City Finances

An Overview of the Current Situation

The 2021-2023 Biennium Budget proposal presented to the Citizens Budget Committee in Spring 2021 projected General Fund expenses exceeding revenues by the end of the biennium unless the City Council takes action to fix the structural conditions that will lead to the shortfall. The General Fund is used to fund our police, fire, general administration, and Parks and Recreation Department

I agreed with that assessment, and the Budget Committee recommended that the City Council adopt the proposed 2021-2023 biennium budget with a call to reduce General Fund expenses by $1 million over the biennium. That was intended to be a down payment on further measures to be taken by the Council and staff in time for inclusion in the 2023-2025 biennium budget that will be presented in Spring 2023.

We are fortunate that actual expenses and revenues over the last 18 months have both been more favorable than was projected back in the winter/spring of 2021, which among other things allowed a transfer of $1.7 million from the General Fund into a Reserve Fund that had been nearly empty for years. The City’s audited financial statements for fiscal 2021-2022 showed substantial increases in ending balances in all of our governmental and enterprise funds, above the financial policy thresholds.

But that’s no reason for complacency.

The City Council still needs to do its job and take up some of the possible structural changes identified in the budget document or identify other possible alternatives that could bring the projected future expense and revenue curves back together. Some of those options may involve how we fund our Parks and Recreation. 

What is the “Structural Deficit”?

The current annual budget for Ashland’s General Fund is about $40 million. 

Ashland does its budgeting for two years at a time. I sat on the Citizens Budget Committee for the 2021-2023 budget biennium. When staff presented the budget to us in Spring of 2021, they said that beginning in 2023 or 2024 and beyond, the General Fund’s projected revenues would be insufficient to meet its projected expenses. This future shortfall is what people are referring to when they mention the “structural deficit.” 

The General Fund deficit could be endured for a time by eating away at the money that has been left over in the General Fund at the end of each year as the “Ending Fund Balance,” which our financial policies say should be at least 20 percent of the average expenditures of the prior three years. This is not a good idea, so the staff recommended that the Budget Committee and the City Council begin to explore possible structural adjustments to bring the projected revenues and expenditures back into balance. 

The Budget Committee approved the 2021-2023 budget, and asked the City Council to cut $1 million out of the General Fund during the 2021-2023 biennium and start exploring structural measures that would put it back on a sustainable path.

Addressing the Structural Deficit  

We will definitely need to do something, and there are already several ideas on the table. 

We could revamp, reduce or eliminate some City programs, while preserving vital services that Ashlanders need and value most. We could outsource some of our services instead of providing them ourselves, though it remains to be seen whether this would actually reduce costs or just reduce quality. We could regionalize some of our services looking to share costs with neighboring jurisdictions. We could consider separating our Parks and Recreation services from the General Fund by establishing a Parks and Recreation District. (I write more about the “Parks Question” here.)

At this point, I think we still need more information about the pros and cons of these and other options. From what I know now, I’m interested in exploring regionalization. Our police department used to have an agreement with Talent to provide some services for them, and this allowed us to share costs to cover the cost of the number of police officers we all need. I understand this arrangement ended because we couldn’t fill some of our officer positions to guarantee the service. There has also been some discussion in the past about regionalizing some aspects of our fire and rescue services as well. In any case, I’d like us to continue exploring partial regionalization options to determine if this set-up could save money for everyone without sacrificing our important police, fire, and rescue services. 

A structural change with respect to Parks would essentially mean going back to the set-up prior to the mid-1990s when Parks used to be funded by a separate levy and not through the General Fund. That changed when Oregon voters approved a statewide ballot measure to reform property taxes. At this point, a re-look at how we manage our parks is long overdue, as our current arrangement is not working for anyone.