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Another budget crisis looms on East St. Louis horizon
By ALAN J. ORTBALS

   East St. Louis could well face another financial crisis June 1, despite the fact that the municipality just passed its 2006 budget one month ago.

   That's because the East St. Louis Financial Advisory Authority only gave approval of its financial plan - and therefore its budget - for five months, according to Ken Gearhart, FAA executive director.

   It doesn't appear that the city is off on the right foot.

   For much of the past 10 years, the city of East St. Louis' financial office has been operated by an outside contractor. The contract with the latest financial advisor expired last year. Gearhart says the FAA wants East St. Louis to continue to use an outside third party, but that the city is resisting.

   "They (the city) did in fact, after pushing and shoving, go out with an RFP (request for proposal)," said Gearhart. "They have received proposals, but they have not made a selection. So we are sitting here this morning with people who would like to order supplies - or maybe services - who can't, because the system has not been set up to receive those requisitions. They're running out of gasoline and toilet paper, and it's just a continuation of this whole chaos that I described - this uncertainty about what's happening and how do we work through it. I wish I was a little more academically inclined, because it would be a great case study," he added.

   In June 2005, it appeared as though the FAA might be disbanded. At least, Gearhart says, the entity was scaling back and he was considering retirement.

   Those retirement dreams quickly evaporated when the city of East St. Louis failed to deliver an audit by the statutory deadline.

   Because the Illinois Finance Authority had issued bonds under the Illinois Distressed Cities Act to consolidate the city's debt in 1993, IFA maintained a role beyond that of the FAA.

   Under the act, if an audit was not filed or if the budget was not balanced, the FAA's powers would be restored. The audit was due by Aug. 30, 2005.

   "They filed an audit - what they called an audit," Gearhart said. "Actually it was a financial statement, but the auditor's opinion was a disclaimer - meaning that he could not give an opinion on those financial statements because he didn't have the information to do so. After considerable discussions at levels above me, the IFA certified to the governor that it did not meet the requirements of the Illinois Audit Act and our powers were then restored. We were gone for just 96 days," Gearhart added.

   With the FAA back in business, the city of East St. Louis needed to get its 2006 budget done in November 2005 so it could be reviewed and approved before the end of the year. Illinois statutes provide a 30-day grace period.

   "We got our powers back Sept. 21," Gearhart said. "Up until that point, the city was thinking about a December deadline and not a November deadline…at least that's what I surmise. I don't think the city was intending to do the financial plan, which to me in this city is more important than - or as important as - the budget itself. So there was a late start, we had a new city manager, we had a new budget director and we were late getting started…and it just took forever. It absolutely took forever."

   According to Gearhart, the financial plan is required by the act and the budget cannot be approved until the financial plan is approved, so that the FAA can see that both documents are consistent. The financial plan should give three-year projections of revenues and expenditures. If a deficit is revealed, it needs to describe the means for balancing that budget.

   With the crisis looming in January 2006, the city of East St. Louis proposed a budget that called for adding policemen and firemen, according to Gearhart.

   But when the city got down to making financial projections as to how to pay for these positions, it blew the budget. He said it generated budget deficits ranging from $1.5 million in the first year to $3 million in the third year.

   "The deficit reduction plan that the city submitted was totally inadequate in balancing that kind of deficit," said Gearhart. "The city felt strongly that it wanted to build a case for more police and fire. We support that, so we basically gave the city until the middle of April (2006) to give us another version. Then, if it passes muster, the authority (FAA) will approve the budget for the rest of the year. If it doesn't pass muster, then we're back to the crisis that we just had…there'll be no budget."

   Gearhart says the FAA has tried to get the city to think in a multi-year framework about how to balance the budget.

   "Based upon how difficult it was to get '06 balanced," Gearhart said, "I almost immediately told them that they've got to start worrying about balancing '07, '08 and '09. I told them we wouldn't nickel and dime the budget into balance, but I think we probably did. I think the budget is held together by bailing wire and bubble gum. Everyone heaved this sigh of relief that we now have a budget, but I try to tell them, 'Take a deep breath and enjoy the moment, but you've got a lot of work to do to make sure this '06 budget stays in balance.'"

   But Councilman Eddie Jackson says things ran relatively well for the past 10 years and that's why the FAA temporarily lost its oversight powers. He says the problems are more recent in nature and agrees that they need to be fixed.

   "We needed an audit," Jackson said. "An audit should have been done, and those in the office should have been paying greater attention to seeing that that audit was done. That is an administrative problem. The administrators there should have been paying greater attention. As elected officials, we said, 'Get an audit done,' but administratively they should have been paying greater attention to detail."

   Lifelong educator Katie H. Wright has lived in East St. Louis since the 1940s.

   She has been a member of the FAA for six years and is currently its vice chairwoman. The ongoing financial difficulties all stem from one thing, according to Wright: leadership.

   "It's the city leadership," Wright said. "The younger people get their degrees and everything and they move away. They don't come back. The only way to develop or get new leadership is to vote - to put good people in office. We don't have the votes to put the best, the brightest, the most honest people and the people with integrity in office. We just don't have the votes to do that," she said.