Surplus funds eyed to cut deficit in Chesapeake

CHESAPEAKE

When City Manager William Harrell looked to trim the budget this year, he and his staff zoomed in on about $12 million in reserves tucked away across city departments.

Social services had about $4.3 million; the Chesapeake Community Services Board nearly $5 million; t he Chesapeake Interagency Consortium, which serves at-risk children, $2.7 million.

These reserves, called "fund balances," are stashes of money city departments keep for one-time expenses or in case of unexpected catastrophes.

Harrell, working with a predicted $7 million revenue shortfall out of a $963.2 million budget, wants some of those departments to use their stashes to help pay for daily operations. He's recommending reduced funding to social services and the Community Services Board, but also is asking those groups to use about $750,000 each of the fund balances to help pay bills.

The idea has not pleased everyone. The chairman of the Community Services Board, which serves those with mental disabilities or mental health or substance abuse problems, worries that raiding the fund balance will make paying for big future expenses more difficult.

"It's like drawing money out of your bank account," said the chairman, Richard Losea. "What happens when the city's portion of that fund balance runs dry?"

But Harrell said saving money this way allows for other expenses, such as a proposed salary plan, which would deliver raises to Community Services Board workers and other city employees.

"The overriding issue is the general objectives of the government are more critical than the interests of individual departments," said Harrell.

Of the fund balances, Harrell said: "These are city dollars that have been placed there. Now is the time to begin drawing down on those funds."

Assisted by a financial adviser, city officials will be reviewing the fund balance policy. Harrell said the prior philosophy was that "departments should fend for themselves in the budget process." In the future, the city might opt to centralize reserve funds, allowing the council to choose where excess money goes, he said.

"There is no need to have these little pockets of reserves all over the city," said Councilman C.E. "Cliff" Hayes Jr. He said that before this year, he was unaware that the fund balances had grown so large.

Harrell said departments that are supported by the general fund rarely have such large fund balances.

Chesapeake's human services department, which oversees social services, Chesapeake Juvenile Services, and the Chesapeake Interagency Consortium, has healthy fund balances that drew Harrell's attention.

Doris "Cookie" Palacios, director of the department, said that the fund balances have grown in part because her groups have had to work within a no-growth budget. That has forced her to hold positions open, which has resulted in salary savings that end up in the reserves.

The fund balance is almost like a lock box with money that the department can't touch, she said.

"It's just growing," Palacios said of the fund balance. "We have all these needs here. Everything that results in a savings flows into an account that we can't access. That's a dilemma for us."

Losea, of the Community Services Board, said the agency's fund balance includes both city and state money. He said it has been accumulating for at least the past 11 years that he has been involved.

He said the agency took $1.3 million from the reserve to use as a down payment to construct the group's main building, which was completed several years ago.

When Losea initially heard that overall funding could be reduced, he thought it would have a "grave impact on Chesapeake's most vulnerable citizens," he wrote in a letter to Harrell.

He said that funding cuts would force the agency to reduce outpatient services to adults and children, to eliminate two clinical therapists and would result in longer waits for residents.

The proposed cuts to social services were also large. Harrell has helped Palacios avoid shortfalls by proposing that social services use more than $750,000 from the undesignated reserves.

Palacios said she is fine with that, as long as the department doesn't have to take money from there each year.

"We're hoping we don't use it for that kind of stopgapping in the future," she said.

Mike Saewitz, (757) 222-5207, mike.saewitz@pilotonline.com