The election may be over, but haggling over the city’s $65 million budget continues unabated. Even though the fiscal year finishes at the end of the month, officials just announced the status of one of the year’s biggest budgetary mysteries: the total amount of police spending.
It was known when a contract was signed with police superiors in March that there would be a substantial increase in the cost of running the police department for the 2002-2003 fiscal year, which runs from July 1, 2002 to June 30, 2003.
The city’s business administrator, Robert Drasheff, has described the contract “very complicated.” According to Drasheff, it varies from officer to officer but provides pay increases averaging about 4 percent for each of the next three years. The City Council is the governing body that controls and votes on how much the city will pay for its police force. In the original budget ratified by the City Council in January, $11.78 million was set aside for police salary and wages.
But because of the complexity of this contract, there has been a great deal of uncertainty in past several months over exactly how much over budget the police would need to go. At a City Council meeting in March, shortly after the deal was brokered, Drasheff said that the overages would run around $200,000 but expressed uncertainty if that was exactly the correct number, due to the nature of the contract.
Emergency appropriations
Councilwoman Carol Marsh, who has been a critic of the mayor’s budget, criticized the administration in March for not completely costing out the contract before signing it.
Then several weeks later, on April 10, $1.3 million in emergency appropriations were on the council agenda to be approved. These appropriations concerned items such health care, cost overruns on electricity, and the unanticipated cost of holding runoff elections. Under the New Jersey Local Budget Law, emergency appropriations are permitted after the budget has been adopted in order to provide for emergencies not foreseen at the time of the budget adoption.
However, the overages due to the police contract were not included in the emergency appropriations resolution, and again Marsh asked if there were going to be police overages. Drasheff said that yes, there were going to be cost overruns, and at that meeting, he estimated the cost overruns to be in the range of $500,000 to $600,000. But he said that estimate was not included in the emergency appropriations because it was his intention to make up the difference by using line item transfers from departments which have an operational surplus for the 2003 fiscal year budget.
That brings the events up to Wednesday night’s City Council meeting. State law allows budget transfers only in the last two months of the fiscal year. At Wednesday’s meeting there was a resolution before the council for $1.66 million in budget transfers from accounts that have money left to accounts that need money to finish the year. By far the biggest single item is the “Police Department Salary and Wages” line item.
The city’s police department needs $1.03 million to finish the year, meaning that at year’s end the police will be $1.03 million over budget; $1.03 million comprises about 10 percent of the police department’s total budget. According to city officials, the rest of the transfer items are housekeeping items, with most of the other items being only a couple thousand dollars each.
The two biggest sources of transferred funds are the group health care line item in the amount of $458,570 and another $125,000 from the fire department. According to Drasheff, the fire department will not spend its entire budget for the year. “At the close of the year, we should have a slight surplus,” said Drasheff last Wednesday. “These budget transfers balance out all of the accounts for this fiscal year.”
But not everyone was content with Drasheff’s analysis of the city’s current finances. Marsh questioned whether the $1.03 million for police has been spent yet. Drasheff said that this is the amount needed to finish off the year and has not yet been spent. He added that the city’s auditors, Ernest and Young, have reviewed the budget transfers and said that they are appropriate and fall within the boarders of state law.
Marsh expressed her skepticism that the city would need $1.03 million with only two weeks left in the fiscal year. Pressed a second time, Drasheff said that “some money” has been spent but did not comment as to exactly what has been spent.
The distinction of whether the funds were spent already or will be spent in the coming weeks is important. First, state law prohibits cities from overspending their budget. If the city foresees it is about to overspend any budgetary item, the City Council must vote to set aside those funds in the form of an emergency appropriation before the money is spent.
The second reason this distinction is important is that if the department of administration or the mayor’s office is spending money that has not been approved, it is then usurping the authority of the council, which is supposed to vote on every dollar spent.
Michael Lenz, who has been fired as the city’s chief financial officer, said he believes that this money has already been spent. “It’s not ok to overspend and then make it up later,” said Lenz during the public portion of the meeting. “This is simply not the way business is done. You [the council] are losing the ability to control how the money is spent [when this is done].”
Lenz’s firing made official
In what could be construed as a somewhat ironic twist, the City Council voted on the resolution to make Lenz’s termination final on the same night it was announced that the city will end the year with a slight surplus.
According to Mayor David Roberts, Lenz was fired due to the findings in an investigation report filed by the city’s auditors. Louis Roberts of the firm Ernst and Young, the city’s auditors, conducted the mayor’s investigation. It centers around the $1.3 million in emergency appropriations approved by the City Council on April 10.
The largest component of the emergency appropriations in the April 10 resolution is related to group health insurance in the amount of $587,847. “The explanation on page one of the [emergency appropriation] resolution states that the reason for the emergency was that the insurer failed to provide timely notice of an increase,” said Louis Roberts the report. “Subsequent to the passage of this resolution, it was discovered by the Purchasing Department that the Group Health Insurance account was erroneously encumbered for approximately $600,000. This over encumbrance negates the need for additional funding.”
The report implies that Lenz could have asked for only $700,000 instead of the $1.3 million, thus being one of the major reasons for his termination.
On Wednesday, Lenz expressed that the over encumbrance error occurred in the purchasing department, which is not under the supervision of the CFO. Drasheff said Wednesday that the error was in fact made by Lenz, thus justifying the termination.
Marsh, who was the only person to vote against Lenz’s termination, questioned the validity of the explanation to terminate Lenz. Her argument was that if this error was so extreme it warranted the termination of the CFO, then why was nothing done to fix it?
“If this was such a big mistake why was there never a resolution brought before the City Council to undo it?” asked Marsh. There was never a second resolution that took the “erroneous” emergency appropriations due the over encumbrance of health care costs out of the budget.
Marsh and Lenz both said it is because Drasheff knew that money would be needed to use for police salary cost overruns that the city had previously underestimated several times.
“Yes, there was a mistake,” said Lenz later Wednesday night. “But you leave buffers just in case there are mistakes, and in this instance they need that buffer to pay for the police line item. Without that emergency appropriation, they would have been back before the council asking for more money to pay for this contract and cost overruns.”
Lenz concluded that the fact that the city did not need to pursue additional emergency appropriations means that the April 10 appropriations were for the proper amount, meaning that the reasons give for his termination were not valid. Lenz has said his firing was a political maneuver by the mayor in order to distance himself from the city’s growing budget.
The administration still contends that the mistakes alone were more than enough justification to relieve Lenz of his duty.