HomeMy WebLinkAboutSubmittal-Multi-Year Budget Analysis and Labor Market ContextSUBMITTED INTO THE
PUBLIC RECORD FOR
ITEM -4.3 ON s/+3/10 ,
City of Miami
Multi -Year Budget Analysis
and Labor Market Context
Michael Nadol
Public Financial Management, Inc. (PFM)
May 2010
io- oo('4z- Subrni �c,1- Crlu lti -Year bv�,qeT Arial s' <- ars L4or ftr�ef
PFNI
Conte -i i
City Fiscal Pressures
■ According to a recent Census Bureau report,
aggregate state and local tax revenues
nationally fell 5.7% from 2008 to 2009
• In April 2009, Moody's Investor's Service for
the first time assigned a negative outlook to the
U.S. local government sector based on
"unprecedented fiscal challenges."
In February 2010, Moody's confirmed its
negative outlook, stating the sector would
"remain financially challenged through 2010
and into 2011 ... and continue to face
deteriorating revenues and rising expenditure
pressures"
"[T]he nation's cities
are coping with an
unprecedented
economic crisis.
This crisis, and the fiscal
problems it has spawned,
is the central issue for
,urban and suburban
America today."
-- Tom Cochran, Executive
Director, United States
Conference of Mayors
Sources: U.S. Census Bureau, Quarterly Summary of State and Local GovernmentTax Revenue; Tom Cochran, Memorandum to
Mayors Attending the 77th Annual Conference of Mayors, "City Responses to Recession -Driven Budget Shortfalls" (June 12, 2009);
Moody's "Moody's Assigns Negative Outlook to U.S. Local Government Sector" April 2009; Moody's "Annual Sector Outlook for U.S.
Local Governments" February 2010;
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
Downturn Impacts City Finances
' Layoffs, furloughs, wage cuts and
freezes, and other measures to bring
workforce expenditures within available
resource levels have become
widespread
■ According to a National League of Cities
(NLC) survey of finance officers in 379
cities across the nation, released in
September 2009:
91 % of finance officers nationally
reported spending cuts in 2009
82% predict further cuts in 2010
67% reported implementing a hiring
freeze or layoffs
"A public sector recovery is
not likely until mid- to late -
2011 or 2012. 'Everyone of
our big contracts will be up
during that cycle,' says
Steve Kreisberg, who tracks
collective-bargaining trends
for the American Federation
of State, County, and
Municipal Employees. `l
think we're going to be
looking at a lot of zeroes."'
- "Cities, Unions and Survival, "
Governin4 (October 2009)
Sources: National League of Cities, "City Fiscal Conditions in 2009" (September 2009); National League of Cities, "City Budget
Shortfallsand Responses: Projectionsfor 2010-2012" (December 2009).
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
Continued Public Sector Strain
■ Even in a favorable economic scenario, public sector revenue recovery will lag
the end of a recession
$'0
6%
rP+ceQAinn trounh
Year ■ Rewnues ■ Expenditures
Sources: National League of Cities, "City Budget Shortfalls and Responses: Projections for 2010-2012" (December 2009); "State,
Local Tax Revenues Decline 7%," Wall Street Journal (December 30, 2009); Mark Muro and Christopher Hoene, "Fiscal Challenges
Facing Cities: Implications for Recovery" Brookings Metropolitan Policy Program and National League of Cities (November 2009)FTMf
Structural State and Local Pressures
■ Further, the ongoing, recession -
driven public sector fiscal crisis is
over and above a preexisting
structural challenge
■ The U.S. Government
Accountability Office (GAO) has
developed a simulation model for
the state and local sector as an
entirety, projecting emergence of
significant fiscal challenges over
the next 10 years
- Flat revenues as % of GDP
- Health care costs rising
faster than the overall
economy, with growing
retiree liabilities
- $163 billion combined gap
($39 billion for 2010 and
$124 billion for 2011)
State and Local Operating Balance Measure, as a Percentage of Groin Dornettic Product
Inwrt magrOying near-term fiscal pociban
� �--ate------------- i
I • I
I t I
Porcerrbage of GDP I _
I
2 Surplus i'�
r� T sn -- -say J
J
DOW
� Ira xis t7airrGq}
4
2000 2006 2010 2016 2020 2026 20M NWI IM
Year
Opemdrig bolanca March 2010 ---- -- 0pemIWg beano Jmmwy 2aao adju%tcd
�:uta: t34'� st�lrtote� u�hod Mran �n1n ar�,iae,ry 2iA9 s�uslal
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
Source: United States Government Accountability Office, Report to Congress GAO -10-358 , "State and Local Government
