City of Norman budget experts project a negative general fund balance in eight years, requiring a remedial course of action during a period of long-term expenditures and projects.
Anthony Francisco, Norman’s finance director, said the city’s expenditures are growing at a faster rate than its revenue. If this trend persists, the city will experience a negative fund balance, which is illegal according to Oklahoma state law.
The city’s fiscal year end 2025 budget book notes expenditures have increased from around $85 million in 2020 to the city’s estimate of almost $120 million in 2024, peaking over the past eight years. Additionally, the city’s beginning general fund balance is projected to decrease from $13 million in 2025 to $4 million in 2029.
“(The projection) is basically a warning to say that we have to take some remedial actions to make sure that we do not stay on the projected course,” Francisco said. “We either have to cut some expenses or add some revenues.”
Kim Coffman, Norman's budget director, said city department heads request 75 to 115 new positions each year, which each cost a minimum of around $80,000 annually.
Francisco said cutting expenses could include decreased levels of pay raises over time and decreased hiring, even for “justifiable” positions. According to the FYE 2025 budget, 68.5% of the general fund is attributed to personnel costs.
“The city of Norman is a very small government for a city its size, and there is justifiable need for additional personnel in a lot of areas, but we don't have the revenues available to supply those needs for additional personnel,” Francisco said.
According to Coffman, the city’s sales tax revenue declined prior to COVID-19 due to online shopping. Following Covid, Coffman said the city saw unprecedented sales tax increases that led to increased expenditures, including 67 new positions. Now, she said sales tax growth has stagnated.
Norman’s FYE 2023 budget book notes sales tax revenue increased by 20% from 2020 to 2022, compared to a 0.8% decrease in 2020.
“Now that sales tax has seemingly flattened, those increased expenditures and the trends they cause have put us on a slightly more perilous projection trend. We bumped up our expenditures, we added more positions, we did capital projects, things like that, because we need to spend what we bring in,” Coffman said.
In September, the Norman City Council approved the Rock Creek Entertainment District Project Plan, which would cost $600 million through a tax increment finance, or TIF, district collecting city sales tax.
The entertainment district is currently facing legal challenges following the success of a petition organized by Norman residents against the establishment of a TIF.
Francisco said the entertainment district would have a projected net negative impact and would not aid the city’s pressing budgetary concerns. He said since the tax increment financing model would allocate 100% of sales tax in the district towards the project, it would not contribute sales tax revenue towards the general fund, though the nearly two-thirds of the general fund’s revenue is composed of sales tax.
Additionally, Francisco said OU’s move to the Southeastern Conference has only measurably increased Norman’s room tax revenue. Regarding other general revenue sources, such as sales tax, he said the move has not had much of an impact.
Ward 7 Councilmember Stephen Tyler Holman, who has been on the Norman City Council for 11 years, said he has seen similar projections for every year of his tenure, adding he is not concerned.
“I wouldn't send any alarm bells about the projection,” Holman said. “It would assume that no changes are made, that no future councils for the next eight years will make any adjustments, that staff won't make any adjustments, … which we always do.”
Greg Burge, chair of OU economics, said projections are based on assumptions and economic trends. While not absolute, he said projections can form discussions regarding avoidable problems.
“It's not so much that eight years from now we'll run out of money, it's just that that's a really good, effective way to think about the pressure points in the budget,” Burge said. “It increases discussion, and then it gets people thinking about the future.”
Burge said most cities conduct similar projections, but it is difficult to project on a long-term scale like Norman.
“There's kind of this rule in public finance that it's really difficult to forecast out more than just a few years in budgets,” Burge said. “My understanding is that most all cities, and certainly all major cities, are keeping track of these forecasts.”
Both Coffman and Francisco believe the city will avoid its projected course due to the illegality of a negative fund balance and the council’s consideration of their warnings.
“On a one-year basis, we have managed to have revenues that are closely in line with expenditures,” Francisco said. “I do believe that we will be able to budget within our means in each year.”
Coffman added the projection is not a cause for concern, adding she has monitored similar projections throughout her career.
“I've been here for seven years, and it's always kind of a doom and gloom situation if we stay on the current path,” Coffman said. “We've always been able to correct the course.”
This story was edited by Anusha Fathepure, Peggy Dodd, Ismael Lele and Ana Barboza. Riley McDaniel and Avery Avery copy edited this story.
