Doing the Math

by John Washington on August 11, 2012

Jim Lane got a little aggravated at me at the North Scottsdale Chamber of Commerce debate Wednesday at Grayhawk. His hot button is apparently the budget. He’s a former CPA, so it SHOULD be a hot button for him.

He brags constantly about bringing a more business-like approach to city government. Ironically, I got dressed down by one of his supporters last week for saying something just like that, and this fellow said,

Anyone who says they want to run the city like a business would soon find themselves in jail.

Jim’s biggest objection seems to be my observation that we have an $8 million deficit. Jim has never actually SAID we don’t have a  deficit. He has SAID we have a “balanced budget.” More on that choice of words in a moment.

Meanwhile, here’s an explanation from Wikipedia:

Deficits occur when a government’s expenditures exceed the revenue that it generates.

From the budget presentation by the City Treasurer on June 5, the difference between planned expenditures ($250.3 million) and projected revenue ($242 million) is about $8 million. I happen to believe the revenue projections are irresponsibly optimistic and the actual deficit will wind up being larger, but that’s another subject.

Jim has also taken me to task for my concerns about the city’s debt. He doesn’t disagree with the number, but he says that most of the debt is from voter-approved bonds. Does that make it any less of a debt?

This definition (again from Wikipedia) of debt also brings to light another issue,

The meaning of ‘deficit’ differs from that of ‘debt’, which is an accumulation of yearly deficits.

“Accumulation of yearly deficits,” has an ominous ring to it. And at the Wednesday night forum hosted by the Scottsdale Area Association of Realtors, Jim actually said, “We don’t have a sustainable budget.” I’m not sure how he reconciles that against his previous statements that we don’t have a deficit, however.

To the point of “Deficit” vs. “Balanced Budget,” I believe that there’s been some nuance applied to this argument. We have “balanced” the budget by transferring money out of reserves and into the General Fund account to cover the deficit. However, that does NOT mean we do NOT have a deficit!

If we keep this up until we run out of reserves, we are eventually going to have to increase revenue (not likely in the near future), borrow to make up the difference, raise taxes, and/or cut services.

Bottom line: This year’s budget is $7 million more than last year, and it includes an $8 million deficit which will add to a $1.3 billion debt.

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