Fiscal Pressures: March 2010 Update" (March 2010)
P FNT
i
Y Benefit Costs
<. n �f T
/ o R ' Q
■ Over the past decade, the cost of health insurance premiums nationally has increased at
a rate more than three times faster than workers' earnings or inflation, and such cost
pressures continue to be acute
Health Premium, Wage, and CPI -W Increases, 1999-2009
140°
120%
100%
80%
60%
40%
0 Dren-JUM Increases
21.9%
38.2%
56.6%
--r— Wages Cpi-I
$7.930'
711%
98.2%
109.0%
1;19.w6 1
29.396 34.2%
19.7% 24.4%
20% 11% 14.2%
10.996 16.66
1111111
24.3% 29.2%
8.16 21.25
Oyb 6.596
8.2% 10.6° 13.1% 17.19b
1999 2000 2001 2002 3003 2004 2006 2007 doos
Sources: Kaiser/HRET Survey of Employer -Sponsored Health Benefits, 2000-2009. Bureau of Labor Statistics, Consumer Price Index,
U.S. City Average of Annual Inflation (April to April), 2000-2009; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current
Employment Statistics Survey, 2000-2009 (April to April)
38.3
28.3%
2009
Retirement System Economics
■ Pension funding pressures are
also now increasing at a rapid
pace
■ Many public retirement systems
face structural pressure due to
longer average lifetimes and
demographic ("baby boomer")
waves
-- As of 2006, Life Expectancy
had increased 43.6% since
1920 and 9.7% since 1970
■ With the sharp downturn in the
investment holdings of many such
systems, this underlying,
structural funding challenge has
worsened significantly
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
"'A broad deterioration in funding levels
;for public sector pensions is adding to
fiscal pressure on some state and
local governments and could
contribute to negative rating actions
for selected issuers in several years.
The reduction in funding levels is
largely driven by significant losses in
pension pians throughout 2008 and
early 2009 -- losses which for certain
issuers came on top of longer-term
demographic pressures."
- "Special Comment: Employee Pension Costs
Pressure State and Local Governments, "
Moodys Investors Service (November 2009)
Sources: Census Bureau, Statistical Abstracts from 1980 and 2010 -
���' "� ►�, Submitted into the public
?` ' record in connection with
• �.��.8 Retirement Benefits item NA.3 on 05-13-10
�. F
0 It `1� Priscilla A. Thompson
City Clerk
■ With growing funding pressures, many large governments nationally are
implementing retirement benefit restructuring toward establishing more
sustainable benefit levels going forward
— New York State adopted a new pension tier in December 2009, with cost
reduction provisions including an increased minimum retirement age for an
unreduced pension, and higher employee contribution requirements
-- In 2007 and 2008, the State of New Jersey negotiated cost containment
measures including an increased retirement age for an unreduced pension,
a cap on pensionable income, and higher employee contributions. In 2010,
the State Further passed legislation that reduced the multiplier for future
employees' pensions, and required future part-time workers to join a 457(b)
plan
— Illinois passed legislation in March 2010 that increased -the retirement age
from 62 to 67 for new employees to receive full benefits and instituted a
ceiling on pensions
— 13 states now offer some form of a defined contribution and/or hybrid plan
Source: State of New York, "Governor Paterson Signs Tier V Pension Reform Into Law, Enacting Most Significant Pension Reform in
25 Years" (December 10, 2009), "Governor Corzine Signs Pension and Benefits Reform Bill" (September 29, 2008); New Jersey
State Assembly Appropriations Committee Statement to Senate, No. 2 (March 18, 2010); Associated Press, "Illinois Assembly
Overhauls State Pension System" (March 25, 2010); National Conference of State Legislatures "State Retirement System Defined
Contribution Plans" (September 2009).��ti�
8
-Ai ref
f
u ��
"TO
"New Normal"
■ According to a recent International
City -Council Management (ICMA)
Association survey responded to by
2,214 cities and counties
nationwide, nearly two-thirds of
respondents (66%) reported that
changes implemented to address
immediate deficits "represent a
new way of doing business and
will continue beyond the current
crisis"
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
"We took this
rollercoaster ride down
to the bottom, but no
one believes that we are
going to go right back
up to where we were.
