Brian Lipke is chairman of the Buffalo Fiscal Stability Authority, better known as the state control board. Lipke, chairman and chief executive officer of Gibraltar Industries, turned his family's small steel-processing company into a billion-dollar business. He discussed Buffalo's financial picture.
Q: The City of Buffalo is reporting a budget surplus this year. Has the city achieved fiscal stability?
A: The city is making steady progress, but it has not achieved long-term fiscal stability. Although it was able to claim a small surplus this year due to unexpected state funds and funds borrowed through BFSA, large deficits are projected in coming years, cash reserves are minimal and revenues are stagnant. In fact, the city is working now to close a $36 million gap in next year's budget.
Q: Can you provide an idea of the total financial savings the BFSA has been able achieve in its first two years?
A: Working with BFSA, the city has saved taxpayers tens of millions of dollars through workforce reductions, better management and planning and a multitude of other initiatives. For example, changing city employees to a single health insurance provider saved more than $10 million the past year. BFSA saved the city another $4 million through our ability to borrow at reduced costs -- and the city's deficit borrowing through BFSA brought more than $25 million into city coffers, thereby helping avoid draconian cuts in services to city residents.
Q: What part of these savings result from shrinking the workforce?
A: Reductions in the size of the workforce have been a significant part of the improvement. But even as the workforce has gotten smaller, employee costs have continued to grow. When you account for huge health insurance and pension increases, taxpayers are actually paying more for city employees today than they did several years ago -- with fewer workers on the payroll today.
Q: With some unions' refusal to negotiate under the wage freeze the BFSA imposed, can additional labor savings be realized?
A: Wages and benefits make up 75 percent of the city's budget. Clearly, the city's workforce has to be involved in any solution. We're hopeful that the public service unions and the city will collaborate to create a more modern, cost-effective workforce that can be the centerpiece of a new Buffalo.
BFSA has proposed a framework for reducing labor costs by using the standards employed by successful organizations in today's world. If the unions and the city work to refine and implement these guidelines, we can reduce the cost of government, and also create a more stable, efficient and effective government that benefits everyone.
Q: Does the recent federal court ruling upholding the wage freeze improve the outlook for reducing workforce costs?
A: In his decision, Judge William Skretny said, "The wage freeze is a reasonable and necessary means to remedy the city's economic inviability and secure the welfare of its residents." That's a clear message that the city's financial crisis is real and that Buffalo can't achieve financial stability by doing business as usual.
Q: What's your view of the bold actions that new Buffalo School Superintendent James Williams has undertaken so far?
A: Williams understands that things have to change, and he's willing to make the tough decisions.