Wheaton city council members heard Monday night how the city would handle the hit to its coffers if the state reduces funding.
Currently, the city receives about $12.7 million each year from the state, most of which goes into the city's general fund that has a total revenue amount of about $38.9 million.
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City Manager Don Rose said the state shared revenues that are most likely to be reduced include the personal property replacement tax -- which has already been decreasing over the last several years -- the use tax and the income tax. Those three sources alone account for about $5.9 million in revenues for the city annually, or about 15 percent of the city's general fund.
The fiscal response plan that was presented at a city council planning session Monday reviewed what would happen if the state shared revenues are reduced by 20 percent -- about $2.3 million -- or more.
"Our ability to get everything done that really needs to get done is certainly being challenged," Rose said of the city's current situation, adding that 34 full-time employees and multiple programs and services were eliminated near the beginning of the recession. "If we look at further reductions I think it's really going to require significant changes in the services and programs we deliver to our residents."
Rose said should state shared revenues be cut, the city council would first need to determine if alternate revenue sources -- which are limited and mostly involve new or increased taxes -- should be used to offset state shared revenue losses.
The city's general fund budget currently contains $27.4 million of non-state shared revenue, which accounts for about 70 percent of the fund's revenue.
Employee costs account for more than 67 percent of the general fund's expenditures, so Rose said city staff members would need to review which personnel positions and services were previously considered to be cut, but remained.
Identifying capital improvement spending that could be reduced would also need to be considered, along with further departmental cuts and the effect they would have on residents.
Over the last several years the city has, however, increased its general fund above 40 percent of the expenditure level -- a move that Rose said will be helpful if the state does reduce shared revenues.
"I believe that if the fund balance stays at that level we certainly would have the ability to gradually move into whatever course of action we are contemplating as a result of the revenue loss," he said. "We won't be necessarily rushed into decision making and can have a through venting and vetting of the various options that we may be considering at that point in time."
Reductions look like they could happen next year, after the state faces a reduction in its "temporary" state income tax increase on Jan. 1, 2015. Rose said if reductions of 20 percent or more occur he will expect the city council to review recommendations for how the city should address the situation within six months of the state approving the reductions.
For now, Rose said it will just be especially important for the city to keep tabs on the activities of the state legislature this year.