It’s often said that there are two things you don’t want to know: what’s in the sausage and how the town’s budget is created.
I don’t think I can help much with the sausage thing but it’s important to open the door to what’s in the town budget, and how it was created.
At Longmeadow’s May 14th Town Meeting voters will be asked to approve the towns Fiscal 2020 budget. At $73.8 million it is an increase of 2.8% over the current year budget. This nearly $74 million budget represents spending in all categories, including $6.7 million in the fee-based stabilization budgets for water, sewer, storm water, and recycling operations.
Excluding these fee-based utility expenses, the town operating budget is $66.1 million.
The process of preparing the Fiscal Year 2020 budget that begins on July 1st began back in October when the Select Board approved budget guidelines for the Town Manager, who along with department heads and our chief financial officer is charged with preparing a balanced budget for the Select Board’s review and approval. This year’s budget directive instructed the town manager to develop a budget that met the spending policies adopted by the Select Board but held the tax rate increase to no more than 2% – one-half percent below the Proposition 2-1/2 limit.
The specific spending policies that were to be met included allocating an annual contributions to the capital budget (which includes road paving, sidewalks and heavy equipment) that is 3% of general fund operating revenue (not allocated for debt) and funding the town’s Other Post-Employment Benefits (medical benefits for retirees also known by its acronym OPEB) obligations at 1.75% of tax levy revenue.
The goal of these two directives is to maintain the infrastructure investment in the town and provide a long-term funding mechanism for the town’s OPEB unfunded actuarial liability that is more than $22 million. Funding these priority spending areas have been a focus of the Select Board over the past three years. The directive to limit the tax rate increase to no more than 2% was a recommendation of the Finance Committee and will delay the date that the town reaches the tax ceiling imposed by Proposition 2-1/2. It should be noted that although the budget directive set a limit on the increase in the tax rate, it did NOT direct a limit on the expense side of the budget, most of which is labor costs set by long-term contracts with teachers and the five unions that represent other municipal employees.
When the Select Board and School Committee were presented the first look at the FY 2020 budget in October, our Chief Financial Officer expressed concern that a balanced budget might require either a reduction in town services or the compromise of one of the budget directives. So how was the budget balanced? Both good fortune and good planning helped create a budget that met the budget directives and maintained the level of services that town residents have come to expect.
New levels of revenue: Part of the balancing of the budget came from the revenue side. There are three categories of non-tax revenue that will increase in Longmeadow’s FY 2020 budget that reduces the needed tax increase. First, is an increase in the aid that the Commonwealth of Massachusetts provides to each municipality. This revenue – often referred to as Cherry Sheet revenue to reflect the color of the paper it’s printed on – is budgeted to increase in FY 2010 by 6.2%.
Second, FY 2020 represents the first year that the annual casino mitigation fund payment we receive from MGM can be included in the budget. Although we’ve committed to using that revenue to offset public safety and traffic impacts of the casino, the state has required that those funds be included as general revenue, and so the funds are being directed toward public safety expenses in the budget. It should be noted that during the casino mitigation negotiations I insisted that a 2.5% annual escalator be included in the mitigation payment schedule, so this year’s payment of $281,875 is 2.5% above the $275,000 received last year – after the 2019 budget had already been approved.
The third revenue increase that we were able to budget was revenue from our municipal ambulance service. Both increased demand and an updated fee structure has enabled us to budget for a 21.6% ($142K) increase in ambulance fee revenue in 2020 compared to the current year. With this added income, ambulance fee revenue now pays for nearly 1/3 of the $2.37 million Fire and Emergency Medical Services department budget.
As much as these three added revenue streams (state aid, casino mitigation funds, and ambulance revenue) are key components of the 2020 balanced budget, there were also changes to the expense side of the budget that should be noted.
Expense side: First, and by no means least, is the budget of the School Department. Independent of the general municipal budget, the school administration developed a budget ($37.45M) that for FY 2020 increases by 2.36% above the current year.
This is the second year in a row where the school budget has increased by less than 2.5%. Of course, this begs the question of what percentage of the overall budget does the school department represent. The answer isn’t as straightforward as one would hope. Although the overall town budget is $73.55M, $56.39M is spent on town departments (including schools) and the balance ($17.16M) is spent on debt service, capital projects and employee benefits. Because the budget doesn’t separate the spending on debt, capital and employee benefits between schools and general government, it’s difficult to calculate the exact percentage that overall school expenses are of the full budget. It’s most likely right around the 66% that the school budget ($37.5M) is compared to overall direct operating costs ($56.4M). Regardless of that answer, holding the FY2020 school budget increase to 2.36% contributes significantly to the town’s ability to hold the line on the tax rate increase.
Despite an overall increase in spending from general revenue by 2.3%, there are some bright spots in the spending side of the general government budget. Overall expenses were cut by 1.9% and debt payments (primarily the result of the retirement of older bonds) is down 3.5%. Offsetting these reductions were an increase of 7.6% in employee benefit costs and an increase of 3.4% in salaries. The Select Board continues to work with the town manager, and to the extent allowed by law, with regulating agencies and benefit providers, on bringing these last two items under better control. Part of the overall budget, although separate from the tax rate, is a projected increase by $13.68 per year (to $40.68/year) in the storm water utility fee for single homes. This fee income will offset $292K of the storm water program’s $850K budget, including compliance with the Federal EPA Municipal Separate Storm Sewer Systems (MS4) regulations. With Longmeadow’s myriad of dingles and brooks, our compliance costs continue to rise, and this utility, authorized by the 2017 Town Meeting, creates a funding mechanism that shares storm water program expenses with non-taxpaying entities. The FY 2020 increase of $13.68 in the storm water utility fee for each household is equivalent to a tax rate increase of 0.2% ($0.038 on the mil rate) for an average valued home.
So that’s how the town balanced a $73.8M town budget with a tax rate increase of 2%: increased non-tax revenue, holding the line on spending where possible, some cuts in expenses, and transfer of some expense to the storm water utility to be shared with non-tax-paying property owners. Not easy, not pretty, but a balanced budget that helps postpone the oncoming tax ceiling limit. Now that you’ve got this, maybe we’ll tackle the sausage recipe. See you at the Town Meeting on May 14th.
– Mark Gold is the chair of the Longmeadow Select Board and welcomes comments about this column at firstname.lastname@example.org.