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2020 Budget – Page 1 <br />MEMORANDUM <br />To: Mayor Walsh and Orono City Council <br />From: Ron Olson, Finance Director <br />Subject: 2022 Budget <br />Date: June 28, 2021 <br /> <br />Attachments: 2022 Budget <br /> <br /> <br />Work on the 2022 budget has begun. Staff is looking for guidance from the Council on the <br />funding priorities for the budget and the level of the property tax levy. In order to assist the <br />council, the departments have identified items that may be increasing that are outside of our <br />control, program and/or staffing change requests that may impact the budget, previously planned <br />tax levy increases (parks and road). Guidance form tonight’s meeting will be used to prepare a <br />draft General Fund budget that will be presented at the July 26th work session. <br /> <br />Issues for discussion: <br /> <br />1. Wage and benefit (FICA, PERA, Health, Work Comp) increases. The City’s four union <br />contracts are in force through 12/31/22. The contracts call for a Cola increase of 2% <br />increase on January 1st, and an additional 1% on July first. The non-union employees <br />have been calculated at 3% on January 1st. In addition to the Cola increase, some <br />employees will be eligible for step and longevity increases. Wages for current employees, <br />including Cola, Step, Longevity, FICA, and PERA will increase $115,000. <br /> <br />Workers’ Comp premiums are calculated based on wages and an underlying rate based on <br />job classification. The underlying rates are currently estimated to be increasing by 20%; <br />this is driven in large part to the increase of PTSD claims. This will result in an estimated <br />30% ($40,000) increase in premiums. For health insurance, union contracts call for a <br />50% match of the family health insurance premium increase. A 10% premium increase <br />would result in an additional city contribution of $75 per month which is approximately <br />$30,000. We will not know the actual insurance premium increases until later this year. <br />The total General Fund increase in wages and benefits is expected to increase by <br />$185,000. <br /> <br />2. Inflation looks to be a factor in 2022. The current Minneapolis/St Paul CPI-U is at 4.6% <br />over the last 12 months. Some of this increase is the result of a rebound of prices after <br />pandemic related dip last spring. Some of the increases are due to ongoing supply chain <br />issues, and some are related to ongoing labor shortfalls. The biggest impact of the CPI for <br />expenditures will most likely occur in the 2023 budget as the labor unions will ask for <br />higher Colas.