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City finance warns of $28–$33 million general‑fund gap in 2027 current service level
Summary
City finance staff told the Minneapolis Board of Estimate and Taxation that 2027 current service level calculations show expenses growing faster than revenues and an estimated $28–$33 million general‑fund shortfall, driven largely by personnel and internal service charge increases and lower forecasted interest revenue.
Finance staff presented the city’s 2027–28 current service level (CSL) estimate and said it represents a baseline projection of revenues and expenses if policymakers make no new decisions. Deputy Chief Finance Officer Jane Denza told the Board that, so far, expenses are projected to grow faster than revenues: across all funds expenses are up 3.1% versus 2.6% revenue growth, and in the general fund expenses are up 5.1% versus 1.9% revenue growth, leaving an estimated $28–$33 million gap that the city will address through the summer budget process.
Budget manager Justin Carlson and Deputy CFO Denza explained that the CSL assumes the 5‑year financial direction adopted in December (which includes planned levy increases). The CSL presentation uses the previously planned levy trajectory—5.4% total property tax levy growth and a 4.8% general‑fund levy increase baked into the baseline—but the projected personnel, internal service charges (IT, fleet, property services, liability) and non‑personnel costs still outpace those revenues.
Staff attributed the major drivers to personnel costs—the city budgets roughly 4,000 FTE positions and anticipates step increases, negotiated cost‑of‑living adjustments, and rising fringe costs such as health insurance and the new state paid‑family‑medical‑leave program—and to rising internal service charges tied to inflation, increased facility square footage and liability fund projections. Ben Zimmerman, principal budget analyst, noted revenue pressures as well: interest earnings are forecast to decline by nearly 30% (about $5 million) because of lower fund balances and yields, and some non‑levy categories such as franchise fees and permit revenue are forecast to contract modestly.
Commissioners asked how police overtime would be treated; staff said overtime is governed by financial policy and is not automatically inflated in the CSL—any request to raise overtime budgets must come as a departmental proposal for policymaker consideration. On levy math, staff said an approximate 1% change in the levy equals about $5.7 million in revenue, providing a rule‑of‑thumb for commissioners considering options.
Finance staff outlined next steps and timeline: the mayor’s budget release in August, the maximum property tax levy discussion in September, public hearings and department presentations through the fall, and final adoption in mid‑December. Staff emphasized the CSL is a modeling step to show the baseline impact of no policymaker changes; closing the gap will require a combination of revenue choices, transfers and policy decisions.
The clerk received and filed the CSL presentation. Staff and commissioners identified follow‑up items including updated revenue trend data over summer months, a review of overtime requests and potential levy scenarios to close the gap.
