Friday, June 5, 2009

The Budget Game

Posted By on Fri, Jun 5, 2009 at 10:44 AM

Give the Memphis City Council credit for this: Members are putting in a lot of late hours trying to come up with a budget, working past 9 p.m. several times this week.

But they'll never get to $50 million in cuts if they stay focused on $7,500 expenses for travel and meals for council members. That's like dieting by cutting the pickle on the sandwich.

At the other extreme, watch for a "Hail Mary" as talks wind down — possibly a pitch for a payroll or privilege tax to take pressure off the property tax and shift some of the tax burden to those who work in Memphis but live outside the city.

The last time a payroll tax proposal was made was 2004, by then-councilman Janet Hooks. The proposal got on the November ballot but failed in the face of voter apathy and opposition from the Memphis Area Chamber of Commerce and The Commercial Appeal's editorial page. Hooks and supporters had only a shoestring budget, while opponents spent more than $100,000 on a publicity campaign.

Anyone planning to revive the proposal will have to deal with FedEx founder Fred Smith's recent comment to the council that if you want less of something, then tax it.

Without a state income tax, Tennessee governments must rely on the sales tax and property tax for most of their revenue. The city of Memphis has by far the highest combined city-county property tax rate in the state.

The only way to make big changes in the city budget is to cut into big items, dip into reserves, or eliminate a proposed 3-percent raise for city employees. The council's budget committee requested that Mayor Herenton's administration find $50 million in cuts. Reluctantly, the administration did that by showing the impact of $18 million in cuts from the police department, $7 million from the fire department, $4 million from parks, and so on.

Every proposed cut came with an explanation of its impact from a city division director.

City and county budget hearings continue next week.

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