Something else to consider….

by both sides of the school building project debate.




As described in a news story that appeared in yesterday's Republican, there is an active ballot question initiative to reduce Massachusetts sales taxes from 6.25% to 3%. Approval of this ballot question in November would reduce annual state revenue by up to $2.4 billion beginning January 1, 2011.

A recent poll by Suffolk University/ WHDH-TV found 49% supporting the initiative and 44% opposed and 7% undecided.

According to Michael Widmer of the business-backed Mass Taxpayers Foundation that does not support the initiative, half of the state budget is dedicated to mandatory spending with only local aid to cities and towns, human education and higher education available for cuts.

Click here to read the full story….

Some issues to consider when deciding how to vote on the Proposition 2½ debt exclusion question at tonight’s special town meeting and at next week’s election…

1. Katherine Craven- Executive Director of the MSBA told us last week that one percent of the state sales tax is committed to the MSBA and used to provide money for Massachusetts school building projects. If Longmeadow does not approve the grant money now, the funds used by MSBA may be reduced significantly and not be available to Longmeadow in the future. She did state that the promised funds for Longmeadow are already set aside.

2. A relatively small reduction (4%) in state aid to Longmeadow for the upcoming FY2011 caused a significant reduction in town services including teacher/ town employee layoffs, reductions in town/school services and a teachers contract with 0% COLAs for the next two years. Any significant cut in state aid that may result through voter approval of the state sales tax reduction will likely require additional Proposition 2½ overrides over the next 1-5 years to maintain the current level of school and town services. If these additional overrides are not approved, this will necessitate drastic reductions in school/town services in order to balance the budget.

The new high school building project costing Longmeadow $44 million over 25 years is akin to a ~$3.2 million override in starting in FY2013 (July 2012)- not something that we should dismiss without serious deliberate thought. In FY2013 we will also be renegotiating the teachers and other town employee contracts again.

Our infrastructure needs, the uncertainty of state aid to cities and towns and our limited financial resources highlight the need to consider this school building project decision very carefully.

Cuts in state aid are announced

Some “relatively” good news…

Today, Governor Deval Patrick has announced cuts of state aid to cities and towns will total “only” $128 million as compared to earlier estimates as high as $500 million.

See full article on Boston.com.

Gov. Patrick also announced that the $128 million in cuts would not affect the state aid to cities and towns for public education but did not indicate how these latest cuts would be allocated town-by-town across the state.

With the new information and applying them equally based upon original state aid allocations ($128M/$5.3B = 2.4%), our "guess" for reduced state aid for Longmeadow is ~ $205,000. Add this number to the $200K shortfall in other town revenue highlighted during the Select Board meeting earlier this week, the town will likely need to cut ~ $400K in expenses for the FY2009 budget year.

It will be interesting to see how the Town Manager/ Select Board and School Committee address this revenue shortfall.

An update from the Select Board

.. and not much good news!

At the Longmeadow Select Board regular meeting on January 20 some additional information related to the FY09 budget crisis was provided…

• Finance Director, Paul Pasterczyk stated that there likely will be a FY09 revenue shortfall of ~ $200K originating from lower investment income (-$107K) and lower excise tax receipts (-$90K). Both of these areas will likely impact FY10 budget revenue as well.
  
• Mr. Pasterczyk updated the SB regarding snow removal costs and stated that the current expenditures were $25K over budget and likely to increase as the winter progresses.
  
• Town Manager, Robin Crosbie updated the SB regarding FY09 budget actions and said that she has asked all town departments to develop budget reduction contingency plans but at this point has not requested specific “appropriation turnbacks” or expenditure reductions. In addition, purchase orders over $500.00 are being carefully scrutinized before she approves them in an effort to curtail unnecessary spending. Ms. Crosbie indicated that a large portion of current expenditures are directed at maintenance and repair items to keep the various departments operational. Bobby Barkett asked if the oversight could be extended to purchase orders > $100…. Ms. Crosbie said that she would followup with each town department.
  
• Ms. Crosbie stated that the fiscal problems currently being addressed by Gov. Patrick that will be impacting Longmeadow and other towns will likely require a detailed review of prioritized town services to determine which ones will be impacted- both in the current FY09 and FY10 budgets.
  
  Ms. Crosbie highlighted that it is possible that the cuts in state aid may not be applied equally across all towns and cities and that a per capita income adjustment or similar factor may be applied… which doesn’t bode well for Longmeadow’s share of the cuts.
  
• Ms. Crosbie wants to maintain current headcount in order to retain key experience and knowledge within town departments. Furthermore, there is no excess in current staffing to provide required municipal services. Clerical staffing is being rotated from department to department when needed to complete specific projects. However, she acknowledged that salaries are a very large factor within the overall town government budget and that large reductions in expenditures will be difficult to achieve without staffing reductions.
  
  In an effort to curtail FY09 expenses, two open job town government vacancies will not be filled.

