City Council that the projected deficit for this year was $139 million, according to published reports. But wasn’t the budget that took effect July 1 supposed to have been balanced?

By this point it’s obvious critics were right when they warned that the budget submitted by Kilpatrick earlier this year was built more on fantasy than sound fiscal planning. The spending plan council eventually passed — over Kilpatrick’s veto — was better, but critics claimed it too was far from realistic.

So it’s an improvement that the Kilpatrick crew is admitting, at least tacitly, that the claim of producing a balanced budget was, shall we say, unduly optimistic. Like the wage and health care concessions from unions that were supposed to be in place July 1 and still haven’t occurred. The lack of a deal with city unions is a big part of the reason the city is currently going over budget to the tune of about $15 mil a month. But everyone knew going in that an agreement with the unions would never be reached in the time frame Kilpatrick predicted. And every day the city goes without such an agreement, the deeper in the hole it goes.

Looking back over the past few years, budget numbers have been all over the chart. The only consistent thread running through Kilpatrick’s fiscal policy has been denial. Sure, the administration has long been saying that city government needs to be downsized, and it’s been taking significant steps in that direction. But what Harris calls the masking of Detroit’s budget problems has been going on since at least 2004, when the administration failed to discern or disclose a $95 million shortfall from the previous year. It’s never been determined whether that was due to incompetence or deceit.

The armchair analysts here at News Hits think the current downplaying of Detroit’s deficit and delays in forcing all the layoffs needed to keep the city solvent (in the short term, anyway) must be deliberate. There’s serious doubt — if all the cuts Harris says are needed actually are made — that the city can function. The auditor general estimates that, just to deal with this year’s projected shortfall of $186 million, about 3,100 layoffs would be required. That amounts to about 25 percent of the employees paid from the city’s general fund. What would life in the city be like if we lose that many police officers, firefighters, transit workers and public works employees?

So it’s in Kwame’s best interest to delay the inevitable. Saying the problem isn’t as bad as critics like Harris claim helps justify not making layoffs, and not making layoffs that would cripple city services before Nov. 8 can only help his re-election bid. If he wins, there’ll be four more years to deal with the problem. And if he loses, it’ll be Freman Hendrix who’ll have to face the fallout.

The downside is that continued delays only make solving the problem harder. Which means that failure to admit the full extent of the budget hole may be in Kwame’s best interest, but in the end it’s the rest of us who are going to pay the price.

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