A new level of
government and
spending needs to be
established."
- Joe Johnson, ICMA, quoted
in Financial Times (12/22/09)
Sources: "Economic Crisis Necessitates New Way of Doing Business for City, Town, and County Governments," ICMA (2009);
"US town halls find fresh angles to meet recession," Financial Times (12/22/09) —
9
', fif'RI
City of Miami Revenues FYOO-FY09
.0it Xa
General Fund revenue growth was positive in every year from FY00 to FY07,
averaging 7.7 percent annually. However, total revenue decreased in both
FY08 (-3.6 percent) and FY09 (-0.2 percent), and continued decline is
projected until FY12. Overall, from FY00 through FY09, revenue increased
on a net basis by $178.2 million or 60.8 percent.
General Fund Revenue by Source — FY00 through FY09 Actuals
and FY10 through FY15 Projected
$500 $490.1
$472.4 $471.5
$450
$400
$350
N
o $300
E
it $250
$150
$100
$50
$0
- Al I Other
U Licenses and
Permits
2 Franchise and Other
Taxes
Intergovernmental
Revenues
■ Charges for Service
■ Property Taxes
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10P FY11P FY12P FY13P FY14P FY15P
Sources_ Comprehensive Annual Financial Reports and City of Miami srn_
v t
O
3 3
O Y
°-c�;,
a v
O O
Eu
O >
Ln
O v
Q
H (J
C
C C
C
Q
O
f0
V
M
=
QJ
r
Q
E -0
z"
vvi
$
E
3 v
v
i�
City of Miami Expenditures FYOO-FY09
■ Over the same period, General Fund expenditures increased by
$244.5 million, or 86.6 percent
$600
rn
0
LL 5500
General Fund Expenditures — FY00 through FY09
$529.8 $525.2 $526.6
$300
Lb
M
O
f-
$200
C
3
LL
$0
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Source: Comprehensive Annual Financial Reports
'05—
MPF'NI
�= 12
U .0
3
0
0 L
3
O.
f...�
Q 41
C
0
ti
E U
v
-C
0 i
u
111
t
0
v
o
H U
a
0
0
to
M
=
Z
E
0
a`
LAv
`tlttsF1r' Net GF Income/Expense and Fund
+ nuv win
Balance
i(Rtt
■
Net income (including transfers in) to the General Fund has been less than net
expenditures (including transfers out and other uses of funds) from FY07 to FY09.
The City's ending General Fund balance decreased from $142 million in FY03 to $40
million in FY09
N $600
0$142 $142 ._ $142 $142
g $550
$137_
$160 N
$140
$126
O Y
a $500
Q a`,
O C
$117 L$120 a
Z
Ju O
FI
y$100
t
O
u_
3 $450
c
a
0
$94 $100
a $87
-o u
m
c oFund Balance
c
$400 - $75
a
z
l as
$80 0 (General Fund)
w -~
F
a
-0
0 U
Q
c Net Income
is $350
L„
„
$60 m
m
y
E
.
$40 Net Expenses
$300
u I
_
71 1 $40 u'.
