Friday, January 8, 2010
FinCom eyes $150,000 override
The Carlisle Finance Committee (FinCom) adopted “guideline” budget for Fiscal Year 2011 (FY11) at their December 21 meeting, based on a proposal presented by Treasurer Larry Barton a week earlier on December 14. This budget would reduce spending by many town departments and would require an override of $150,000 to fund part of Carlisle’s assessment for Concord-Carlisle Regional High School (CCHS), and a transfer of $27,500 from the town’s free cash balance.
The FinCom’s essential task is to recommend to the Board of Selectmen (BOS) and voters a “levy limit” or “balanced” budget (that is, a budget that balances expenses and anticipated revenues without requiring an override of the Proposition 2 1/2 levy limit on property taxes. The first version of this budget, historically adopted as the year closes, sets a “guideline” for development of detailed expense lines for each town department based on estimated income for the town as a whole. Then at FinCom hearings from January through March each department explains the details of proposed spending for FY11 and requests exceptions to this “guideline budget.”
Usually as these meetings continue and requests for additional spending are evaluated, FinCom revises the guideline budget and, generally in March, suggests various possible override proposals to the Selectmen, to be placed on the Town Meeting Warrant. This year, however, FinCom incorporated the assumption of a ballot override before budget hearings begin, rather than during and after. FinCom members have also assumed a free cash transfer will cover the CCHS assessment if the override fails.
School expenses drive budget
The guideline budget might in fact be less draconian than had been feared earlier this fall, when the FinCom asked departments to consider how they might handle cuts as high as 10%. At that time town leaders confronted an increase expected to be as high as $900,000 in Carlisle’s assessment for operating expenses at CCHS (“Board of Selectmen, Carlisle School Committee and Finance Committee issue joint statement,” September 25, 2009; “Stormy weather forecast for town finances,” October 2, 2009).
Several changes led to the slightly more rosy picture, Barton noted. First, the Carlisle School has not requested any increase over this year’s budget, a major contribution to closing the gap created by the ballooning CCHS assessment. Also, the Concord-Carlisle Regional School Committee (RSC) voted in December to effectively reduce Carlisle’s CCHS assessment by $39,000, Barton added. The RSC will lower their total FY11 budget request from the two towns by transferring $125,000 from the district’s Excess and Deficiency account. (This surplus account, which currently holds an amount equal to more than 4% of the RSC budget, serves in effect as the regional school district’s emergency reserves.)
Cuts vary by department
Nonetheless, guideline budgets for many town departments for next year would be reduced by a total of $135,000, and the rest have no increase, to compensate for increases of $828,966 in Carlisle’s high school assessment and $91,235 for unemployment insurance. The largest reductions will be $50,000 (7%) in the general government and town hall budgets, $17,600 (4%) for the library, $16,000 for police and fire departments (1% and 4%), $10,000 (1%) for the Department of Public Works, and $25,000 (10%) in short term capital expenditures (equipment and maintenance). Treasurer, Town Clerk, Building Inspection Services, and Recreation departments will suffer lower reductions ranging from 1% to 4%. Most of these cuts had been decided at a December 9 meeting of the Strategic Financial Planning (SFP) Committee (SFP), and were little discussed by FinCom (“Town considers job reductions, sharing functions with Concord,” December 18, 2009).
As an argument for the reductions Model alluded to a long-term goal of the SFP: to use the sharp rise in the CCHS assessment to “knock down other parts of the budget.” Then, when in three years these assessments decline (as currently projected), other town budgets will be “cleaned out” to ease the burden on taxes of payments for the Carlisle School reconstruction project.
No override discussed at first
At the December 14 FinCom meeting member David Model praised the first version of the guideline budget, which Barton called a “straw man,” noting that it would require “a nominal amount of free cash” and allow the committee and town to “live to fight another day.” By the following week, however, FinCom members’ initial relief at what Model had called “prudent” was replaced with enthusiasm for even more reductions and for reserving free cash. On December 21 they cut the Gleason Library’s budget further than first planned, anddecided that an override of Proposition 2½, rather than a free cash transfer, would fund part of the CCHS assessment.
To member David Verrill’s question whether the committee could feel “comfortable” recommending the $191,000 transfer from free cash, Barton explained that that account, normally at about $800,000 to 900,000 is at an historic high of over $1.2 million.
[Free cash results from unrestricted funds remaining at the close of the fiscal year, which ends June 30. The level of free cash fluctuates from year to year, depending on unforeseeable events such as unexpected income or lighter than normal snowfalls. A town’s free cash must be certified by the state before Town Meeting can vote to use the funds.]
“In normal times” the town has not spent more than half whatever the free cash level has been, Barton continued, One reason not to spend more this year is an anticipated further jump in the CCHS assessment a year from now, he added. Moreover, the free cash, stabilization fund and overlay account (a reserve set aside to cover tax abatements to property owners) add to reserves, which may in turn bolster the town’s bond rating.
Override preferred over tapping free cash
On December 21, members argued against using a free cash transfer to close the deficit, now about $187,000. Instead, FinCom cut an additional $10,000 from the library’s funding for books, videos and other materials, and planned to recommend a Proposition 2 ½ override to fund $150,000 of the high school assessment.
An override permanently increases the town’s “levy limit” (the total amount the town can raise in taxes), so overrides are “more useful [than transfers from free cash] when you know the expenditure will be ongoing,” Barton said. The high school assessment tends to increase more each year than the town departments, making it an “appropriate” purpose for an operating override. Free cash, on the other hand, is “useful for periodic forms of expenditure” like replacing equipment that “ you know . . . won’t recur,” he added. Using free cash for ongoing operating expenses is “like using a savings account to pay the mortgage.”
Keeping guideline budgets low would prevent having to reduce them later as income and spending estimates are refined, members decided. Moreover, they continued, the committee can still allocate free cash transfers or increase the override based on explanations and requests from particular departments during the hearings.
By the end of FinCom hearings in January and February, the committee will learn more about some expenses that are presently unknown, such as the town’s assessments for Minuteman Career & Technical High School and for Middlesex County, and about expected state aid. Also, an energy task force expects to request funding for repairs to town buildings, Barton warned FinCom.
Stabilization fund contribution questioned
FinCom chair David Guarino suggested FinCom might reconsider a transfer of $75,000 to the town’s stabilization fund this year, pointing out the “budget picture was a little different” when the initial decision was made two years ago. Barton argued that the town should continue to contribute to this reserve fund, to maintain the town’s bond rating in anticipation of borrowing for the CPS project. He estimates the fund should be equal to about 5% of the town’s operating budget to keep that rating. Currently the town has over $2,200,000, or nearly 10% of annual operating expenses, in reserves, in the free cash account (over $1,200,000) and stabilization fund ($930,000).
FinCom FY11 budget hearings will begin January 11, continuing on January 25,
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