Birmingham’s FY 2021 budget will be delayed for three months as the city works to ascertain the financial impact of COVID-19.
Mayor Randall Woodfin originally was scheduled to present his office’s proposed budget to the City Council by May 20, before the start of the fiscal year July 1. “That will not happen,” he told the council Tuesday.
“The uncertainty surrounding the current financial impact, along with quantifying possibilities of second and third waves on future financial resources, makes it extremely difficult to forecast operations with any degree of accuracy,” Woodfin said. “It is therefore the position of the finance department that the normal process of budget development be postponed until we have better data for estimating both the short-term to mid-term impact of the pandemic.”
The majority of city revenues come from sales, use and occupational taxes, all of which are expected to generate less money as a result of the pandemic. Woodfin told councilors Tuesday that the city is expecting “anywhere from a $75 million to $110 million impact on the 2021 budget.”
For comparison, that amount would be between 17% and 24% of this year’s $451 million operating budget, which Woodfin called “lean.”
“Adjustments to an operational budget of our size to offset this amount of deficit would require major reductions and austerity measures to our current cost structures,” Woodfin said, adding that he hoped the three-month delay “will provide more time to receive data, to better understand and assess the impact.”
Woodfin’s office now plans to present its proposed FY 2021 budget on Aug. 20. If the council approved that budget, it would go into effect Oct. 1. In the meantime, Woodfin said, the city would “roll forward” with the FY 2020 budget, “with certain cost modifications (that are) still being identified, evaluated and quantified.” Those changes will be presented to the council by the end of next month, Woodfin said.
One budget reduction measure was passed by the council Tuesday, deferring the city’s incentive payment to grocery delivery company Shipt by one year. As that payment amount was dependent on the number of employees Shipt hires, it’s unclear how much of an impact that change will have on the FY 2021 budget.