Grand Rapids avoids potential layoffs, service cuts thanks to $94 million from the feds

GRAND RAPIDS, MI – Grand Rapids officials say talks about possible layoffs, vacation days and service cuts are off the table after receiving an estimated $ 94 million in federal aid.

“We all breathe a sigh of relief,” said Molly Clarin, the city’s chief financial officer. “We went to a different budget and dug into reserves, and we had to start making these decisions: service rollbacks or downsizing, either through vacation or layoffs or the like. Those things were definitely on the table. “

The estimated $ 94 million coming to Grand Rapids is the city’s share of the $ 4.4 billion federal budget raised for cities, towns, villages, and counties across the country thanks to the latest federal stimulus package Michigan to be deployed. The same package is responsible for the $ 1,400 worth of stimulus checks.

Related: See How Much Stimulus Money Your City Is Getting; Michigan splits $ 10.3 billion in funding

Prior to the $ million pledge, city officials offloaded their spending plan for fiscal year 2022 beginning July 1, with an estimated deficit of $ 15 million to $ 20 million in income tax receipts last year, and there was no way to get around it Compensate for losses except by diving into savings or cuts and other adjustments.

According to Clarin, city officials never gave an exact number of downsizing or vacation days it would take to make up for the shortage. However, you have gone through certain scenarios, such as: For example, how much could be saved if some employees worked one day less per week, or how much could safely be withdrawn from certain balances in the departmental fund.

In the absence of cuts or relief, the city would be running out of reserves due to the lack of income tax and running a deficit of $ 6.5 million by fiscal year 2024, Clarin said.

That forecast also includes estimates that it will take four to five years for income tax revenues to return to normal, resulting in a $ 45 million funding gap in current urban services over that period.

Related: COVID-19 income tax losses could push Grand Rapids into budget deficit without cuts

Given the slow return of income tax revenues, city guides are cautious about including additional expenses, especially longer-term ones, in the upcoming budget proposal. City officials will submit the draft budget for fiscal 2022 to the Grand Rapids City Commission in late April.

“We are planning a continuation budget in which we do not reduce the service levels that we offer the community, but also do not program anything that causes costs in the long term,” said Clarin, “because we are still doing it.” need to figure out the long-term problem, which is personal income tax – that source problem for our foreigners – and also the impact that unemployment and business closings have had on our tax base. “

About half of the $ 94 million federal funding will help address the city’s income tax problem.

Parts of the other half, Clarin said, will likely be used for housing issues, stimulating local businesses to recover from the economy, helping vulnerable populations like the homeless, and more.

Much of this will be set out in the budget proposal at the end of April, she said.

Grand Rapids will receive the estimated $ 94 million in two parts, with the first half coming soon and the second half in 12 months.

The city’s income tax problem is a product of the pandemic.

Many people who live outside the city but usually work in the city were allowed or had to work from home to prevent the spread of COVID-19.

The unintended consequence: the same non-urban residents can, with confirmation from their employer, withhold part of their urban income tax for the period in which they worked from home in the 2020 calendar year.

From previous tax returns, about 80% of non-urban residents have chosen to withhold some of their Grand Rapids income tax, Clarin said.

The 2020 calendar year income tax deficit is estimated at $ 15 million to $ 20 million. This includes income taxes that city dwellers did not pay while they were unemployed, which was more than usual last year due to the economic shutdown.

The city had expected approximately $ 86.5 million of the general fund’s revenue for that fiscal year to come from income taxes. Of this, around $ 46.6 million should be generated by non-residents working in the city.

The city’s general fund spending this fiscal year is approximately $ 149.3 million. The overall spending plan, which includes other funds and revenues, was approved for $ 531 million.

The city guides, who had drawn up and approved the current spending plan in summer 2020, expected revenue shortfalls due to the pandemic and saved around $ 22 million from the previous year’s budget.

The city introduced a freeze on hiring and other spending cuts, but made no cuts in full-time staff.

Grand Rapids received approximately $ 13.6 million in federal COVID-19 grants last year, some of which were distributed across the state and others across Kent County.

Other Kent County’s communities, as well as the county itself, are also expected to receive funding from the latest federal stimulus package.

Some, but not all, of the estimated payments include $ 127.4 million to Kent County, $ 14.4 million to Wyoming, and $ 5.1 million to Kentwood.

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