Town of Normal staff have proposed a $205.4 million budget for the next fiscal year. The increase from the $185.7 million estimated budget for the current year is 19.6%.
Town finance director Andrew Huhn said Tuesday during a daylong budget workshop for the town council that a lot of that jump will be funded by projected double-digit revenue growth, mainly in sales and income tax receipts.
"We set the budget at 12% and 4% (increases) for those revenue sources, which is looking a little low, honestly. We're always cautious because if we go into a recession in '23, then what is actual strong revenue now can change very quickly,” said Huhn.
Revenue from charges for services such as refuse collection, ambulance runs, and the Illinois State University contract for fire services will all grow a modest amount. Huhn said the ambulance and refuse line items reflect continued growth at Rivian and elsewhere in the town.
In most years, revenue projections are relatively firm. Huhn thinks the next cycle will be uncharacteristically flexible on the revenue side because the town continues to see strong money flow.
“This is my 31st town budget work session. This one is really strong. There are a lot of good stories in this budget,” said City Manager Pam Reece.
On the spending side, part of the increase comes from $2 million to allocate past surpluses. There is $6 million more for pension funds, an additional $1.5 million for additional road work, $1.2 million more for parks and facilities, and nearly $4 million in debt reduction by the end of the fiscal year. Utility costs are projected to rise by $1 million. Utility costs have doubled, said Huhn, noting there also will be a separate $268,000 increase just in street light costs.
The budget continues a shift away from using only property tax money to pay for police and fire pension and Illinois Municipal Retirement Fund obligations. The general fund is taking up more of that burden as pension contribution requirements increase, said Huhn.
"What we're trying to do is be sensitive to property tax issues. We kept the levy flat. We perceive in the future that the general fund will absorb a lot of what the levy was paying for to try to maintain a reasonable levy for the citizens," said Huhn.
Adding 5 full-time positions
The draft spending plan includes five new full-time jobs during the second year of a plan to restore positions cut during the pandemic and past economic downturns. Last year, the town added 23 positions. Most of those have been filled. The requested new jobs would be in the City Clerk's office, Cultural Arts, Finance, Public Works, and Engineering departments.
Insurance costs continue to rise, though Huhn said he expected the post-pandemic surge in claims to level off. Salary expenditures grow based on the consumer price index for non-union workers and by contract for police and fire union members. Huhn characterized salary growth as "mild."
Salary and benefits comprise 48% of budgeted spending; most of that is fire and police.
“In service organizations, salary and benefit costs are generally more than 50% of the budget,” said council member Karyn Smith. “I think Normal does an excellent job at being efficient in their workforce.”
Vehicles, water department chemicals, and other operational line items have significant inflationary increases.
Water and sewer rates will stay flat in the new cycle, though there are 2% jumps in the out years of the five-year projection.
Even though the proposed spending increase is 19.6%, Huhn said that's conservative compared to revenue growth the town is seeing. The town plans for less than 60% of current year revenue growth and 100% plus of the rise in current year expenses. He said they allow for other reserves as well.
"We budget at full employment and that never happens. We have some vacancies during the year. That gives us an automatic hedge. Contingency funds are an automatic hedge. We budget high for capital and gas costs and utility costs. Our goal is always not to get surprised by an unforeseen deficit," said Huhn.
“This has to be the strongest budget I have seen in 10 years,” said council member Kevin McCarthy. “I appreciate how responsive this plan is to the current situation. We are doing more work because of our strong position, we are also paying off overhead because we can right now and it’s prudent to do so. And we’re also aiming to hold steady some locally set revenue streams, all responsible and prudent actions.”
Actual revenue increase in state shared sales tax in 2022 from 2021 was 21.7%.
“That’s just unbelievably high, compared to what we have seen. Historically, it has normally been between 2-3%. Local tax (sales) is an 18.8% increase. We are currently seeing almost those numbers through our current period of actuals for this year,” said Huhn.
Huhn said a potential recession later this year may or may not be a problem, but the town is going into it in a strong position. He said he was not overly concerned about State Farm layoffs. Current shedding of IT workers, he said, does not appear to be as significant as the wave years ago when the Bloomington-based insurance giant ended contractor work following a digital transformation program.
