Birmingham Grappled With Budget as COVID-19 Slowed Economy

Mayor Randall Woodfin on Facebook Live 6.12.2020 (Source: Solomon Crenshaw Jr.)

At first, Birmingham officials predicted that COVID-19 would have a dire impact on city coffers.

Though officials had immediately responded to the pandemic by allocating $1.2 million to a loan program for small businesses that had been affected, by June 2020, business tax revenue had fallen by nearly 20%, leading Mayor Randall Woodfin to call the situation an “economic crisis” that would result in “painful” budget cuts.

His proposed FY 2021 budget anticipated a nearly $50 million drop in revenue, resulting in furloughs for 259 full-time employees and 114 part-time employees. The city also suspended non-essential employee travel, cost-of-living adjustments, nine paid holidays and longevity pay.

The budget also included cuts to finding for transit and schools, though Woodfin argued that those cuts were offset by federal funding and increases in capital expenditures. Public libraries didn’t fare as well, taking steep cuts that resulted in 158 of the system’s 211 employees being furloughed.

By December 2020, city finances had largely stabilized, and then-Finance Director Lester Smith told councilors that losses would be less than anticipated — an estimated $17.1 million dip instead of the initially predicted $18.2 million.

Earlier that month, the City Council had voted to borrow $4.85 million from the city’s general fund reserve to bring back 132 furloughed city employees, mostly from the library system and the city parks department. Those costs would also be offset by federal funding, Woodfin said.

When the city received $74.4 million in funding from the American Rescue Plan in June 2021 — another $74.4 million in American Rescue Plan funding is due to be delivered this spring – it prioritized giving bonuses to city employees. Full-time employees will get $5,000 and part-time employees $2,500, totaling about $16.8 million. Kelvin Datcher, the city’s director of intergovernmental affairs, cited employees’ “unprecedented sacrifice and unprecedented service.”

Much of what city employees had sacrificed due to COVID — merit raises, longevity pay, the cost-of-living adjustments — was restored in the city’s FY 2022 budget, which, despite the previous year’s dip, was the city’s largest ever.