CHICAGO — Detroit Mayor Dave Bing Friday proposed a $1 billion fiscal 2014 budget that devotes 33% of the general fund to employee benefits and leaves a $380 million structural deficit at the end of the year.

The $1 billion budget is based on recent revenue estimates developed by a new revenue estimating conference, and the city, which is under state control, is not allowed to exceed the figure. It marks a decrease of roughly $300 million from the current budget.

The budget comes just two weeks after the state took over the beleaguered city and appointed bankruptcy attorney Kevyn Orr as emergency manager. Orr has the final say on any budget, but has said he hopes that Bing and the Detroit City Council can agree on a final spending plan that he will then review.

"The bottom line is we must manage our expenses to align with our revenues," Bing told city council members at the budget presentation Friday morning. "We were confronted with making difficult and challenging decisions and we were confronted with having to manage our city's finances like never before in Detroit's history."

Pension and health care costs eat up 33% of the general fund budget, the mayor's office said. The budget reduces the workforce to 9,800 from 10,437 that were employed at the beginning of fiscal 2013. It maintains police and fire positions and includes $28 million for the city's restructuring.

The structural deficit is expected to climb to $380 million by the end of fiscal 2014, up from $327 million by the end of fiscal 2013. That is actually good news, as the 2014 deficit is expected to total around $50 million, down from previous years, chief financial officer Jack Martin told the council.

"The deficit will be significantly less than it was in 2012," Martin said. "We're looking at $60 million or $50 million this year — the significance of that is that the deficit is increasing at a decreasing rate," he said, prompting laughs from the council members. "In 2015 hopefully we'll start to turn the corner and the deficit will start to go down."

Separate from the budget, Detroit expects to have $5.2 million cash position by the end of fiscal 2013, Martin said.

"Despite all of these recommendations, we still cannot eliminate the city's operating deficit completely," Bing said.

Council members spent most of the meeting reacting to Bing's proposal that the council budget be cut to $7 million from $11 million, and that each council member be allowed to employ only one staff member, down from the current three or four aides employed by each. Bing's recommendation comes on the heels of a recent report from Conway MacKenzie that compared the Detroit City Council to other legislative bodies of similarly sized cities.

Council members complained about the cuts coming just months before it shifts to a new district-based representation from a city-wide representation, and indicated that they would restore many of the cuts when they crafted their own budget.

"Mr. Orr is leaving and doesn't live in this community, and we want to make sure we don't handicap the way this government works and was set up to work," Council President Charles Pugh said. "Mr. Orr does have the final say but I hope he will respect the needs of this community and the people who will be here beyond his tenure."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.