Norfolk may furlough workers to trim deficit

NORFOLK

Because of the deteriorating economy and state budget cuts, the city faces exploding deficits that could grow to $46 million in 2-1/2 years, City Manager Regina V.K. Williams said Tuesday.

Williams, who previously had said she hoped to avoid layoffs or furloughs of city employees to balance the budget, said she's "not optimistic" that unpaid furloughs can be avoided this year.

The current budget, which concludes at the end of June, is more than $11 million in the red, Assistant City Manager Marcus Jones said.

Norfolk already has taken a step toward controlling costs, trimming $13.9 million in expenses out of the current budget. But declines in state revenue have outpaced that. Revenues are down more than $20 million since July 2008, Jones said.

Projected declines in state funding mean that in the next fiscal year, which begins July 1, Norfolk's budget gap will grow to $35 million and then to $46 million in the following year unless costs are reduced or revenues increase, he added.

"This is going to be the toughest budget we've had to deal with in a long, long time," Mayor Paul Fraim said. "We've got some difficult choices to make."

To reduce the current deficit, departments have been told to cut their budgets immediately by 5 percent, not including personnel. That will close the current budget gap by half, Jones said.

A hiring freeze implemented months ago has not worked, in part because the poor economy has discouraged job turnover, he said.

Williams said she hopes the rest of the gap can be cut by eliminating contracts with private agencies. The city can't end a fiscal year with a deficit. "It's going to be very difficult" to close the gap, she said.

But those cuts will only get the city through the end of June.

In the coming year, increases in employee insurance and retirement costs will add $11.3 million to city expenses. And rising debt service will tack on nearly $10 million to the budget.

Meanwhile, tax revenues are declining with the exception of real estate taxes, which are showing slight growth. That growth will all but disappear in the next few years as falling housing prices depress residential real estate assessments, Jones said.

Williams has until April, when she unveils her next budget, to decide how to reduce the $35 million projected gap for the upcoming year.

Already, the school system has been asked to accept a $5 million cut in city funding.

Williams also has told employees that there will be no raises next year and warned council members that new programs will be limited.

The city has a $4 million economic downturn fund, but Williams said she doesn't want to use that. "It's one-time money, and that's not going to solve our problem," she said.

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com