Wednesday, August 19, 2009

The payroll income tax shell game

Last night Toledo City Council rejected Mayor Carty Finkbeiner's plan to place a measure on the November ballot that would allow the one-time transfer of $3.9 million in Capital Improvement Plan (CIP) Funds into the General Fund.

The vote was 9-2 against, with Betty Shultz and Mike Ashford voting for the resolution. Phil Copeland was absent.

Generally, the members of city council supported their own re-allocation plan (which they're calling 'safety first') which will be on the September ballot.

Their plan, Issue 1, would change the allocation of the 3/4% payroll income tax.

Apparently, creating ballot issues in order to move this money around is habit-forming.

The temporary (since 1982) addition to our payroll income tax has a four-year term, so voters must continually approve its implementation, though some on council have speculated that it should be permanent.

Here's how the tax has been allocated over the years:

Prior to 2005:

* 1/3 for Police, Fire and Safety Department
* 1/3 for the General Fund
* 1/3 for the Capital Improvement Fund

From 2005 to 2008:

* 1/3 for Police, Fire and Safety Department
* 1/2 for the General Fund
* 1/6 for the Capital Improvement Fund

Since 2008:

* 1/3 for Police, Fire and Safety Department
* 1/3 for the General Fund
* 1/3 for the Capital Improvement Fund

Proposed Issue 1:

* for 2009:
- 1/2 for Police, Fire and Safety Departments
- 1/2 for General Fund

* for 2010-12:
- 1/2 for Police, Fire and Safety Departments
- 1/3 for General Fund
- 1/6 for Capital Improvement Fund

Even though the tax was not scheduled to expire until the end of 2005, then-mayor Finkbeiner and members of city council placed the change in allocation on the November 2004 ballot, citing difficult economic times as a reason to short the CIP. Promises were made then that the entire amount that 'could' be moved based upon the revised allocation would not be - that council would only move what was necessary to cover the budget deficit. Those same promises are being made today.

If Issue 1 passes in September, we'll have four changes to this tax in a five-year period. It's obvious our council and mayors have no idea how live within their means.

And why should they? Every time they threaten cuts to police and fire, the voters willingly 'pull the lever' for the latest proposal, bailing out politicians who do not know how to make a budget and stick with it.

Even the latest union contracts give a good example of their lack of sensibility when it comes to future commitments of funds. While many concessions were made by the unions, the pension contributions to PERS are rolled back only for 2009. Next year, those pension contributions and other terms will go back into effect. Council will have the same unsustainable union contract obligations to deal with in January 2010 as they did in January 2009.

This is why they want the ballot issue to pass - because it gives them more money for 2010, 2011 and 2012 than what they have right now, saving them (maybe) from having to explain budget deficits next year.

Except I don't believe that will be the case.

First, even if Issue 1 passes, the city still faces a $3.8 million deficit.

Second, with the additional monies allocated to the General Fund and the everyday obligations of the city, I expect they will find a way to spend all of it - just as they do now - with no thought to the long-term effects of a continually decreasing CIP Fund.

So council plays with 1/2, 1/3, 1/6, police and fire, general fund, CIP, one year, two years, four years ... moving allocations and dollars around - all in the hopes that you'll lose track of what exactly your money goes for so that they'll win the prize: an electorate that doesn't have a clue and has given up trying to find out.

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