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Mayor Jackson: Carryover balances, careful planning to help buoy 2021 city budget

Cleveland City Hall
Posted at 5:44 PM, Feb 16, 2021
and last updated 2021-02-16 18:14:42-05

CLEVELAND — City budget hearings unlike any in recent memory began Tuesday morning as Cleveland City Council and Mayor Frank Jackson look to plan out how to fund city services in 2021, a year highlighted by the ongoing pandemic and the recession it created.

In his remarks to members of Council, Mayor Frank Jackson said the proposed $1.8 billion budget spares layoffs of city employees and does not include reductions in city services. Although the city undoubtedly was impacted by the pandemic-related shutdowns in the spring of last year, the city's financed have been buoyed by CARES Act funding, cost-cutting measures, and the yearly carryover balances.

Coincidentally, city finance director Sharon Dumas had projected a recession in late 2020, and the city planned accordingly, Jackson said. Unbeknownst to everyone at the time, the recession would be caused by the coronavirus pandemic.

"It was very swift and more severe, even more so than the recession in 2008 and 2009," Jackson said. "As a result of that, because we had budgeted $43 million for the economic downturn, we were able to cushion that loss in revenue."

The city's proposed 2021 budget includes a general operating fund of $659 million with projected revenues of $636 million. Council President Kevin Kelley noted that the conservative approach to the budget in 2020 has helped the city's finances weather the storm.

"I just want to highlight how bad things could have been if we hadn't budgeted a certain way leading into 2020," Kelley said.

Jackson told Council that the proposed budget would be the first time since voters approved the income tax in 2016 that the city's budget would not be structurally balanced, meaning expenses would outpace revenues. However, because the city had a carryover balance of $43 million the prior year, which effectively acts as a short-term rainy day fund, the city was able to use $23 million to cover the projected revenue shortfall in 2021.

"We were able to minimize the impact of the economic downturn," Jackson said. "It still hit us but we were able to minimize it to the point where our services were not substantially impacted."

The shortfall in revenue is due to the continued impact on tourism and entertainment. In his letter to Council, Jackson said revenues from income taxes, hotel taxes, and other streams including sporting event admissions and parking, were nearly $60 million short of projections in 2020, due entirely to the pandemic.

Of particular concern for city leaders are Cleveland Hopkins International Airport and the continued impact the pandemic has had on the airline industry and economy overall. According to airport passenger data, total passengers at Hopkins declined by more than 57% in 2020. Much like Cleveland Water and Cleveland Public Power, the airport's budget is derived largely from user fees.

"When the pandemic hit, they went down to as low as 500 people per day. This is compared to thousands of people per day," Jackson said. "They have picked up and they've come a long way since then but they have not returned to the number of people utilizing the service. They are recovering and they are maintaining but we have to pay attention to them because they are so closely tied to this economy."

As far as public safety is concerned, the mayor's proposed budget also includes three classes of police cadets, amounting to 180 new police officers in 2021. One hundred new firefighters are expected to be hired along with 40 new cadets for Cleveland EMS.

Refund Cleveland, a collaboration between residents, Open Cleveland, and Black Lives Matter Cleveland, has created an online budget creation module that allows residents to not only prioritize the city's general fund but also send their recommendations to the City Council before it is finalized. The interactive module provides a 'birds-eye view' of the general fund's budget.

To date, the city nor the council have not solicited feedback from residents by way of town halls or public comment at council meetings.

The Council is expected to continue budget hearings on the general fund for the next two weeks. The city must finalize its budget by April 1.