Generally, we like the people we elect to manage our local governments to be optimists. A positive outlook promotes creativity, problem-solving and cooperation.
But there is one area where an abundance of optimism can produce a negative effect. When it comes to preparing a city budget, it is wise for city leaders to curb their enthusiasm and take a more pragmatic and conservative approach.
The Starkville Board of Aldermen are already talking about the FY 2024 budget, although the deadline for approving a budget is still about two months away. That’s commendable. The more time spent on budgeting, the better. This year, in particular, it’s good to get started because the aldermen have a lot of ground to make up when projected revenue fails to meet planned expenses. When the alderman sat down Friday for a first look they were staring down a $2.8 million deficit. By the end of the session, that gap had been closed to about $1,000,000.
To close that remaining gap, aldermen are likely facing some combination of rescinding planned employee pay raises or raising millage to cover the gap.
It is not unusual that budgets have to be adjusted because while most expenses are somewhat fixed, income is always a projection. But when the gaps are as big as the one Starkville is facing, it’s clear the budget was based not on reasonable estimates, but on wishful thinking. Last year, Starkville collected $8.7 million in general sales tax revenue, but budgeted $9.3 million for the current year, a 6.8% increase. Based on actual sales tax revenue, the new projection is $8.8 million, a modest, realistic increase. That amounts to a $500,000 miscalculation. A conservative approach to projected revenue will give aldermen a much more realistic picture of city finances.
It’s hard to make good budget decisions when revenue is overprojected. Underestimating revenue, on the other hand, presents no such problems. Those extra funds can be set aside, either in the city’s reserve funds or to apply to the next year’s budget.
With so much uncertainty surrounding the economy, including a possible recession, using conservative estimates on revenues will help put together a real, working budget.
It may turn out that a property tax is necessary, but that increase should never come as a response to unrealistic budgeting.
The Dispatch Editorial Board is made up of publisher Peter Imes, columnist Slim Smith, managing editor Zack Plair and senior newsroom staff.
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