As Independence city manager, it is my job to oversee the day-to-day operation of all city services and the 1,100 city employees who provide basic services to our citizens. The foundation upon which these services are built is our budget, making the development of our budget one of the most important activities I do each year.
Developing the city’s budget has become increasingly difficult, as costs continue to rise at a rate that outpaces our revenue growth. These downward trends, combined with increased costs of providing even the most basic of services, has opened up a multimillion-dollar deficit in our budget for several years. This year, that deficit exceeds $3.6 million. The Missouri Constitution requires us to adopt a balanced budget each year.
Given these financial challenges, we have had to make difficult decisions each of the past three years to balance our budget. This problem is heightened when one considers that 83% of the General Fund budget is dedicated to employee wages and benefits. That leaves just 17% of your tax dollars to fund efforts like blight removal, code enforcement and filling potholes. This is not to say that employee wages and benefits are not a wise value. To the contrary, our employees – both current and retired – are viewed as a critical asset.
However, we have a responsibility as stewards of public resources to manage the public dollar wisely. For decades our personnel costs have escalated at an unsustainable pace. This is not the result of pet projects. In particular, costs associated with the city’s retiree health insurance program are rising. City costs are projected to increase to $20.5 million next year. Of that total, the city spends $7.5 million on retiree health insurance, which is projected to increase to more than $8 million next year. The current value of the city’s post-employment health insurance liability exceeds $285 million. That means Independence residents each owe $2,400. In neighboring Lee’s Summit, residents owe about $55.
The budget I submitted to City Council seeks to convert our Medicare-eligible retirees to a Medicare supplement plan. Presently, our retirees over age 65 and their dependents are covered by Medicare and utilize the city’s insurance as secondary insurance. This is a lifetime benefit; no one is losing insurance. The Medicare supplement plan I have proposed maintains similar coverage to the city’s active employee insurance program and lowers their monthly costs from $115 to just $39, an annual savings of $912. Moreover, it saves the city $5 million per year. These represent savings that can be used to fund basic services like public safety, snow removal and maintaining our parks.
If the recommendations to modify the health insurance for Medicare retirees is not accepted, the budget will need to be reduced. We have reached a point where our options are limited to cutting back services, eliminating programs, closing city facilities and laying off staff. We must face these challenges and make the tough decisions to ensure we have a stable foundation for the future of our city.
– Zach Walker is the city manager of Independence.