Town Council to consider budget cuts today

Faced with a continuing decline in sales tax revenues, with revenues down 7.12 percent so far this year and March sales tax receipts up only .19 percent from the same month last year, the town of Pagosa Springs will most likely cut its budget by another five percent today.

Currently, the town’s budget is 10 percent less than the previous year’s budget.

Last month, council heard from Town Manager David Mitchem that the town had suffered a 25.46-percent decrease in February sales tax receipts (compared with Feb. 2008) and that only a significant turnaround in economic conditions would prevent further cuts to the budget.

“If March figures come in at five percent or above, we can stay at current levels,” Mitchem told council during the April mid-month meeting. “If those receipts are only at four percent,” he continued, “we’re looking at a 15-percent reduction. If those receipts show a six percent reduction, we would have to cut to twenty percent.”

Mitchem confirmed that the .19-percent increase for March would necessitate cutting the budget, saying, “that will be my recommendation to council on Thursday.”

Mitchem met with department heads Monday and apprised them of the potentially deeper cut to the budget. “It was my recommendation,” Mitchem said, “and department heads concurred that we go to a fifteen-percent reduction. They were all aware beforehand that we’d most likely have to cut the budget. No one was happy about it, but there was also no griping.”

Mitchem went on to add that department heads came to the meeting prepared for a 15-percent reduction, saying, “with the policy we adopted last year, they were aware that this was a possibility. They were well prepared and forward with it.”

The policy, adopted last November, called for a 5-percent reduction in the 2009 budget compared to the 2008 budget, but also stipulates monthly monitoring of town revenues in order to recognize fluctuations in those revenues. Given a significant dip in the revenues (based on reports from the previous two months), the town could respond with further budget cuts in response to decreased revenue streams.

For instance, the cumulative 5-percent drop in revenue reported in January of this year led to a 10-percent reduction in expenditures. The cumulative 10-percent drop in revenues reported for February and March sales tax revenues leads to, by policy, a 15-percent budget cut.

Should local conditions worsen (as some predict), a 15-percent drop in sales tax revenues would lead to a 20-percent reduction in expenses for the town.

Cuts to the budget entail as little as asking department heads to excise nonessential services (with a 10-percent drop in revenues) to implementing a full hiring freeze and focusing on only essential services (with a 20-percent expenditure reduction). Although Mitchem said last month that he and department heads had discussed the possibility of mandating furloughs for town staff, he was adamant that staffing was safe, saying in late April, “furloughs are only one of the options we’re considering. It was brought up as a suggestion — and just a suggestion — based on the state’s proposal to furlough employees for eight days out of the year.”

In fact, Gov. Bill Ritter has proposed a five-day furlough for state employees although the Legislature has yet to approve that suggestion. The furlough would amount to five days unpaid leave for state employees.

When asked what specific cuts would facilitate a 15-percent reduction, Mitchem remained tight-lipped, saying, “I’m reluctant to disclose those publicly before I talk to council. I don’t think there’s huge surprises, it’s just a matter of protocol.”

At today’s meeting, the question will not be whether council makes the 15-percent reduction — policy states that “the town will not delay its response to changes in revenue streams,” a clear indication that reported reductions in revenue necessitate immediate response by the board — but where exactly those cuts will occur.

Given the policy, council will have little choice in accepting or rejecting a budget reduction and will most likely mull where the cuts will occur in today’s meeting.

Unfortunately, with current economic projections, council will probably face the need for deeper cuts to the budget in the near future.

According to an Associated Press “Economic Stress Index” released last Monday, a measure applied to every county in the U.S. that factors in local unemployment rates, foreclosure and bankruptcy rates, Archuleta County has a stress index of 10.47 in March 2009 — meaning that over 10 percent of Archuleta County residents suffered at least one of the factors used in the measure. Across the U.S., 38 percent of the more than 3,000 counties included in the survey had a stress score of 10 or above, putting Archuleta County in worse shape than 62 percent of all counties.

On the cusp of its traditional tourist season, the town and county can only hope that travelers will look to the Pagosa area as a summer destination. Unfortunately, tourist dollars are only a small portion of the local economic equation and, unless other sectors of the economy experience a miraculous upturn, further cuts to the town’s budget appear likely.

jim@pagosasun.com