Friday, November 20, 2009
Future shortfalls prompt initiative to reduce town departments
Town finances have become a growing concern for the Carlisle Board of Selectmen (BOS). They have responded by forming a special committee on Structural Financial Planning (SFP), and have also asked town department heads to give input on how costs could be cut by 10%. With uncertainties in income from property growth and state aid, and new school building projects in the pipeline, the SFP has been asked to make recommendations for reductions in town government so that major tax increases will not be needed in the years to come.
Committee to focus on paring town government expenses
At their first meeting Thursday, November 12, SFP members Tim Hult, John Williams, David Freedman, Larry Barton and Tim Goddard (absent member Dave Model) looked at projections, set goals, and began dividing the work of examining what pieces of town government could be reduced or eliminated. Chair Tim Hult reported that a computer projection of town finances over the next ten years shows rapidly increasing expenses as debt service for two school building projects is added to the usual yearly increases. In a worst-case scenario, taxes could as much as double. “We need tax increases to be sustainable, and double is not,” said Hult. “Right now is when we could affect that,” by reducing structural costs so taxpayers will be able to support future capital needs.
Hult noted that the SFP committee will focus on approximately $5 million of Carlisle’s guideline $22 million FY11 budget that comprises town services. After some discussion, it was decided the goal would be an ongoing reduction of $250,000 per year. Hult reported that the Carlisle School Committee is working in parallel to restructure and reduce costs at the Carlisle School, which comprises about $9 million of the proposed FY11 budget. Of the remainder of the budget, roughly $6.5 million is to be used to support the Concord-Carlisle Regional High School (CCHS) and Minuteman Regional High School, and $2 million covers employee benefits and county retirement expenses.
Town Treasurer Larry Barton presented a proposed FY11 guideline budget and projected budgets for FY12 and FY13. One of the few pieces of good news is that Free Cash is “now at an almost historic high,” said Barton. Because departments were encouraged to under-spend their FY09 budgets, there is now over $1.2 million available. Barton noted that if $300,000 were transferred from Free Cash it appears the FY11 budget would be short by about $60,000.
Looking forward to FY12 and FY13, however, there could be more difficulty. If state aid and local receipts remain at low levels, new growth rises by only 1.25 % per year and departments are again held to 0% growth with 2% for the Carlisle School and 5% for CCHS, the computer projects shortfalls of $680,000 (FY12) and $550,000 (FY13). While Free Cash may be available to plug holes in the short term, the need for long-term cost reduction is clear if large overrides of Proposition 2-1/2 are to be avoided.
Stock market impacts
county retirement funding
“The two areas that scare me are insurance costs and county retirement assessments,” said Barton. Together they are expected to total $2 million in FY11 and continue to grow at a 9% and 12% pace. “Last year will continue to haunt us,” said Barton. County retirement investment losses in the stock market last year will be charged back to towns and spread over five years to smooth out the impact. There is no room for cost reduction as Carlisle is at the lowest level of benefits permissible by state law and county retirement is a non-negotiable assessment from the state.
CCHS expenses rising
The other “gorilla in the room is the high school,” Barton noted. Although most departments are being held to a 0% increase, the projected FY11 budget accepts the Concord Finance Committee’s proposal for the CCHS of $6.1 million, or a 5% increase, but negotiations continue. “[The regional school committee] asked for large increases and wants to be held harmless for cuts in state aid,” said Barton. Although efforts have been made to educate Concord leaders on Carlisle’s plight, the 3-to-1 ratio of Concord to Carlisle voters at any joint Town Meeting, along with a projected three-year increase in Carlisle’s student percentage, would hamper any Carlisle-initiated attempts at cost reduction. “Even without the assessment ratio [rising] we could see significant increases,” said Barton.
Barton then presented three pages of capital projects that are in the pipeline for approval within the next ten years. These include the Carlisle School project, two to four $30 million phased projects at CCHS, potential affordable housing initiatives at Village Court, Greenough and the Cranberry Bog, cisterns, DPW truck replacements, tanker trucks and others. Freedman wondered if there was room for cuts in the capital budget, but Barton said that the town’s $25 to $26 million asset base probably requires more than the 1% investment currently reserved. Hult agreed. “I worry we’re starving maintenance.” However, he noted the 1% does not include “excluded capital” projects, which are voted on separately from the town’s operating budget.
$250,000 in savings sought
With a sobering future picture in mind, the committee turned to refining its mandate. As far as a target for cuts, “I think we should use a number in the $200,000 to $250,000 range,” said Hult. He noted the Carlisle School expects to reorganize to make possible a 0% growth rate over the next years. As the school budget typically rises by 3% annually, this would free about $270,000. Another $250,000 in reductions would make a no-override budget realistic in the coming years.
Williams agreed with the $250,000 target, saying “We’re making a significant dent there. That’s a half million dollars” with what the school expects to realize. But Freedman suggested a lower reduction with a two year phase-in during which it would be possible to “measure pain and suffering.” Barton agreed that it would be a good idea to “let the departments prepare over two or three years” and not surprise them with “all the pain in one year.” This would give time for department heads to ponder, “Can we do what we do more efficiently? Could we do it for less?” Barton added.
Hult noted that the department heads will be returning their recommendations for reductions within the next week. He proposed six areas for the committee to investigate for cost reductions. After some discussion, the team of Hult and Goddard was assigned to public safety and community/recreation; Model and Freedman took finance/administration and library, and Williams and Barton took public works and land use/Board of Health. Each team will read the recommendations within their areas and meet with departments for more information.
The following is the proposed schedule for upcoming SFP committee meetings:
• 11/25 Report on each budget area, revisit FY11 budget and financial models
• 12/10 Second iteration budgets, Community Preservation Act funding analysis, update school budget information
• 12/23 Present each groups’ thinking and direction
• 1/14 Present and analyze scenarios
• 1/28 Define recommendations and update financial model
Each meeting is public and will be held at 8 a.m. at Town Hall. A joint Finance Committee/ Board of Selectmen meeting will be scheduled in February to hear recommendations. ∆
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