Wall Street Notices Main Street; Stocks Fall
The disconnect between the Masters of the Universe, whether on Wall Street or at the Fed, could not have been clearer in this last week.
On Wednesday, the Fed released the minutes of the June 23 FOMC meeting, which contained statements like this: “In their discussion of the economic situation and outlook, meeting participants generally saw the incoming data and information received from business contacts as consistent with a continued, moderate recovery in economic activity.”
Translation: “We talked to other MOTUs and MOTU-wannabes, and they think things are peachy.” Not completely peachy, though, as the Fed did revise downward their expectations a wee bit.
Meanwhile, things look much different in places where the MOTUs rarely travel, or even seem to be aware of — places like Topeka, Kansas.
On July 6th, Norton Bonaparte, the city manager of Topeka, released his 2011 proposed Topeka City budget [pdf] for public discussion. The 296 page document breaks down spending and revenue in the city’s general fund and various restricted fund in great detail.
In 2009, the Topeka city council adopted what appeared to be an austere budget for 2010, but by mid-year it was clear that the revenue projections were not going to be met. For instance, it was obvious that sales tax revenues — $27.99 million in 2008, $26.5 million in 2009 — were not going to meet the budgeted $28.05 million for 2010. A revised budget was adopted which anticipated only $26.2 million in sales tax revenue. To adjust the spending, the council adopted many additional cuts, including more than 40 police, fire, public works, parks & recreation, zoo, and other municipal jobs positions [pdf]. They were a mix of management and non-management position, with most (but not all) being vacancies that the council decided not to fill [FAQ pdf here]. Last month, they eliminated the city’s Human Relations Department (which provided city staff resources to the Human Relations Commission to investigate civil rights complains), transferring the work to the city manager’s office staff, and the city has continued to hold open additional positions as they became vacant.
And last week, Bonaparte told the city that this still was not enough.
In the proposed 2011 budget released last week, Bonaparte’s own office is projected to lose four FTE positions relative to the 2010 revised budget, part of an overall elimination of another 56 positions. Social services funding is being slashed 25%. No raises for department heads, and only minimal raises for other city workers. No money is allocated in the proposed 2011 budget for repairs to city facilities. And on and on and on . . .
From top to bottom, more people are being asked to do more work, and given fewer resources with which to do them.
The most contentious part of the budget appears to be the proposal to raise various fees for permits and licenses. Should this not be approved, it would mean finding another $821,250 in either revenue or cuts — such as eliminating another 17-20 positions.
That’s what the economy looks like in the capital of Kansas, and so I was not at all surprised to see that the latest survey of consumer confidence was remarkably sour. Wall Street was apparently caught off guard by this, and the Dow dropped 261 points.
But why were the survey results surprising to them? Topeka’s budget picture mirrors that of many cities around the country, and proposals like those being put forward get noticed and talked about by everyone in town. Despite the city having one of the most popular municipal golf courses in Kansas, fewer people are spending the money to play there. All around town, people know that things are tough, and the folks they meet in the grocery store or at church or in the office are telling them that things are not going to be getting better any time soon and everyone will have to tighten their belts another notch or two.
If it comes to believing the MOTUs or the local city managers about where the economy is going, it seems people are more likely to believe the local folks.
Graph courtesy of Calculated Risk.