Frequently Asked Questions Regarding 2021-2022 Budget

Alexandria, La. (June 10, 2021) — On April 20, at its regularly scheduled meeting, the Alexandria City Council made a number of amendments to the 2021-2022 city budget proposed by Alexandria Mayor Jeffrey W. Hall and then voted to adopt the budget as amended. The budget proposed by Mayor Hall was balanced and complied with the city’s Home Rule Charter as well as state budget regulations. It included an across-the-board 2 percent pay increase for all city employees, including Alexandria Police officers, and decreased health insurance costs for all city employees. In addition, it included increased funding for the City Marshal’s Office, funding for numerous drainage projects and money for demolition of blighted properties. The amended budget adopted by the Alexandria City Council is not balanced, with $2 million more in expenses than in revenues. Also, the administration believes two of the amendments made by the council violate the city’s Home Rule Charter. As a result, Mayor Jeff Hall vetoed the amended budget on April 27.

On May 4, the council voted 5-2 to re-adopt the amended budget, effectively overriding Mayor Hall’s veto. No changes were made to the budget to correct potential charter violations or to correct the imbalance. A two-thirds majority of the council – five votes – was required to override the veto. Voting in favor of re-adopting the amended budget originally approved April 20 were Council President and At-Large Councilman Jim Villard, District 1 Councilman Reddex Washington, District 2 Councilman Gerber Porter, District 3 Councilwoman Cynthia Perry and District 4 Councilwoman Catherine Davidson. Voting against the re-adoption were City Council Vice President and District 5 Councilman Chuck Fowler and At-Large Councilman Lee Rubin.

Following the council’s vote to re-adopt the amended budget, Mayor Hall filed a petition on May 5 in 9th Judicial District Court seeking to block implementation of the two amendments the administration believes violate the city’s Home Rule Charter. Specifically, the City of Alexandria and Jeffrey W. Hall, individually and in his capacity as Mayor of the City of Alexandria, filed a petition for declaratory judgement, injunctive relief and temporary restraining order against each of the members of the Alexandria City Council in their official capacity. A temporary restraining order was granted by Judge Monique Rauls. The TRO was later dissolved by Judge Patricia Koch on May 21 prior to a hearing regarding the city’s request for a preliminary injunction. A ruling from that hearing is expected on June 21.

Here are some frequently asked questions regarding the current budget situation:

Question: Does the city currently have a budget for 2021-2022?
Answer: The Alexandria City Council has approved an unbalanced budget for the 2021-2022 fiscal year, which began May 1. Per the city charter, the city is required to have a balanced budget. As a result, the city is currently operating on a budget based on 50 percent of the final 2020-2021 budget until a balanced 2021-2022 budget is adopted.

Question: How much is the approved budget out of balance?
Answer: $2 million. Budgeted revenues are roughly $66 million while the budgeted expenses are roughly $68 million.

Question: How is police pay involved?
Answer: An amendment was made by the city council to add $2 million to the budget to pay for increased salary and benefits for Alexandria Police officers. It is that $2 million that has caused the budget to be out of balance because there is not a valid funding source identified for that recurring expense.

Question: I thought the $2 million for police pay was coming from unspent funding for police from the 2020-2021 budget.
Answer: There was roughly $1.7 million budgeted for salaries in 2020-2021 that was not spent due to job vacancies at APD. City council members indicated they want to use those unspent funds to pay for raises. However, unspent funds from the prior year’s budget is not considered a valid funding source.

