Minneapolis closes budget year on strained note

The economy has gone from bad to worse in the six months since Minneapolis Mayor R.T. Rybak first presented his 2009 budget, and that has caused the mayor and the council to make some adjustments.

For instance, city leaders learned recently that starting in 2010, they will have to come up with at least $38 million more in pension obligations. The pension funds are suffering from weak investment returns.

Rybak says, for now, that money will come out of property tax revenue.

"We'll keep the hiring freeze on, but, more important we'll go back in our budget and make strategic cuts."

"So we did have to move from the 6.8 percent property tax increase to the 8 percent," Rybak said, "which I hated to do. But the fact of the matter is we have to pay for pensions."

Rybak says for the last four years, the city has been trying to merge the three closed pension funds with the state pension pool, known as the Public Employees Retirement Association. He says that will reduce the burden on city property taxpayers.

Rybak's original budget also did not call for a hiring freeze. But in light of a major state budget deficit and the likely reduction in state aid payments, Rybak says such a measure has become necessary.

"It's the sort of move you take when you need to do something quickly, but it's not a good long-term strategy," Rybak said. "So we'll keep the hiring freeze on. But more important, we'll go back in our budget and make strategic cuts. None of which we want to make, but we're going to make choices. We're going to be clear about that to the citizens about what that means for services."

City Human Resources Director Pam French says the freeze will apply to new hires for open positions. She says there are 395 open positions -- nearly 10 percent of all city jobs -- that can remain unfilled. French says it may become necessary to extend the freeze to all jobs.

"In the event we were to eliminate occupied positions, we want as many positions across the city vacant for the workforce that may be cut," French said. "So we minimize the amount of layoffs we would have."

The hiring freeze includes a waiver process which allows department heads to fill jobs which they determine to be essential.

The last time the city imposed a hiring freeze was five years ago. In 2003, the Legislature cut more than $30 million in aid to Minneapolis.

That year the city laid off nearly 70 workers, including firefighters and civilian police personnel. The firefighters were later rehired, and the police force has since surpassed the pre-2003 numbers.

The hiring freeze was lifted in 2005.

French says for the last five years, the mayor's office and city staff have followed a long-range budget process designed to help the city endure another big cut in state aid.

"It's not a good time, but I just think we are positioned well to be able to understand to a greater degree the impact of cuts that the city of Minneapolis would be taking if we receive them," French said.

City leaders are likely wondering less about if the cuts are coming, as they are wondering how much money they will lose. And soon, they'll learn if their years of budgeting and planning will actually pay off.

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