Miami Mayor Regalado: Furloughs may be needed to balance the budget

After a surprise court ruling, officials got to work on a plan to balance the $485 million budget. Furloughs are likely unless employees agree to cut benefits.

08/25/2012 5:00 AM

08/25/2012 8:25 PM

Miami Mayor Tomás Regalado has a back-up plan for balancing the city’s budget.

He would mandate furlough days — as many as two a month — and defer some capital expenses, such as fixing windows in city buildings. City leaders are also considering cutting vacation days, raising the city’s parking surcharge and changing the way employee pension plans are calculated.

“If we can’t use Plan A, we have Plan B,” Regalado said. “The city is not going to go bankrupt.”

Plan A was to declare “financial urgency,” a legal maneuver that would have allowed city commissioners to force $40 million in employee concessions. But last week, a Miami-Dade circuit judge ruled that City Manager Johnny Martinez had improperly invoked the tool, forcing city budget managers to consider other ways to slash the $485 million operating budget.

An unflappable Regalado said he isn’t worried.

“The good thing is, we have time,” the mayor said, noting that the budget is not due to the state until September.

But critics contend time is short. They point to Miami’s history of using financial urgency to balance the budget — and the fact that the City Commission can no longer increase the city’s cash flow by raising taxes.

“The city is heading to bankruptcy and Miami government is turning a blind eye to reality,” Fraternal Order of Police Vice President Javier Ortiz wrote in an email to commissioners last week.

LIKE A DECK OF CARDS

The court ruling Monday, prompted by a lawsuit from the police union, was a stinging blow to Regalado and his administration.

The rest of the week wasn’t much better. Talks with the firefighters’ union went nowhere. Chief Financial Officer Janice Larned threatened to quit on Thursday and had to be talked into staying on the job.

Budget managers, meanwhile, worked on the back-up plan.

Budget Director Danny Alfonso said he and his team found $17 million in additional savings. Of that total, $11 million comes from the city’s two pension boards agreeing to change the way they calculate benefits.

The budget team also slashed the amount of money they were planning to move from the operating budget into special funds for capital projects, Alfonso said. “We may not fix a window or replace a carpet here in the building,” he said.

The amount of money headed for the rainy-day reserves is also likely to dip from $8 million to $5 million. And plans for new services, including a $400,000 mini dumpsite, will likely be shelved.

Still, Miami’s budget gap exceeds $23 million.

Financial urgency is not completely out of the question, but it would take a vote of the City Commission. Alternatively, the city could win its appeal of last week’s court ruling. However, the most likely scenario involves the city and its four labor unions returning to the bargaining table.

In previous negotiations, the city had asked the unions to change the retirement age from 50 to 55 and adjust their pension benefits. Also, police employees were asked to pay for their take-home cars, and firefighters and solid waste employees were asked to pay higher co-pays on their health insurance. The talks came to a standstill after Monday’s court ruling.

If the two sides can’t reach an agreement, a special magistrate will hear the case and make a recommendation to the commission. At that point, the commission will have the power to rework employee contracts.

The process, however, could take months. And continuing under the current contracts into the new budget year could cost the city millions of dollars.

“That would mean that the manager would have to impose some of his management rights, which could include layoffs and furloughs,” Alfonso said.

Regalado says layoffs are off the table.

‘NOT PRETTY’

The FOP’s Ortiz said he is open to negotiations. But he argues that the city owes its firefighters and police officers millions of dollars from previous years when financial urgency was invoked.

“Regalado’s strategy to balance the city’s finances is a failure and we are heading towards a financial emergency,” Ortiz wrote in his letter to the commission last week. “What are you going to do when you owe the city’s public safety employees in excess of $60 million in benefits that provide us with important tools like public safety equipment?”

Responding to the note, Commission Chairman Francis Suarez implored the union to resume negotiations. Suarez said that he had seen the contingency plan. “As you can imagine, the preliminary results are not pretty,” he wrote to Ortiz. “It is indisputable that the results are far worse for our employees than fruitful negotiations will be.”

Regalado said it is up to the unions to make the next move. “We are going to have a balanced budget,” the mayor said. “The unions have to decide whether to do reform in the pension program or have cuts in their current salary and benefits. That’s the only option.”

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