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Keller Administration Lays Out Path Forward on Budget Challenges Created by Coronavirus

City reserves, savings can cover 2020 deficit, collaborative planning underway for 2021-22

June 29, 2020

As the City Council met in a public study session last Thursday to examine the City’s budget for Fiscal Year 2020 in the wake of the Coronavirus pandemic, Mayor Tim Keller’s administration laid out a vision for fiscal solvency both this year and in the coming budget years.

The pandemic had a devastating effect on local and national economies, closing businesses and eliminating jobs, virtually overnight. As unemployment rose to historic levels, cities around the country slashed budgets and furloughed or laid off workers. In Albuquerque, decreases in tax and fee revenue has created an anticipated FY2020 shortfall of $27.3 million in the City’s budget.

Mayor Keller’s administration began working to identify current-year savings by banning travel, examining department budgets for cost savings, putting restrictions on new hires, and examining contracts for potential cutbacks. Through organizations like the US Conference of Mayors and in partnership with the Albuquerque Congressional delegation, the administration also fought successfully to make sure Albuquerque was on the list of major cities across the country to receive direct funding from the Federal CARES Act, securing $150 million in COVID-19 relief.

In Thursday’s Study Session, Chief Financial Officer Sanjay Bhakta announced that the administration plans to cover the expected shortfall by drawing down the CARES Act relief funding to cover salaries paid to public safety, public health, health care, human services, and similar employees whose work has been substantially dedicated to mitigating or responding to the public health emergency.

Mayor Tim Keller said, “We directed a significant City response to the Coronavirus pandemic, dedicating thousands of hours of city worker time to deliver meals, respond to health and public safety challenges, stand up testing and care for vulnerable people, and make sure no one fell through the cracks. By drawing on relief funds to cover these eligible expenses and moving quickly to identify savings, we can make sure that for FY2020 we close the budget shortfall and, thankfully, avoid the layoffs and furloughs we’ve seen in so many other cities.”

The administration is working with City Council to allocate $42.7 million in payroll expenses to the CARES Act. Combined with other identified savings, this means the City will not have a deficit at the end of FY2020.

However, the outlook for FY2021 and 2022 is on less certain footing. Bhakta said, “We don’t yet know how long COVID-19’s impact on the economy will last, but we are anticipating a shortfall next year of anywhere from $55 to $107 million. The timelines for understanding what revenue will look like and the timeline for using CARES funding are not in sync, which will make allocating that funding in the best way challenging.”

The Department of Finance and Administrative Services is planning for a budget shortfall ranging in Fiscal Year 2021 from $16 to $66 million, with a narrow window in which to apply CARES funding to the City’s expenses related to the Coronavirus response.

The administration is working with the Council to develop a budget that take these challenges into account and develops a collaborative approach to solve them.