Lansing's next budget includes nearly $13 million in cuts to programs, reserves

Correction: A previous version of this article stated the Arts Impact grants were eliminated to save $87,500. The Arts Impact grants were eliminated to save $75,000.

LANSING – Deep cuts are in store in the 2021 fiscal year after City Council slashed nearly $13 million that had been earmarked for expenses including the arts, staffing, citywide events and Lansing's reserve funds.

The more than $216-million-dollar budget takes effect July 1,  but officials warned amendments are likely as the city reels from the economic effects of the COVID-19 pandemic.

Certain sectors of Michigan's economy, including manufacturing and construction are reopening in phases, but nonetheless Lansing officials predict the city will lose $7.8 million in income tax revenue next fiscal year.

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Virus-related fallout also could cost Lansing $1.2 million from charges for services, $164,000 from fines and forfeitures and $106,000 from licenses and permits over that budget cycle. 

Michigan's budget is likewise taking a hit and Lansing expects to lose $3 million in revenue sharing from the state in fiscal year 2021.

Lansing Mayor Andy Schor had proposed a $229 million budget in March although he warned that spending plan was just a placeholder due to uncertainty surrounding the pandemic.

The city's current budget, covering fiscal year 2020, isn't settled either with further amendments expected before June 30. 

"The hardest part right now is not knowing if we’re at the bottom," Council President Peter Spadafore said, although he added he believed the budget prioritizes health and public safety.

"We've made sure that the front-line workers that we've relied on since day one of this pandemic are still protected," Spadafore said.

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City will spend less on staffing

Because of the pandemic, Schor ordered a freeze in April on nonessential spending, as well as a freeze on promotions and nonessential hiring. Those restrictions will save Lansing $700,000 next fiscal year, according to the latest projections. 

The budget nixes tens of thousands of dollars allocated for temporary staff members used by departments including Neighborhoods and Citizens Engagement, City Council, the mayor's office, the city attorney's office and the city clerk's office.

By cutting training and travel for staff, Lansing will save $80,000 more. Additionally, the money allocated to incentivize city employees to live in Lansing will be halved, saving $25,000. The $26,317 previously allocated for an employee recognition program also will be halved.

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Lansing has offered voluntary furloughs to non-bargaining employees as well as city workers who belong to the United Auto Workers, Teamsters 214 and Teamsters 243 unions. Lay-offs are not included in the recently adopted budget, but Schor has warned involuntary furloughs and layoffs are possible depending on finances. 

Council Member Adam Hussain proposed cutting pay for council members, but City Attorney Jim Smiertka said, by charter, that power requires a recommendation from the citizen-led Elected Officers Compensation Commission.

Lansing City Council slashes millions from reserves to cover budget shortfall

Reserves drop to historic low

The 2021 budget will slash Lansing's reserve funds to about $2 million, which is the lowest level in decades and only 1.4% of general fund spending. 

Reserves are unallocated funds intended to provide some cushion during an economic downtown. A 2015 city policy directs Lansing's to keep reserves equal to between 12% and 15% of general fund spending.

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Even prior to the pandemic-related cuts, Lansing's reserve levels were at $6.8 million, or less than 5% of general fund spending, leaving the city more vulnerable to the crisis. 

Lansing slashed millions from reserves in 2019 and 2020 in part because of series of financial mistakes, including fines owed to the Internal Revenue Service.

The city's reserves had dropped during the Great Recession and Lansing had finally surpassed  the 12% target in 2017. 

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Grants to nonprofits cut and could be cut further

An ordinance requires Lansing to set aside 1.25% of its general fund, for "basic human services," with the goal of promoting equity and social justice.

Because of the drop in general fund revenue, that allocation will likely drop $243,000 from the amount previously planned, bringing total human services funding to nearly $1.6 million total. 

The organizations that will receive grant funding through Lansing's Human Relations and Community Services department already have been selected. But, because Lansing's general fund is in flux, Lansing officials have warned the participating nonprofits they might end up receiving more or less money than originally indicated.

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Arts funding cut and events, programs cancelled

The recently-adopted budgets eliminates $75,000 earmarked for Arts Impact grants, awarded through the Arts Council of Greater Lansing to local organizations for projects like murals. About $87,500 in other funding for arts-related nonprofits remains.

Other spending reductions will come from eliminating Lansing's subsidy to the Common Ground music festival, which already has been postponed to summer 2021 because of the novel coronavirus, and shuttering the city's outdoor pools this summer. The cancellation of Lansing's Fourth of July celebration will save $25,000. 

About $2,000 will be saved by reducing the money that City Council can spend on community events. 

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Other savings

The city expects to save $1.9 million annually by rebidding health care plans. The providers remain the same and the quality of the health care plans will not change, Interim Finance Director Shelbi Frayer said. 

Additionally, Lansing will free up $2.25 million in previously earmarked money by putting the proceeds from sale of the former Red Cedar Gold Course towards improving park facilities. 

Developers Joel Ferguson and Frank Kass bought the property from the city and are building hotels, retail space and apartments. 

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Property owners will be charged for drain project

Not included in the budget was city funding to cover Lansing's share of the 30-year, $34.8 million Montgomery Drain Project, a regional effort to prevent storm runoff from contaminating the Red Cedar River. 

In the past, city officials have raised the possibility of using Lansing's operating budget to fund all or part of the city's estimated $22 million share. But, that's a much heavier lift given financial strain because of the virus, council members said. 

Instead, the costs would be covered by taxes paid by all property owners in the city as well as a special assessment charged to an estimated 125 residential property owners and 55 commercial property owners in the immediate vicinity of the project near the Red Cedar River. 

Contact reporter Sarah Lehr at slehr@lsj.com. Follow her on Twitter @SarahGLehr.