Denver poised to make up for historic budget shortfall without layoffs

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DENVER (KDVR) — Denver faces the largest budget shortfall in modern history, but the city is poised to make millions in cuts without layoffs.

It all stems from a lack of taxes and fees coming into the city as a result of the economic devastation from forced shutdowns due to the coronavirus pandemic. 

The Department of Finance projects a 10.5% decrease in general fund revenue, compared to a 6.4% decrease in 2009 during the Great Recession. Sales tax revenue projections are down 16.8% and lodger’s tax revenue is down 62.3%, wiping out roughly 5 years of growth.

It all adds up to a projected $226 million shortfall that the city needs to make up through cuts, furloughs, savings, reserves and hopefully federal reimbursement.

Denver asked each department to evaluate and cut 7.5% of its department budget without impacting personnel. Most departments came up with cuts under that figure, because any further cuts would impact employees’ jobs, according to a DOF spokesperson.

“The 7.5% is simply to respond to this year’s challenge,” said Chief Financial Officer Brendon Hanlan to Denver City Council on Wednesday. “Next year’s challenge is 11.5 percent.”

Denver has a lot of cash in reserves, and is putting $96 million of that money toward closing the gap. The problem is: if they use reserves in a similar fashion next year, they run the risk of dipping too low into that pot, and could hurt their AAA credit rating as a city. That’s why the cuts next year will be even deeper, according to Hanlan.

Across the board, departments are using vacancies as a cost-saving method: not hiring open positions to save one or more salaries worth of taxpayer money. The issue is, some counselors worry this may stretch city employees too thin in certain areas, by forcing them to pick up the slack.

“It would not be equitable to be giving four times more responsibility, and then requiring the department to keep its vacancy savings open,” said Councilwoman Robin Kniech.

Hanlan says it would be better to hold or abolish vacant positions rather than impacting current staff. Under the current budget plan for 2020, there are no layoffs across city departments.

LINK: PowerPoint presentation on Denver budget reductions

Other council members are concerned about limiting resources for departments that are on the public’s radar considering the pandemic, and the climate toward social justice reform.

“I’m wondering why we would even touch the independent monitor’s office or our housing office in any way,” said Councilwoman Candi CdeBaca. 

Hanlan explained that no departments are exempt from this budgeting process, but those departments remain a top priority for the mayor’s administration. 

The revenue forecast will be reevaluated by the city in September. 

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