Friday, December 7, 2007
Finance Committee Chair David Model sees rough sailing ahead
Carlisle Finance Committee (FinCom) Chair Dave Model is concerned. A decade of ever-increasing town budgets fueled by real estate growth is ending, and unless new revenue sources magically appear or taxpayers agree to pay much more, services will have to be downsized. Over the next few years, the burden on town leaders to make the right choices will be heavy.
Model believes it is time for citizens to get involved, but if history repeats itself, few residents will weigh-in during the process of budget formation. Most seem unaware that, by the time a budget reaches Town Meeting, many important decisions have already been made. The Board of Selectmen (BOS), with the advice of the FinCom, will have decided what to include in the basic budget, what to offer in overrides, and what to cut outright. In structuring the choices offered to voters, the BOS may limit what can be considered for budgetary inclusion.
The next few years will determine whether schools remain strong and town services remain available. In an interview on November 28, Model offered a brief primer for the concerned voter wishing to understand the budget process, become involved, and make his or her opinion known.
Real estate loss leaves budgetary hole
New real estate growth in Carlisle, once the engine behind rising revenues, has died. Model notes that no new building permits have been filed in 15 months, so no real estate growth is projected for FY09. The budgetary effect is huge. Carlisle had been a magnet for new building over the past ten years, resulting in millions of dollars in real estate value added to the tax rolls each year. This increased value, known as new growth, contributed hundreds of thousands of dollars each year to town tax revenues outside the restrictions of state law Prop. 2-1/2.
Because Carlisle raises 98.4% of its revenue through residential property taxes, it is greatly impacted by tax restrictions. State law limits the yearly increase in property taxes to 2-1/2%, not including new growth. That limit can only be surpassed if voters support an override Article at Annual Town Meeting. Model says that the no-override yearly increase, known as the levy limit, was never enough to fully fund the Carlisle town budget. "Group insurance and the county retirement fund alone chew up the 2-1/2%. We've always had to depend on something else," namely, new growth and the passing of overrides.
In the absence of new growth in FY09, all town departments have been told to prepare operating budgets consistent with no increase. The FinCom must, by law, design an overall budget that assumes no override. The 2-1/2 % increase allowed in the levy limit budget is dedicated to fixed costs as mentioned above, leaving nothing for departmental budgets.
Over the next months, the FinCom will be reviewing those no-growth budgets and deciding whether to recommend one or more override articles be added to the warrant for Annual Town Meeting. Given the uncertainty of any Town Meeting vote, there will be heavy pressure to minimize the size of overrides offered. That will be done by recommending that some overages be dealt with outright through staff and program reductions.
Carlisle School may be short $700,000
Two-thirds of the town's $20 million budget is dedicated to education, and school budgets are the hardest to control. Salaries are set through collective bargaining agreements negotiated by the school committees and then become contractual over several years. State and federal mandates such as No Child Left Behind, special education, and English as a Second Language add to the increase each year without commensurate new funding. Finally, the regional agreement with Concord ties Carlisle's hands to a large extent where the high school budget is concerned.
At the Carlisle School, preliminary projections see a $700,000 shortfall in FY09 at the 0% budget level. Contracts in force currently provide an average 6% increase per year per teacher, including step, or cost of living increases, and lanes, or increases due to added education or longevity. These contracts build in cost increases and make budget control difficult without staff reductions. At the current time, it appears likely that even with a cash transfer of $200,000 to $300,000 available from reserves, some staff cuts will be necessary.
CCHS buffered by region
At the high school, the regional agreement requires that the two towns pass the same level of funding for CCHS, allocated according to an assessment ratio of Carlisle-to-Concord students. Concord has not seen the same real estate downturn as Carlisle, and the Concord FinCom is recommending a FY09 budget for the high school consistent with the 3.8% increase for their other town departments. Although Carlisle could pass a lower budget at its Town Meeting, the inconsistency would have to be resolved, possibly through a joint Town Meeting at which Concord voters would outnumber Carlisle's 3-to-1. "We're the tail wagging the dog," say Model. "Concord always takes the lead."