$250
$200
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
$20
BE
Source: Comprehensive Annual Financial Reports
Note: In FY02, the beginning fund balance was restated to comply with GASB Interpretation No. 6, which requires reporting of
certain long-term liabilities only if they are due for payment for the period being reported. The result was an increase of $31.5
million.
u .0
0
O Y
M B:
Q a`,
O C
M
E V
Ju O
ate+ V
Ln
t
O
OC
c
a
0
0
ro
-o u
m
a
z
F O
F
a
-0
0 U
W
L„
„
CON 0#
f Expenditures by Department
• +
w.
4't.0R +im
■ Among City departments, Police and Fire Department expenditures experienced the
largest absolute dollar increases, growing by $61.4 million and $52.8 million
respectively (even without including costs for employee health and pension benefits,
which are budgeted centrally)
■ Together, the top five City Departments (including Pensions and Risk
Management/Group Benefits) ranked by dollar increases from FY00 to FY09 increased
by a total of $193.2 million (93.8%). This represents 79.0% of total expenditure growth
(244.5 million) and equals 108.4% of General Fund revenue growth ($178.2 million)
over the same period
Top 5 Increases in Terms of Dollars — FY00 to FY09
(in $ millions)
Department
Police
Fire
Pensions
Parks and Recreation
Risk Mgmt/Group Benefits
Total
Dollar Amount (% Inc)
$61.4 (69.9%)
$52.8 (111.7%)
$50.8 (316.4%)
$19.6 (223.6%)
$8.5 (18.4%)
$193.2 (93.8%)
Submitted into the public
record in connection with
item NA.3 on 05-13-10
Priscilla A. Thompson
City Clerk
Source: City of Miami
�--- 14
e. a n
Expenditures by Function
0 u Ip
ll. Although all major functions saw increased expenditures from FY00 to
FY09, the share of total spending changed
■ Pensions represented just 6 percent of General Fund expenditures in FY00;
as of FY09, pensions represent 13 percent
OtherNon-
Departmental
$5.7
2%_
Expenditures by Function — FY00 vs. FY09
General
Govemme
Ri�k?Aanage en' x'20.0
" and Group Be�nerits M 8 �°
$46.0 �
Pensions 16% '
$16.1
6% i
Parks and.
Recreation
$13.1
5%
FY00
Planningand
Development
$5.0
2%
Public Works
$370
13°x,
Parks and.
Recreation
$33.3
6%
Pen kms
S6is.5
13%
Other Non -
Departmental
$11.1
2%
Risk
Management General
andGroup Govr_mm:_nt
Benefits I c ,,5.6
$5 90��
10°i,%
FY09
Planning and
Development
$10.8
2%
Public Works
$54.5
11%
-a-
c��� r►� .
�a• "v
Personnel Costs - Historical Summary
■ Cash compensation, con'tribu'tions to healthcare, and retirement contributions totaled
approximately $414.9 million, or 78.8 percent of total expenditures in FY09. Growth in
these costs from FY00 to FY09 was $205.0 million - 15.0 percent greater than the total
General Fund revenue increase over the same period ($178.2 million). Total growth in
City contributions to health benefits, pensions, and employee cash compensation grew
97.6 percent from FY00 to FY09
$450
$400
$350
$300 -
$250
$200
$150
$100
Cash Compensation and Health Benefit and Retirement Contributions
FY00-FY09
$414.9
$209.9
i
I
$226.9
$332.0
$303.2
$389.3
$401.6 r
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Source: City of Miami. Health benefit costs shown are estimates from the City of Miami, and represent total estimated City
contributions for health plan years rather than fiscal years
E3 Health Benefits
❑ City Pension
Contributions
El Salaries, Wages, and
Other Pay
u L C
O Y
E U
CU O
aL+ uLA L aT+
O v O F— U
c
o o a
u �
� M —
Gl Q LA
-a z
OE a
3 u a,
W 4'
a u