Overall, not much good news from last night’s meeting. In fact, it looks like there will be an additional shortfall of ~ $200K in town revenue that will need to be compensated in addition to what the state announces late next week.

The SB seemed resigned to wait until the "financial tsnami" hits Longmeadow at the end of next week and will take up discussion of what to do next at their regular meeting on February 2.

Stay tuned to the LongmeadowBuzz blog for additional updates.

A Financial Tsunami is Heading Toward Us!

These headlines are from this past week’s Springfield Republican (week of January 12, 2009) and highlight the continuing fiscal crisis facing the the state of Massachusetts. The news stories highlight that there is an need to cut another $1 billion (vs. total budget of $28.1 billion) by the end of January from the fiscal 2009 budget because of shrinking tax collection revenue. This is in addition to the $1 billion worth of cuts already imposed last October which did not include aid to cities and towns.

A total of $2 billion of cuts in the current FY09 ending on June 30 are needed.

Governor Deval Patrick said, “ We’ll apportion the pain- and it’s sure to be painful- as equitably as possible and as broadly as possible.”

This past week the state legislature gave Governor Patrick the authority to cut state aid to cities and towns but limited it to cuts of $500 million for the current fiscal year. Gov. Patrick’s new authority is also somewhat limited when it comes to cutting general education for a single school district. He cannot cut it to less than the “foundation budget” which is what the state calculates is the minimum $$ needed to educate students. While I do not know what the current foundation budget is for Longmeadow schools, I suspect that it is much lower than the current school budget so the budget cut limitation is not going to protect our state aid for Longmeadow schools which is currently $6.2 million.

Here is a possible scenario that is very scary….

In the current FY2009 the state budget is providing a total of $5.3 billion in local aid to cities and towns.

Current FY 2009 financial aid to Longmeadow is as follows:

Schools- $3.9 million

Town- $2.3 million

Cuts of $500 million to cities and towns represent a 9.4% cut ($500 million/ $5.3 billion). For Longmeadow this might translate to state aid cuts of $367,000 for schools and $216,000 for the town- a total of almost $600,000!

Given that the FY2009 is more than half completed, reductions of this size would be very difficult and result in a significant reduction of town and school dept services. If there was significant free cash available to reduce this unanticipated deficit, then the FY2010 budget would be significantly impacted.

My question is:

What are town leaders (Select Board/ Town Manager + School Committee) doing right now to prepare for the tsunami wave that has already been formed in Boston and is heading west towards us?

Let's hope that for some reason that this financial tsnami is deflected and heads in a different direction! We should know by the end of January!

Is there a looming financial crisis for Longmeadow?

Two months ago Governor Deval Patrick announced significant cuts in budgets for most state departments after a $1.4 billion state budget shortfall. At the time there was no impact on local funding for cities and town. However, the Boston Globe reported on December 31 (see online story) that the governor was preparing up to $1.0 billion in additional cuts for the current fiscal year which may involve some cuts in local town/city funding.

From this 12/31/08 Boston Globe article…

“Governor Deval Patrick said yesterday that he was preparing for up to $1 billion in additional budget cuts, raising the specter of reductions in aid to municipalities, more layoffs of state employees, and drastic cutbacks in the services that state government provides to its residents.”

"There's a lot of pain, and it's going to have to be spread around," Patrick told reporters during a 30-minute briefing in his State House office. "Nobody's enjoying this. This is incredibly difficult."

Possible emergency budget cuts being considered by the state will not effect FY2010…. cuts in local budgets to compensate for less state aid will need to be made now! In FY2009. Cuts made in the middle of a fiscal year are much more difficult to make because the budget funding deficit must be made up before July 1.

In the current FY2009 the state budget is providing $5.3 billion in local aid to cities and towns. Current financial aid to Longmeadow is as follows:

FY2009
Schools- $3.9 million
Town- $2.3 million
Total- $6.2 million

In the yesterday’s Springfield Republican (1/04/09), it was reported that local western Massachusetts cities and towns were expecting a 5-10% cut in state for the upcoming FY2010… for Longmeadow that could be as much as $850,000. Let's hope that the Governor Patrick does not cut FY2009 local aid to cities and towns.

















To add some additional worry for the current fiscal year, it was also reported in yesterday’s Springfield Republican that current motor vehicle excise tax collections for many towns/cities are down significantly for the current fiscal year.

Based upon the budget information (see page 2 of ATM report) presented at the 2008 Annual Town Meeting, Longmeadow was expecting $2.15 million in excise tax revenue for the current FY2009 fiscal year budget. A short fall of 10% would mean that the town would have to cut $215,000 from the current FY2009 budget.

In past years, the challenge to town leaders has been to prepare a balanced budget that meets the needs of our town for the upcoming fiscal year starting July 1. Let’s hope that we do not have make emergency cuts in town services before July 1 because of revenue funding shortfalls.