The Budget and Borough Investment
As we near the end of our annual budgeting process, it is worth discussing how the budget comes together and the philosophy behind the investments that are made in the borough.
Over a period of roughly six months, the department heads come together and discuss what the next budget for the borough may need to look like. The early stages of this process generally involve reviewing where the budgets are mid-way through the year and where they reasonably expect to end the year going forward. As we get deeper into the late summer and fall, this process becomes more precise as projects and bills are paid and tax revenue and electric revenue can be projected with more certainty.
At this point — usually between October and November — upcoming investment projects are reviewed and categorized by how important it is for each to be completed. Inevitably, there are always more projects than funds available to do the work, and we must deprioritize some projects so that other critical work can be completed in the coming year based on the anticipated revenues from sewer and electric services in addition to tax revenue. In a near perfect world, some projects would get moved to the following year and no additional funds (tax increases or rate increases) would be necessary. As you all know, that is not the case and reality can make choices difficult.
Inevitably, in this scenario, elected officials are presented with only a hand full of options; increase taxes, increase rates, cut budgets and/or services, borrow money, or some combination of all the options. In my opinion, there is no one size fits all answer to this question. Cutting budgets whenever there is a shortfall is not always the right answer, and neither is raising taxes, either.
The right decision rests entirely on the type of budget issue we are experiencing and the lasting impact of how best to solve the problem.
For example, this year we experienced a $600,000 budget shortfall because our cost-saving trash to steam program ended. Meanwhile, we still must buy the same amount of power for the borough every year to ensure our service is at the quality that residents need and rightfully expect. We could cut from other budgets and services in the borough to ensure that the $600,000 gap is filled. With a hole that large, there are only a handful of places to get that volume of investment to pull from without destroying an entire department. Even if you went for the more economical approach of “spreading the pain around,” you would still end up gutting a department to reach your needs. On top of that, we are not dealing with a one-year issue. That $600,000 will need to be accounted for every year going forward which means any department cuts would be, in this case, permanent. The reality is you cannot cut your way to success with this type of issue. You must solve it through investment.
The $600,000 gap exists because we were trying to find new and different ways to bring down the cost of investing in power in the borough — as we should. Our trash to steam program helped us out for quite a while, but the future of that program was never in our control. Additionally, the cost of power and related fees continues to climb steadily which is also outside our control. If we want to avoid future problems like this, we must find a way to generate more of our own power and have end to end management of the cost structure for our residents. To do that, we need to invest in our borough and the infrastructure that we maintain. Slashing budgets from another department is never going to fix this issue — it is only going to prolong the problem while also damaging another service in the borough.
This is not the case for every budget gap that occurs. There are times when cutting back makes sense because we are trying to fund a short-term issue or a one-time problem. In cases like that, we need to tighten the belts and find the money within the existing structure. However, if the issue is systemic and going to exist going forward, we need to invest to fix the problem so that the long-term health of our budget and our community is properly managed. Choosing to ignore problems only makes things worse.
If we are going to build up our community, we need to approach these issues from an investment standpoint which helps all of us move forward together.