Employee-hours tax fails. 2018 budget explodes.

Budget Chair Lisa Herbold bet big by putting the employee-hours tax into her revised balancing package, knowing that it didn’t have majority support from her colleagues. She lost that bet today, and with that her budget plan fell apart.

As I wrote last night, the first consent grouping of budget items up for vote today included the employee hours tax and seventeen items that would be funded from the projected revenues. Several of those items were important, arguably critical, items for 2018. Herbold’s gambit was that she could use those items as leverage to get her colleagues to vote for the tax as a necessary evil.

They didn’t. The tax was voted down 4-5. The “no” voters on the Council ( Harrell, Bagshaw, Johnson, Juarez and Gonzalez) all said that they are in favor of an employee hours tax in principle but wanted more time to run a real stakeholder process to build the plan for the tax and what the revenues should be spent on. They committed to make that happen in the next 90 days (Juarez wants to do it in 30, Gonzalez wants until March 31, but all five want it to happen quickly). Gonzalez and Sawant are both working on resolutions to that extent to be approved by the Council next Monday.

Plan B for funding the seventeen items (totaling $12.95 million) was proposed by Harrell: transferring $5 million from the city’s Revenue Stabilization Account (i.e. the “rainy day fund”) and redirecting next year’s annual contribution to the RSA instead to collectively cover the $12.95 million.  That led into another lengthy debate about whether that was an appropriate use of the RSA funds, and in the end that measure also failed. Ironically, Sawant and Licata proposed using RSA funds two years ago to fund the homeless response; it was voted down by Harrell, Bagshaw, and other “fiscal conservative” Council members. Today that flipped: Sawant, Harris-Talley, Herbold, and O’Brien were among the Council members voting it down.

Those two budget line-items took three hours today. And after all that, the Council is left with a proposed budget that is out of balance by $13 million. In response, they adjourned today’s meeting (cancelling the afternoon session) and will reconvene at 9:30 tomorrow morning.

Now they must madly scramble for a new plan. The original schedule was for the budget to be largely complete by the end of tomorrow afternoon’s session, with the final committee vote next Monday morning and the full Council voting in the afternoon to formally adopt the budget.  If they can magically find $13 million in the next 18 hours, that might still happen, but it doesn’t look good. The Council is deeply divided, and their usual “go-to” revenue sources are tapped out. Everything up to this point was easy; suddenly writing the budget just got hard.

Either Herbold or Harrell (or both) will need to step up to guide the Council out of the wilderness — and quite frankly, neither of them showed a willingness today to provide that kind of leadership. This Council doesn’t have much stomach for budget cuts; Johnson proposed a set of cuts last week, but that proposal went nowhere. $13 million is not a lot of money in the grand scheme of the city’s multi-billion budget, but finding it will still push the Council members out of their comfort zone.

Herbold has had a good run the last two years since joining the Council in January of 2016; she has pushed through several important pieces of legislation and has been very visible in offering amendments to her colleagues’ bills. But this is a huge stumble for her, and if she holds ambitions of being Budget Chair (or even Council President) going into 2018, today might have just put an end to that. She went all-in on the employee-hours tax, spending her political capital as Budget Chair to insert it into her balancing package despite its lack of consensus (or even majority) support, and tied it to essential spending. If she had pushed it through, she would have earned resentment from some of her colleagues but at least could declare a major political victory. Now she still has all the resentment to deal with, but nothing to show for it.

We’ll know more tomorrow morning about how they intend to move forward. They will find $13 million, but it won’t be easy and it won’t be a consensus decision.