East Lansing City Council Sets Budget for Next Fiscal Year, Keeps Parks Funding

The East Lansing City Council officially set its budget for fiscal year 2026, opting to keep funding for parks and burn through about $2 million in reserve funds. 

Leading up to the decision, there was broad discussion about a potential $2.6 million cut to the Parks and Recreation Department, as city leaders search for ways to balance the budget. The cut was part of a “Deficit Reduction Plan” from City Manager Robert Belleman. Council adopted six of Belleman’s suggestions in the plan – reducing the deficit by about $1.1 million – but left the parks cut out. 

Still, the table has been set to put Belleman’s plan in place later on. At the May 27 meeting, council voted to draft language for a Parks and Recreation millage, which would allow residents to vote whether or not to fund the parks department through a new property tax millage. Replacing the general fund’s contribution to parks with a millage was part of the Deficit Reduction Plan.

Where city finances stand. 

The concerns about the city finances started to pick up in February, when a five-year financial forecast showed the city will be bankrupt within five years if it does not change course. 

While the city currently holds a healthy amount of reserve funds, if it dips below a 12% ratio of reserves-to-general fund budget, its credit rating could worsen – which would raise interest rates and make large projects more expensive. Before the city trimmed about $1.1 million off the budget deficit, it was projected to dip below that 12% mark within the next two fiscal years. 

Even with the adjustments, the general fund will carry a $2 million structural deficit that city officials will eventually need to address. A structural deficit is not caused by a large one-time expense or loss of revenue, meaning the city will have to make lasting changes or the deficit will persist in future years.

Councilmember Mark Meadows questioned if the deficit will end up being as bad as is projected, pointing out that at the start of the current fiscal year, the city was projected to burn more than $5.6 million of reserves, and is now budgeted to use only about $400,000 of fund balance.

“I have no confidence whatsoever that we’re going to actually use $2 million of our fund balance to balance the budget this year,” Meadows said. “So, what is a budget? A budget is a guess.” 

Councilmember Erik Altmann jumped in to say that he is concerned about the idea that the budget is “smoke and mirrors.” He then asked Belleman to explain why the city did not use as much fund balance this fiscal year as it was initially budgeted to. 

Belleman responded by explaining that the city’s current financial landscape is propped up by a few factors that were not accounted for at the start of last budget season. He highlighted a large state grant that paid for traffic signals, the city delaying about $1.2 million worth of capital improvement projects and about $1.7 million in savings due to staff vacancies, primarily in public safety. 

“It’s our goal to fill those law enforcement positions so that we can address the noise and traffic concerns that have been brought before this council for the last several months, if not longer,” Belleman said. 

Belleman added that the city received a one-time revenue boost through the American Rescue Plan Act that “masked” the city’s structural deficit. The city received more than $12 million through the federal ARPA program in the wake of the Covid-19 pandemic. Those funds have nearly all been spent.

Besides the factors mentioned by Belleman, the city will lose about $1.6 million annually after the Michigan Supreme Court ruled it cannot collect “Franchise Fees” attached to Lansing Board of Water & Light bills, as it has been since 2017. The settlement details in the case – how much the city will pay back to BWL customers, the timeline payments will be made, etc – are still being litigated in Circuit Court. 

Mayor George Brookover called the pending BWL settlement a “rogue variable” for city finances. 

Altmann agreed with Belleman that the city needs to move quickly to address its budget challenges. He said the budget needs to be balanced for the next fiscal year. 

Mayor Pro Tem Kerry Ebersole Singh added that revenue from the state is “never a sure bet” and changes to federal spending could add to the city’s problems. 

City to draft language for a Parks and Recreation millage, which may be placed on the November ballot. 

While the city is expected to carry a deficit this year, it is moving forward with the biggest part of its plan to address the shortfall going forward. 

Council voted to draft language for a property tax millage to fund parks and recreation. If the city decides to replace the general fund’s entire $2.6 million contribution to parks with a millage, voters will need to approve close to a two mill property tax increase.  

When discussing the topic, Belleman said he did not intend to eliminate parks funds to start the fiscal year, rather to start a community discussion about “an alternate revenue source to help sustain parks and rec operations.” With the structural deficit in the general fund, cuts will be needed. Some cuts may be made to parks without a millage, Belleman said. 

“Each year… the general fund will struggle to have its expenditures live within the resources it gets annually,” Belleman said. “What I’ve recommended and continue to recommend is that the parks and rec program present a ballot issue to our residents to dedicate resources to maintain and grow that program, and not to rely on our annual budget constraints, and be faced with potential cuts if the City Council makes those.”

Council voted to draft language for the millage, but not to place it on the ballot yet. The city will have until August 12 to submit its ballot language if it wants the millage to be in front of voters at the November election. Belleman said that ballot language will be proposed at either the June 3 or June 17 City Council meeting. 

Leading up to the meeting, some community members pushed back on the idea of raising taxes to pay for services that have been covered by the general fund. The city’s Parks and Recreation Advisory Commission criticized the proposal at its May meeting and in a letter drafted by the commission’s chair.

Not everyone on council was on board with moving forward with the millage, as Meadows and Councilmember Dana Watson voted against drafting the millage language. 

Watson said the community seems against the millage already and cast doubt on its prospects of passing. 

Meadows said he believes the city should wait until the financial health team, which will soon be assembled, gives recommendations before trying to pass the millage. The financial health team will be made up of community members who analyze the city’s budget to recommend financial adjustments.

When explaining their votes, Singh and Brookover each said that they are not necessarily voting to put the millage on the ballot, but to continue to look into the option and draft language that could be used for a millage. 

Altmann favored the millage, saying it’s a route to insulate parks funding from the city’s financial struggles moving forward.

“Right now, we have a structural deficit that is several million dollars,” Altmann said. “I think if we have an opportunity to find a stable, long term source of funding for parks and rec, we should all want that, I certainly want that.”