Good evening! It's an honor to be with you on this historic day for Indianapolis and Marion County! This year, for the first time, the budgets for the city and the county have been put together by the city's Office of Finance and Management.
We are moving toward eliminating the distinction between city and county budgets. This, together with the additional control over municipal corporation budgets that the City-County Council has been given, and the authorization to merge the Indianapolis Police Department and the Marion County Sheriff's policing functions, means we are much closer to the goal of smaller, smarter, simplified, unified government here in our state's capital. The beneficiaries will be our taxpayers, who will get better service for less money.
We will now bring the same kind of fiscal discipline to the county side of the budget as we have brought to the city's budget. The problems of the past were not due to a lack of capability by our current and previous county auditors, but to a system that gave the auditor responsibility without authority, and gave county agencies authority without responsibility. The new state law consolidates the budgeting and financing roles for all of city and county government, promotes accountability, and promotes better budget planning for the future. The buck now stops here!
This change comes none too soon. The county budget is in deep trouble. I will detail our plan for rescuing it tonight, but make no mistake, until Indianapolis Works passes, the county budget will be on life support.
I am proud of the way this budget was put together in very trying times. First, we are using the new county option income tax money to fund all the Tier 1 priorities identified by the Criminal Justice Planning Council for fixing our broken criminal justice system. What does this mean in plain English? It means we are taking a huge step toward ending the early release of dangerous criminals onto the streets of Indianapolis because of jail overcrowding. We are funding more prosecutors, more resources for the criminal courts, and more equipment and people for the crime lab to move those arrested through the system faster.
The guilty need to be judged quickly and moved to state prison to serve their time. The innocent need to be sent home. Our jail cannot continue to be a long-term human warehouse – a monument to a grossly inefficient system. You deserve the credit for this because of your courageous bipartisan votes earlier this year.
The specific steps to end jail overcrowding were developed by a bipartisan group led by our county clerk, Doris Anne Sadler. Ms. Sadler and her committee deserve our gratitude for checking politics and parochialism at the door and looking for real solutions to a problem that has bedeviled us for years. Now our job is to fund these solutions and end the horrendous practice of releasing dangerous criminals who belong behind bars!
Second, there will be no cuts in public safety funding beyond those I announced in June. While other county agencies are being asked to make sacrifices similar to those made by city agencies, the Sheriff, prosecutor, criminal courts and other components of the criminal justice system are not. We have been, and will continue, searching for efficiencies and other cost-cutting steps in our criminal justice agencies, but we cannot increase funding for measures to end jail overcrowding with the right hand and cut the base funding for the very same agencies with the left. With a county budget in such deep trouble, this requires some aggressive steps, which I will outline shortly.
Third, we are continuing the course of strong fiscal discipline in city spending. For 2006, the city budget totals $533.9 million or $8.6 million less than the city's 2005 budget. This decrease comes despite a 12% increase in city employee health insurance costs, a 29% increase in fuel costs, and increases in many other contractual obligations. And, for the sixth straight year, there is no increase in property taxes to fund the city budget!
Finally, the budget I offer this evening begins solving the problems of tomorrow even as we grapple with the substantial challenges of today. We just learned that our county option income tax receipts will probably be at least $8.5 million higher than previously projected. The city's share, just under 60% of the total, will be applied to paying down the pension obligation bonds used to fund this year's budget. Borrowing money to pay current pension obligations to our retired police officers and firefighters was a distasteful last resort for the 2005 budget. The sooner we can pay off those bonds the better.
To fully understand this year's budget proposal, a little history is required. Unigov united all the major components of city and county government except for police and fire services. As things have evolved, funding the city's police and fire departments and dealing with their unfunded pension liabilities have proven to be the biggest challenges in local government. For at least twenty years, mayors and councils have tried every creative idea they could think of to keep the city's head above water without huge tax increases.
In recent years, the county's budget situation has been deteriorating. A growing Marion County required more services. The Sheriff's responsibilities increased dramatically as population shifted to the outer townships. Added burdens were placed on the courts, the jail, the prosecutor, probation and other partners in the criminal justice system. And costs imposed by the state, such as juvenile incarceration charges and child welfare expenses, over which you - the county's fiscal body - had absolutely no control, exploded.
