Kansas City is not in an immediate budget crunch … yet.
But for the past few years, every budget has become tighter than the last as the city grapples with slowing revenue growth and increasing expenses.
The issue this year is whether the Kansas City Council can keep from dipping too much into the city’s savings. Because if the council isn’t careful, the city could run out of money by 2030.
City staff has reduced the projected budget deficit from $100 million to $54 million over the past few months. Now, the 1,000-page document will be scrutinized by council members as they evaluate a $2.5 billion budget to fund street resurfacing, police salaries, public transportation and debt payments.
At the same time, Kansas City is under pressure to present itself well to a massive audience when the World Cup arrives in less than four months.
“This is our opportunity to show them why more than half a million people call Kansas City home,” Mayor Quinton Lucas and City Manager Mario Vasquez wrote in the budget’s cover letter. “The submitted budget has a foundation built on the priorities of Kansas City residents.”
Here’s what to know going into the city’s upcoming budget hearings.
The proposed budget was presented to the City Council on Feb. 12, and next are the public budget meetings and departmental hearings. Amendments to the budget must be submitted by March 12, and the City Council must take its final vote to approve the budget on March 26. It will take effect on May 1.
Public budget meeting schedule:
Monday, Feb. 23, at Ruskin High School, 6 to 8:30 p.m.- Monday, March 2, at Guadalupe Community Center, 6 to 8:30 p.m.
- Saturday, March 7, at Winnetonka High School, 9 a.m. to noon
Financial squeeze
This year’s financial squeeze did not come as a surprise to leaders at City Hall.
Six years ago, the initial COVID-19 lockdown put pressure on Kansas City to make significant cuts to balance slumping revenues.
But after the lockdown ended, the economy sprang back with an infusion of federal grants from the Biden administration, which poured money into infrastructure projects, public safety and housing.
On top of that, Kansas City saw unexpected surges in earnings tax revenues and taxes on online sales.
In an ordinary year, the city expects general fund revenue to grow at 2% per year. But for the four years following the initial lockdown, revenues grew at nearly four times that rate — an average 7.2%.
That put Kansas City in an unusually strong financial position where city leaders had more money than they knew what to do with.
“The recovery following that very short-term recession really accelerated our revenues in a way that we just hadn’t seen,” Brenton Siverly, the city’s deputy director of finance, told the City Council on Sept. 30. “And it was almost impossible to forecast as a city, and that’s something that other cities and the state witnessed during the same time frame.”
But city leaders, including Lucas and then-City Manager Brian Platt, knew that the surge of revenue would not last forever and started preparing for it to slow down. So they loaded up the city’s rainy day fund with the excess revenues to prepare.
Now that slowdown is starting to happen — at least on the revenue side.
Some expenses continue to increase faster than revenues, which is contributing to a structural deficit. That’s when the city is consistently spending more than it’s bringing in.
So while the city’s revenues are increasing by about 2% each year, operating expenses are increasing by 4%. In next year’s proposed budget, the city is expected to spend 4% more on wages, 10% more on health insurance and 19% more on pensions.
In September, the city’s finance department estimated that Kansas City would have to pull $100 million from its rainy day fund to fund next year’s budget.
After implementing a hiring freeze and trimming where it can, the city was able to get that deficit down to $54 million.
That’s why, during the budget discussions, the City Council will be unlikely to make any additions to the budget without cutting spending elsewhere.
Deciding where to cut
If you attend Kansas City’s budget hearings this week, you’ll likely hear the phrase “priority-based budgeting.”
That’s a strategy that the city has started to use over the past few years to decide what programs should receive funding increases and which should be trimmed.
After the finance department warned the City Council about the deficit issue in September, the city manager told all city departments that they should expect only mandatory funding increases. Those mandatory increases would include debt payments or required 2% salary increases for staff.
Then, all 212 programs in the city were scored for how well they aligned with the city’s business plan and the priorities of residents.
