Finance director gives parting thoughts on budget | A CBT Conversation

Former Columbia Finance Director Lori Fleming has been practicing her Spanish for 30 minutes every morning. But Columbia’s longtime budget chief is admittedly a numbers person, not a words person, so she thinks she’ll do most of her learning when she starts her new job in South America.
Fleming’s last day at the helm of the city’s finances was Dec. 3. She left two days later for Washington, D.C., to train for her position as part of the US Treasury Department’s Office of Technical Assistance. In January, she’ll head to Honduras, where she will help the government bring its financial reporting into compliance with International Public Sector Accounting Standards.
Fleming grew up in the Peoria, Ill., area, and went to school at the University of Arizona, where she earned degrees in accounting and management information systems. She went back to Illinois to get a master’s degree in accounting.
She began her career as an accountant for the city of Peoria and worked her way up to finance director there. In 1995, she started her 15-year stint as Columbia’s finance director.
Since Fleming has led Columbia’s finance department, it has gone completely digital and increased the turnaround time for budget development. When she started, department heads made changes to budgets on paper, and information technology employees then punched them into the city’s computer systems. Tweaking individual budgets took about 24 hours, she said. Now, with the software the city has, employees can make budget changes and see their effects instantly.

With federal stimulus money drying up, fiscal 2012 is expected to be one of the hardest years for local government budgets since the recession hit. Is Columbia’s next budget going to be particularly difficult compared with the past several years? What revenue streams have been hit hardest, and what is the budget gap the city must plug?
The city of Columbia has not used stimulus funds for operations. However, the city did receive these funds for capital projects.
The 2012 budget will be difficult due to the rising cost of health care and pensions. But the city’s single most significant revenue stream, sales taxes, actually grew 2 percent in 2010. That is a sign of improvement. Current projections indicate an additional $1 million to $1.5 million will need to be cut from the projected expenditures for the fiscal 2012 budget. This is about what was necessary in the 2011 budget process. So I would say 2012 is going to be just about as difficult as the 2011 budget process.
With your departure and City Manager Bill Watkins’ retirement, the fiscal 2012 budget will be driven by two new faces. What effect will that have on the budgeting process? Do you have any suggestions or words of wisdom on crafting a budget?
The budget staff has developed a very good process for budgeting. I believe that process is flexible enough to respond to any changes in philosophy a new city manager will want to make. So much of the detail work is done by budget staff and staff out in the departments that I am confident the 2012 budget process will proceed without a hitch.
As far of words of wisdom: Don’t underestimate the amount of time it takes to properly review and prepare the budget. The city really doesn’t have one big budget but dozens of individual budgets. It takes a lot of time to review.
The general mood right now seems to be against any sort of fee or tax increases to cover budget shortfalls and suggests gaps will likely be plugged with program cuts. What city services do you think can be trimmed with the lowest impact on citizens, and which do you think are likely to be targeted by staff and the City Council?
The Council sets the priorities; staff will figure out how to meet those priorities. I think everyone is aware of the issue of increasing pension costs that must be addressed. However there is no simple quick fix to that issue, which will take years to address.
What has changed in terms of the city’s financial liabilities during your tenure? What has changed in terms of how the city generates revenue? Has the structure remained relatively consistent?
Not much has changed in the way Columbia generates revenue. There probably are more state and federal mandates that the city has to comply with, which usually have a cost.
Columbia, like most municipalities, has been hit by rising pension obligations and decreased fund returns. Is this the biggest challenge the city faces in terms of long-term liabilities, and what steps would you recommend to mitigate the problem?
There is no quick fix or simple answer to the pension liability issue. It will take a joint effort between the City Council, management and employees to figure out how to address this issue. I think the city is on the right track by starting the discussion now before it becomes a crisis. Because the pension liability is a long-term liability, the city has time to figure out the best course of action.
Given the hit the city has suffered in its sales tax base and the fact that Columbia is no longer the regional shopping hub it once was, do you think Columbia needs to begin looking at ways to diversify its revenue stream away from the strong dependence it has on volatile sales taxes?
The Finance Audit and Advisory Committee did some really good work in reviewing the city’s revenue sources. I believe they made some good recommendations the Council should consider. However, it is difficult to talk about increasing fees in the current economic conditions.
The issue of Internet sales that are not taxed will be the biggest factor in determining whether Columbia, and for that matter most cities across the nation, will have to find new revenue sources.
To prop up the municipal bond market two years ago, Congress established the Build America Bond program, which subsidizes municipal bonds so they pay a higher interest rate to investors. Now Congress will have to decide whether to extend that program amid concern among investors about the financial stability of some local governments. How have Build America Bonds benefited Columbia, and if Congress does not extend that program, will it affect the city’s ability to access the bond market?
The city has a great reputation in the bond market, which provides good access. Although we have taken advantage of Build America Bonds, I do not believe it will have a big effect on the city’s ability to issue bonds.