In 2001, we received a major boost from the state when the legislature passed a new pension relief bill. As a result of that temporary reprieve, the city – which was by no means comfortable, but in less of a state of crisis than the county – was in a position to help fund the county's budget. Since 2001, the city has provided $56 million of direct support to the county's budgets! That's why the county was able to make it to February 2005 without any general tax increases.
But all the while, both the city and county saw their financial health decline. From 2002 to 2005, annual COIT distributions to the city and county decreased from $121.6 million to $104.7 million. The cumulative loss in COIT from the national economic downturn was more than $32 million over that period. Assessed value growth for Marion County property has been stagnant at 1% per year, leaving us unable to keep up with inflationary costs for fixed contracts. To protect our dwindling city savings account, I ordered significant cuts in spending. We cut $55 million out of the city's budget in 2003 and 2004, before I even proposed Indianapolis Works. City workers without contracts received no raises in 2004 or 2005. I, and the top twenty leaders in my administration, took pay cuts in 2003 that have continued to today. As evidence of our frugality, the city government's share of the local property tax bill declined from 30% in 1999 to 26.8% in 2005.
It was in this environment that I proposed Indianapolis Works last August. Without too much rehashing, let me just note that Indianapolis Works would reduce the overall cost of local government by $35.7 million per year. The portions of it that passed the legislature allow us to reap something less than $10 million in annual savings, and that is only if the police merger is passed by the City-County Council. The failure of the legislature to pass the lion's share of Indianapolis Works is why I announced another $28 million in city budget cuts and the elimination of nearly 200 jobs by attrition in June – the most painful cuts so far.
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The city's portion of the budget I propose tonight was largely explained at the time the budget cuts were announced. We will be able to make it through the rest of 2005 and to the end of 2006 with a modest balance – very modest – left in our savings account. It means a third year of no raises for those city employees not covered by contracts, but again we will pick up 100% of the increased cost of their health insurance premiums, so no employee should lose money.
I said in June that I would explain tonight how we would raise $2.5 million in additional public safety-related revenues. This is the plan I ask you to approve. As many other cities already do, we would increase the fees we charge for responding to false automated fire and burglar alarms, trash fires, hazardous materials spills, and for providing accident reports. Additionally, we would begin charging for Indianapolis Fire Department responses to motor vehicle accident scenes. The Office of Corporation Counsel would work with the Indianapolis Police Department and IFD to collect these fees. Finally, the city would step up its parking ticket enforcement efforts by increasing the base fee, doubling the fee if it is late, and streamlining the collections process. The expected revenue generated by these efforts is at least $2.5 million annually.
I might mention here that the city budget includes no raises for Indianapolis Police Department officers for 2006. The IPD contract is the only one that expires in 2005. We have begun contract negotiations with the Fraternal Order of Police. If those negotiations result in raises for 2006, we will submit a separate fiscal ordinance.
The strict fiscal discipline we have brought to the city budget for six years will now be applied to the county budget as well. We start tonight, but we have more work to do this year and next. In spite of tireless work and being quick studies, City Controller Bob Clifford and his team have only been working with the budgets of all the entities that make up the county budget for a few weeks. While some cuts could be tailored, in most cases, the Office of Finance and Management simply gave agencies, other than those involved with criminal justice, a percentage cut and will allow them to decide how to make it work. However, we will ask those county employees not covered by contracts to go without raises for 2006, but this year we will pick up 100% of the increased cost of their health insurance premiums.
Not cutting the agencies that comprise the criminal justice system means that the overall budget cuts on the county side are relatively small, because the biggest county agencies are the public safety and criminal justice agencies. Consequently, figuring out how to make the county budget work was a Herculean task. The county was already underfunded for 2005, the current fiscal year, by more than $15 million when we started. For 2006, we were faced with requests from county agencies that were $21 million higher than the amounts appropriated in 2005. Most of these requests were for real operating expenses such as fuel for Sheriff's vehicles, managing an election in 2006, inmate medical care, criminal court costs and other critical recurring expenses. By utilizing the county's portion of the higher-than-anticipated COIT, cutting administrative budgets, and by using a part of the second year's COIT increase, we were able to piece together a budget that works through 2006 without a property tax increase.