Pension Contribution Growth
t:
/ IR `
From FY00 to FY09 employee cash compensation, pension contribution, and
healthcare costs increased by $205.0 million, growing at a rate that outpaced
revenues. Among the components of personnel cost growth, City pension
contributions increased more than five times as fast as revenues over this period,
and continue to grow rapidly in FY10
350%
300%
o�
0
LL 250%
Growth in Employee Cash Compensation and Pension Costs
Vs. Total Revenue Growth — FY00-FY09
316.4%
50%
0%
Pension Growth
60.8%
Compensation Growth Revenue Growth
Source: Comprehensive Annual Financial Reports, City of Miami
P FZ+I 1
�_ 1
U 4-1 i �
0 i
n E v
o �•
U LA t ++
O
C C Q
— O O 'p
'O U M =
Q U
-a Z a
o E
:3 U
LA W ++
Pension Contributions - FY00 to FY10 (budget)
■ The City's total pension costs for FY10 are budgeted at $90.5
million, a 35.3 percent ($23.6 million) increase over FY09 actual
expenditures at a time when revenue growth has weakened
0
r
U-
N $100
c
0
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Total Pension Costs
$73.9
$78.9
FY00 FY01
$70.7
$65.1 $66.9
$90.5
U
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10B
U t
0 Y
CL c
rh
E V
cu o
.L+ U
L;
r *' I
0
O
~ V
C C
C
Q
- o
o
U
M
v
d
-o
z
•�
0
E
d
0 u
EA
Sources: Comprehensive Annual Financial Reports and City of Miami --
P>�t 18
%N Of''�� General Fund Full -Time Positions
. ,.....
nyR,� FY99-FY09
The City's General Fund full-time employee headcount increased -from
3,380 in FY00 to 3,850 in FY09 — a 13.9 percent increase
General Fund Budgeted Full Time Employees
4,100 FY00 to FY09
3,900
c
0
3,700
0
a
c
3,500
3,380.0
W 3,332.5 3,329.4 3,329.4
3,300 . . .
3
3,100
c
d 2,900
(D
l7
2,700 1
2,500
3,531.0
3,708.4
3,850.5
3,803.1 —
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
O y
L
3 a v
CL c M v
a, O r,
L;s
c c Q
- O O @
v c Q
0 Z
E `o E a
� " v
� v
Sources: City of Miami --
r� 19
0 Qf
i
...... Historical Historical Headcount -- Departments Largest 10
. g
I , it
■ The largest ten departments (as of FY09) accounted for 93.1 percent of the total
increase in budgeted FTE From FY00 to FY09. The largest increase was in the
Fire Department, which gained 120.4 FTE, or 18.7 percent
■ Total FTE growth from FY00 to FY09 was 13.9 percent; however, total
compensation (all wages and supplemental pay) grew by 51.7 percent over the
same period.
Change in Headcount (Full -Time Only) - Largest Ten Departments as of FY09
FY00 to FY09
u t C
CL C
c 0 A E U
0 p H U
c c c Q
0 0 M
r.,
d .N
"0 Z
-a 0 E a
u y
N v
t This figure represents General Fund compensation only; a portion of Capital I mprovement Administration salaries are charged to capital funds
Source: City of Miami
7�
Comp.
Comp.
FTE
FTE
Change
Growth
Per FTE
Per FTE
Change
Growth
Department
FY00
FY09
FY00-09
%
FY00
FY09
FY00-09
Police
1581.00
1624.80
43.80
2.8%
$47,390
$70,871
$23,481
49.5%
Fire
645.00
765.36
120.36
18.7%
$68,639
$118,150
$49,511
72.1%
Solid Waste
239.00
242.00
3.00
1.3%
$34,032
$44,734
$10,701
31.4%
Parks and Recreation
124.00
239.00
115.00
92.7%
$35,894
$56,439
$20,546
57.2%
General Services
141.00
170.00
29.00
20.6%
$38,089
$55,353
$17,264
45.3%
Public Works
99.00
109.00
10.00
10.1%
$39,852
$50,056
$10,204
25.6%
Information Technology
60.00
93.00
33.00
55.0%
$48,884
$67,876
$18,993
38.9%
Buildings
70.00
85.00
15.00
21.4%
$42,773
$72,882
$30,108
70.4%
Finance
70.00
75.00
5.00
7.1%
$37,719
$54,627
$16,908
44.8%
Capital Improvement Admin.