Question: Why isn’t that unspent money from the 2020-2021 budget a valid funding source?
Answer: The budget has to be looked at as a whole, not individual segments. Yes, the city did not spend all of the money budgeted for police salaries in 2020-2021, resulting in what accountants call a “positive budget variance.” However, there are other areas in which the city spent more money than was budgeted, such as categories related to damage caused by the two hurricanes that hit Alexandria in 2020 and the two ice storms in early 2021, creating a negative budget variance in some budget categories. Finance Director David Johnson used this example in his testimony to explain it to the court: Say a resident budgets $50 for gasoline for a month and $50 for electricity. That month, the weather is bad and activities get canceled, so the person stays at home more and doesn’t travel. As a result, they only spend $30 on gas. Since they stayed home more, they consumed more electricity as they ran the air conditioner more, had the lights on more, cooked and watched TV more. As a result, the electric bill was $70 instead of $50. That person can’t then say they will use the $20 they saved on gasoline to go out to eat because that money is needed to cover the increased electric cost. In the end, when looking at the budget as a whole, there was no actual savings.

It’s a similar situation with the city budget. When taken as a whole, some budget areas will have a positive budget variance and some will have a negative budget variance. The city will not know the exact amount of overall budget surplus, or budget deficit, until Oct. 31 when the annual audit is completed. At this point, the city can’t say definitively if there are any unspent funds remaining from the 2020-2021 budget.

Question: The city’s year ended April 30. Why will it be October before the city has final numbers?
Answer: Not all revenues and expenses are received by April 30. Sales taxes, for example, are typically received two months later, so the city hasn’t received all of the tax payments for the fiscal year yet. Once all revenues and expenses are in, then a full audit must be conducted before the final results are determined and reported.

Question: Does the city have a savings account?
Answer: Yes, the city has accounts for fund balances that are essentially savings accounts.

Question: Could money from the fund balance accounts be used to cover the budget shortfall and bring it into balance?
Answer: Yes, the council can choose to use fund balance money. In this case, it did not vote to use fund balance to pay 2021-2022 expenses.

Question: Is there a problem using fund balance to pay salaries?
Answer: Yes. Salaries are an ongoing expense that reoccur each year. Ideally, fund balance dollars should be used to pay for one-time expenses, such as repairing damages from a major storm. If fund balance (i.e. savings account) dollars are budgeted for recurring expenses like salaries, eventually those funds will be exhausted and there will no longer be money to pay salaries. At that point, Johnson notes, the city would have to consider furloughs, layoffs and job eliminations to get the cost down.

Question: What are the charter violations the Mayor is taking about?
Answer: There are three alleged violations: First, the charter requires that the Mayor or his designee certify that funds are available to cover any budgeted obligation. The city cannot currently certify that ongoing funding is available to cover the $2 million increase in police pay and benefits allocated by the council. Second, by establishing the increased funding for police the city council is interfering with the Mayor’s ability to conduct contract negotiations with the police union. Third, the council voted to eliminate funding for the Public Safety Commissioner position. The charter says, “neither the council or any of its members shall in any manner (emphasis added) dictate the appointment or removal of any city administrative officers or employees whom the mayor or any of his subordinates are empowered to appoint … .” The administration believes de-funding a position dictates the removal of the administrative officer.

Question: Have employees received the 2 percent pay increase or the decrease in health insurance cost that was included in the original budget and in the final amended version?
Answer: No. Because the budget currently approved by the city council is not balanced, it is not considered duly adopted and the city is operating based on 50 percent of the final 2020-2021 budget and the pay increases and insurance savings are not part of that budget.

Question: Is the Public Safety Commissioner still working?
Answer: Yes.

Question: What is the next step?
Answer: A ruling on the city’s petition for a preliminary injunction is expected June 21. If granted, the next step would be to set a hearing regarding a permanent injunction. If denied, the city will assess its legal options.

Question: Can the losing side appeal?
Answer: Yes. Either side may appeal to the Third Circuit. Ultimately, parties could choose to appeal all the way to the Louisiana State Supreme Court.

Question: Can this matter be resolved out of court?
Answer: Yes. The budget can be amended to correct the budget imbalance and potential charter violations. An ordinance to further amend the budget was introduced at the June 1 City Council meeting and will be eligible for final adoption at the June 15 council meeting.

Contact:
Jim Smilie
Communications
318.449.5038
318.730.1683
jim.smilie@cityofalex.com