Using a portion of the 2007 COIT is really a cash flow measure, more akin to the tax warrant program run by our bond bank than to the pension obligation bonds approved last year. The reason is that there is a source of new revenue coming on line to pay off the debt.
If all this sounds as though we remain in a precarious financial situation, we do. That is why we need Indianapolis Works. The $21 million in savings each year from the fire merger alone would make a big difference in funding local government. To those who say Indianapolis Works won't solve all our financial challenges for all time, I ask, What would? Indianapolis Works is just one – but a very powerful one – of the tools necessary to build a more solid fiscal foundation for our city and county. And even if we have problems in the future, with Indianapolis Works we'll always be $35.7 million per year better off.
I cannot conclude without mentioning the dark cloud that hangs over our heads and the heads of all mayors and city council members across our state. No matter how brilliantly we, together, manage the difficult situation we find ourselves in today, all our efforts could well be rendered useless by several recent actions of the state legislature.
At a time when local property taxpayers are still reeling from the court ordered reassessment in 2003, we face the prospect of higher property taxes in Indianapolis and Marion County without any increases in local spending. Why? Because state government has been steadily passing the cost of its business down to the local property taxpayer.
Let me give you a few examples:
First, the state budget that was just passed cuts the long-standing state support for property taxpayers through the property tax replacement credit. Even if we do not raise rates in Marion County, property taxes will increase by about $2.6 million a year in 2006 and 2007. This makes the upcoming phase-out of the inventory tax - which was a part of the state tax restructuring plan in 2002 – even more painful for homeowners.
Second, the state budget changed the school funding formula to make schools more reliant on property taxes and less reliant on state funding.
Third, the state has required local taxpayers to pay one-half of the costs of juvenile detention. In every other instance in the state correctional system, the state is charged with paying for the incarceration of convicted offenders. The state claims Marion County owes over $60 million and is mandating an immediate tax increase to collect it. We believe this is wrong and have asked the courts to decide the matter once and for all.
Finally, the state Department of Child Services has asked for $30 million more for the Family & Children Fund than what was spent in 2004 and what was budgeted for 2005 - an almost 50% increase in two years! That doesn't include a request for the City-County Council to authorize a $15 million loan to cover the shortfall for 2005. All the painful city budget cuts I announced in June would be negated by this one increase. And the worst part is – those who spend the money have no responsibility for raising it. And those who must raise it have no control over how much is spent.
At a time when we are asking every department of local government to be more efficient, tighten belts and cut costs, it is unfair for state officials to wipe away with the stroke of a pen the conservative fiscal philosophy we all have delivered for six years.
The bottom line is that unless the state legislature makes significant changes in the way state government does business, property taxes will go up, and there's nothing any of you, or I, can do about it.
This fall and through the next session of the General Assembly, I will work with other mayors and local officials across the state to convince the Governor and state lawmakers to join us in the battle for property taxpayers. We'll ask them to take a hard look at the system that passes the costs of state government to local taxpayers, and also to give local governments the tools and the flexibility they need to be efficient, cost-effective and accountable to the citizens that elect them. The taxpayers of this city, county and state deserve nothing less.
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As difficult as this budget year has been, I believe we have turned the corner. A combined city and county budget allows us to impose strict fiscal discipline across the largest part of local government. In Indianapolis Works, we have a plan to significantly reduce the expenditure side of the ledger and bring better, more uniform services to the entire county. With the new COIT money, we can end the scourge of the early release of dangerous criminals onto our streets and reduce crime in Indianapolis.
We have asked much of city and county workers over the past several years. We've asked them not just to maintain the essential services our citizens deserve, but to do more with less. We've asked them to be creative, frugal and patient. Time and again, they have risen to the occasion.
Today, I'm also asking you, as well as every single elected official in this room and across this county, to also rise to the occasion and join me on this mission to cut the cost of government, to be ever vigilant in saving money for our taxpayers and to ensure local government is efficient, disciplined, responsible and accountable to the people we serve.
By working together, and always, always keeping the best interests of the people of Indianapolis in mind, we can keep our city on that same upward trajectory that has characterized us for the last 40 years.
Thank you.