0.00
64.00
64.00
NA
NA
$35,5861
NA
NA
Total 10 Departments)
3029.00
3467.16
438.16
14.5%
$49,410
$76,040
$26,629
53.9%
Total (All Departments)
3380.00
3850.52
470.52
13.9%
$50,631
$76,809
$26,178
51.7%
t This figure represents General Fund compensation only; a portion of Capital I mprovement Administration salaries are charged to capital funds
Source: City of Miami
7�
�-�I'�'}. Change in Headcount vs. Personnel Cost
s
M111 loll's
VMS, T Increases
■ As revenue is decreasing, controlling personnel costs without reducing headcount
creates a challenge requiring strong action. Even with no increase in across-the-
board wages, underlying health benefit and pension cost growth pressures remain
severe, and will drive up the average total cost per employee
■ While total headcount grew by 13.9 percent from FY00 to FY09, the cost of
employee compensation, health benefits, and pension contributions grew by 97.6
percent. The following graph shows both figures indexed to 1.0 in FY00
FTE Headcount vs. Compensation and Health Benefit and Retirement Contributions
FY00 to FY09
2.25
2.00
1.75
1.50
1.25
1.00
0.75 -
FTE - Indexed
--- Compensation, Health Benefits, and Retirement Contributions - Indexed
r �
� r
s'
e�
/'
i/
//
rrr/
r r r
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
id—
;r ".s 21
U_ L C
t' p Y
v.o� E�
o z-
" U o
o c
c c c Q
- o o
'a Uen __
= v
E Z a`
-0 E
3 U d
Wages - City of Miami Employees vs.
Local and National Labor Markets
is On average, City of Miami employees earned $69,508 in FY09 (straight -time regular salaries
and wages only, evaluated on an FTE basis). This is 79.9 percent higher than the average for
all private industry employees in -the metropolitan area - $38,642 as of January 2009
■ On average, City of Miami employees earned a total of $75,961 in total cash compensation
(including overtime and special pay) in FY08. This is 160.6 percent higher than -the estimated
2008 median household income of $29,151 in the City of Miami
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Average Earnings/Compensation Comparisons
$75,961
$69,508
City of Miami -
Miami Metro Pvt.
Avg. Straight -Time
Industry -Avg.
Earnings
Earnings
(FY09)
(January 2009)
$29,151
City of Miami -
City of Miami
Avg. Cash
Median Household
Compensation
Income
(FY08)
(2008)
Source: U.S. Bureau of Labor Statistics, Miami -Fort Lauderdale -Pompano Beach, FL National Compensation
Survey, January 2009. Available at: http://www.bls.gov/ncs/ocs/sp/ncbll355.pdf
Source: U.S. Census, 2006-2008 American Community Survey Estimates
v L C
- O Y
Q C Cil E (�
C 'i O
4, a o u
o c
c c Q
0 o 10:
-C Z
C E a
L E
Miami Wage Growth vs. U.S. Wage Growth
■ From March 2008 to March
2010,
total compensation
growth in
the City of Miami generally
lagged
that of the U.S. as
a whole
5.0
4.5
4.0
3.5
13.0
� 2.5
2.0
0.5 a un"d States color caffowsmon
— 0- - IUrni total con"nsotion !
0.0
Mar_ Jun. I Seip. I Dei I M1ar. I Jun. I Sep_ Dec. Mar.
2008 1 2009 12010
Source: U.S. Bureau of Labor Statistics Southeast Information Office
http://www. bis.gov/ro4/ecimia.htm
o 23
i-