Assuming Carlisle accepts the inevitabe and recommends a high school budget consistent with Concord's, about $250,000 will have to be found above the 0% budget. Most likely the FinCom would recommend drawing on Free Cash reserves. Currently there is $900,000 in Free Cash, and the FinCom attempts to keep the level at 3% of the budget, or $600,000. However, some Free Cash may also be required this year to close a shortfall at the high school due to a spike in special education outplacements.
Model notes that the Carlisle FinCom had earlier met with Concord counterparts to raise awareness of our situation, but "our lobbying effort fell on deaf ears." Concord town leaders felt it would be unfair to recommend a lower level for the high school than for their other departments. However, the good news is that Concord is unlikely to offer a high school override, so Carlisle will not have to worry about meeting an even larger budget.
A long-term issue between the two towns remains. Over the next few years the assessment ratio, currently at 28%, will move against Carlisle as a higher percentage of our students enter the high school. Heretofore, every increase in the high school budget will be felt more severely in Carlisle.
Town departments likely to be flat
Assuming available Free Cash is dedicated to mitigating shortfalls at the schools, other departments will have flat-line budgets,and no choice but to consolidate or cut services. Less real estate activity has reduced the workload in some areas, opening the way to job-sharing or part time work, and staffing lost to resignations is not being replaced. "It's not a pleasant process," says Model, "and people have been very understanding."
The newly negotiated police contract provides an average 3.25% increase, so $30,000 will have to be found. Police personnel cuts are not possible because the minimum of two officers and one dispatcher per shift needs to be maintained. "Cuts below that level are not prudent," says Model. "We wouldn't save money because of the overtime."
Model notes the need to keep up infrastructure; whatever the pressures. Although it is tempting to cut where it will not be noticed, deferring maintenance and new building could be a long term disaster, and he is not sure he wants reductions to be invisible. "Voters will slowly wake up when they see the cuts and understand what we're talking about."
Can Carlisle ignore change?
"Even if we deal with this year, what about next?" asks Model. The Carlisle Long Term Planning Committee recently reported that property taxes are on track to rise from 6% to 8% of household income within five years. Should we accept that increase, look for new areas of revenue growth, including higher-density development, or cut services? Where should the priorities be? And what about the added burden of a new school building?
Carlisle's 5,000 population is smaller than many area towns and Model feels that size matters. "Can we continue to afford our own police department, DPW, and K through 8 school?" asks Model. Without new growth, is the Carlisle model viable in the long term? Should we be looking at sharing some functions with other towns? What about new revenue sources? The hard truth is that past efforts at revenue generation have come up without substantial workable alternatives to residential property taxes.
Difficult choices must be made, but they are being made all over the Commonwealth. Model refers to a recent Massachusetts Municipal Association website posting that Free Cash has declined statewide by 43% as municipalities "face structural budget deficits related to rising costs, limited revenue-raising capacity and inadequate local aid." (www.mma.org). Statewide, many communities are struggling with the same issues as Carlisle, and perhaps creative solutions will arise.
In the meantime, Model hopes to get more people involved in coming up with those solutions and making those choices. He has addressed the Carlisle School Association and counsels other interest groups to "get informed, prepare, and mobilize." Waiting for Town Meeting to make a case can be a losing strategy, as overrides need to pass at the voting booth. In the past, the election has consistently drawn a wider range of voters that slant the vote against the override than the voters at Town Meeting, and "measures that need passing may not pass" if the case is not made ahead of time.
Model notes the FinCom review schedule will be issued to the Mosquito and the Town website in January. He suggests each concerned voter check the schedule for the budget reviews of most interest and "go and ask questions." For those unable to attend meetings he offers his email address for feedback, Dmodel@tritonsys.com.
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