El Paso City Council approves pay cuts & furloughs as it deals with $86 million budget shortfall

EL PASO, Texas -- El Paso City Council voted Monday to cut the pay of thousands of city employees beginning May 24 and put over 400 employees on furloughs for as long as a year as it grapples with the economic fallout of the coronavirus pandemic.

Council voted 5-3 to approve the pay cuts and furloughs - with Peter Svarzbein, Alexsandra Annello and Cassandra Hernandez voting no.

Officials now estimate that the city's budget will take a total hit of $86 million over the current and following fiscal years, which prompted City Manager Tommy Gonzalez to recommend the combination of 12-week pay cuts for all employees as well as some layoffs in an attempt to address the shortfall.

The city's chief financial officer, Robert Cortinas, said the projected budget shortfall is tied to plunges in sales taxes, franchise fees, licenses and permits and other revenue sources for the city.

Cortinas told council that all of the city's operations had been reviewed and efforts were made to decrease expenses across the board, but he added that "personnel costs account for almost 75 percent of the general fund budget."

"In order to deal with the financial impacts being caused by this health crisis, we are unfortunately forced to implement pay reductions for 12 weeks,” Cortinas explained. “We are (also) disappointed to report that we will have to temporary furlough and layoff employees who are unable to perform their work remotely and for those assigned to facilities and programs which have been closed or have ended.”

The pay cut will not apply to all 6,000 employees however. Officials said police officers and firefighters will not be impacted as their wages are fixed under union contracts.

Council was also told Monday that the market impact of Covid-19 on the pensions of approximately 4,400 workers is $58 million in the current fiscal year, which ends Sept. 1.

Complicating the city's budget woes further are limitations placed on the use of $119 million in emergency federal funding given to El Paso. The city manager indicated the monies could only be used to cover specific Covid-19 expenses; he said only about a million dollars of those funds can actually be utilized currently.

A couple of council members have proposed halting plans to construct a new arena, also referred to as a 'Multi-purpose Performing Arts and Entertainment Facility', to help ease the city's financial stress.

The arena plan, which has been tied up in litigation for years by historical preservationists seeking to protect the Duranguito neighborhood, is set to be discussed by council on Tuesday.

Below you can view the latest city budget presentation, as well as the pension presentation documents from Monday's council gathering.