When the city gathered resident feedback for its five-year business plan, residents rated streets and sidewalks, police, housing, neighborhood services and public transit as their top five priorities. (You can find the results of that survey on Page 62 of the budget document.)
Programs were also scored based on cost recovery. For example, it costs the city money to hire tax auditors in its finance department. But those auditors will end up bringing more money into the city than the cost of their salaries by making sure everyone is paying their taxes.
After all of the programs were evaluated, some of the highest scoring programs were neighborhood legal services, the municipal court’s rehabilitation program and solid waste management. Meanwhile, some of the lowest scoring programs were the city’s communications program, workplace safety and parking services.
The amendment process
At this point, Kansas City will start presenting the budget in a more detailed way to community members and the City Council.
The city’s budget office or the City Council have about two weeks to submit any amendments to the budget.
Unlike last year, when the City Council voted on a last-minute amendment to fund public transportation, council members plan to hold themselves to the March 12 deadline.
“If there are any budget amendments after that date or filed on the day we are adopting the budget,” Councilmember Crispin Rea said during the Feb. 12 budget presentation, “don’t even come and ask me for my support. Count me as a no vote.”
Over the next two weeks, the City Council will hear directly from department heads to look more closely at each department’s funding for the next year.
The police department hearing will be one to watch after several council members raised questions during the Feb. 12 presentation about funding to pay legal settlements and an unusual $6 million transfer from the violence prevention fund.
The department got in trouble last year with the City Council after it maxed out its lawsuit fund just a few weeks after the budget was approved.
“Removing the $6 million out of that violence prevention fund is a no-go for me,” Mayor Pro Tem Ryana Parks-Shaw said during the presentation. “I’ll state today that I’ll be looking for an amendment on that as well.”
Councilmember Johnathan Duncan echoed those feelings.
“One way to put it is that we’re using the violence prevention fund to fund officer pay,” he said. “Another way to put it is that we’re using the $6 million from the violence prevention fund to fund settlements by the police department, which is $5.9 million.”
The police department will get $331 million this year, which Siverly told the council is roughly 27% of the general fund. Kansas City is required by Missouri to divert 25% of its spending to the state-controlled police department.
Upcoming hearings
Kansas City will host two more budget meetings to receive feedback from the public. To learn more about how a budget is formulated, read this explainer from 2023.
The city already hosted one budget meeting on Feb. 23. The Beacon assigned one of its Documenters to take notes at that meeting, and those notes will be available to read later this week at this webpage.
In addition, the Kansas City Council will hear from each city department at the City Council chambers over the next two weeks to dive deeply into their budget.
Departmental budget hearing schedule:
Day 1, Wednesday, Feb. 25, 8:30 a.m. to noon
- Budget overview — 8:30 to 8:45 a.m.
- Finance — 8:45 to 9:05 a.m.
- Law — 9:05 to 9:25 a.m.
- Office of the City Clerk — 9:25 to 9:45 a.m.
- Office of the City Auditor — 9:45 to 10 a.m.
- Human Resources — 10 to 10:20 a.m.
- Conventions — 10:20 to 10:50 a.m.
- Civil Rights and Equal Opportunity — 10:50 to 11:10 a.m.
- City Planning and Development — 11:10 to 11:50 a.m.
Day 2, Thursday, Feb. 26, 8:30 a.m. to noon
- Housing and Community Development — 8:30 to 9 a.m.
- Parks and Recreation — 9 to 9:30 a.m.
- Public Works — 9:30 to 10:10 a.m.
- Neighborhood Services — 10:10 to 10:40 a.m.
- Municipal Court — 10:40 to 11 a.m.
- Police — 11 a.m. to noon
Day 3, Thursday, March 5, 8:30 a.m. to noon
- Fire — 8:30 to 9:30 a.m.
- Water Services — 9:30 to 10:10 a.m.
- Aviation — 10:10 to 10:50 a.m.
- Health — 10:50 to 11:25 a.m.
- General Services — 11:25 a.m. to noon
This story was originally published by The Beacon, a fellow member of the KC Media Collective.
