WVN Newsletter #132: Attacking Budget Shortfall
- Dear Wayland voter,
As you begin a new year, probably with your latest property tax bill
in your "to pay" file, the Finance Committee continues to address
Wayland's fiscal problems. Though ranked second only to
Weston in a recent Boston Globe survey of per-capita municipal
expenditures, Wayland faces the same challenges as many
other cities and towns.
The Finance Committee's forum on Dec. 15 clarified some of the
problems. In case you missed it, Molly Upton has this summary.
CONFRONTING A $3.3 MILLION SHORTFALL
The Finance Committee gave a thorough explanation of the
town's current finances. Topics covered included replenishing
free cash, the $3.3 million budget shortfall, reduced state aid,
rising health care costs, requirements to fund pension
obligations and accounting for health care obligations.
To address some of the larger issues, the Fincom is
contemplating investigating other groups for health care and a
different pension plan administrator.
Other recommended reading regarding the plight of towns and
cities can be
found at the Mass Municipal Association report
The first issue addressed was the reduced amount of free cash
(aka "rainy day" fund) and the need to show the bond rating firm
Moody's that the town is making progress to raise the
percentage of free cash from the current 2.5% of town budget to
5% in order to maintain the AAA rating which enables borrowing
at a reduced rate. "In the past 5 years, it has been raining," and
the town has spent $4.5 million from free cash to reduce
operating deficits and to eliminate or reduce overrides, the
audience was told. Now free cash is $1 million vs. $5 million
five or six years ago.
Chairman Chris Riley noted that if state aid had continued at the
same rate as in 2003 ($5.2 million) the town would have $3.3
million more in free cash.
In October, the Fincom asked all departments for two budget
scenarios: a level service budget for Fiscal year 2007 (allowing
for some increases in utilities and contractual negotiations), and
an 8% reduction from the level- service FY `07 budget. The
Fincom said this 8% potentially could be ameliorated somewhat
by the work of the ad hoc budget advisory committee.
The town receives nearly 80% of its revenues from property
taxes, 9% from the state, and 8% from local receipts (which
includes such things as excise taxes on cars). Although the
town will receive an estimated additional $600,000 from
"reserves" such as property taxes from new homes and major
renovations (and ambulance receipts), it also has $800,000 less
in funds than last year because the town is dedicating $300,000
to replenish free cash and is without last year's transfer of
$500,000 from the water department budget.
For FY '07, the Fincom estimates a 7.5% or $3.9 million increase
in expenses. Thus $3.9 million less the $600,000 in reserves
equals a $3.3 million shortfall.
The items consuming most of the town budget are: salaries,
60%; employee/retiree benefits, 13%; other expenses, 17%; and
debt payments, 7%. Other factors include offsets, such as fees
in the schools and Park & Recreation, 2%; and insurance, 1%.
The good news is the town is on schedule to fully fund the
pension for municipal employees by 2028. The bad news is the
FY `07 amount is $2.3 million, an increase of $315,000
compared with 2006. There is a bill pending in the legislature to
have cost of living (COLA) adjustments affect the first $16,000 in
benefits per person, up from the current $12,000. Part of the
problem is that prior to the mid `70s, employees contributed 5%
of salaries to their pension. All employees hired since then pay
9% of their salary (excluding overtime), and 11% of salaries over
The state is requiring towns to actuarially list their obligations for
health care costs. Chairman Riley observed that this
requirement should lead towns to think carefully about adding
employees and examine outsourcing as an alternative.
Health care costs are rising by 17% or $1.1 million and will
exceed $5 million in FY '07. In the last five years, health care
costs have risen 25%. From 2004 to 2007, the health care bill
has risen $6 million. Two factors contributing to the increase
were a state law allowing teachers to retire early, and the
addition of a number of families joining the plan in the last year.
This would seem to indicate that Wayland's plan is more
generous than those offered by private industry.
Wayland's contributions to the health care coverage are within
range of its peer towns for active employees and at the high end
for retirees. For active employees, Wayland contributes 69% of
monthly premiums, while other towns contribute on average
70-90%. However, for retirees, Wayland pays about 65% of
monthly premiums compared with other towns' average of about
One quarter of the total health care costs is consumed by
retirees. Wayland could save substantial sums if it is able to
convert eligible retirees to Medicare. Many employers require
retirees to pay for Medicare B (non-hospital) coverage.)
One unanswered question is why the Massachusetts Teachers
Association does not offer a health care plan, given its size and
presumed leverage with health care providers.
State law requires Wayland to offer coverage to employees
(including teachers) working more than 20 hours per week and
the town can make changes only within the collective bargaining
process. However, some towns are trying to separate health
coverage from collective bargaining; the state can change its
health care coverage at will, but the towns cannot.
The ad hoc budget advisory committee hopes to reduce the
shortfall and to make recommendations that have long-term
benefits. It has identified about $400,000 in possible savings to
date, and is investigating other major items such as 1) selling
town-owned land, 2) other health care options for consideration
in FY '08 collective bargaining, and 3) being reimbursed for
using material to cap the landfill. Other possibilities:
-- Creating a public works department, consolidating functions
between the town and school department such as maintenance
-- Encouraging the legislature to change the retirement plan
administrator (currently Middlesex Retirement).
-- Looking for areas to outsource.
GOAL: AVOID OVERRIDES
The Fincom wants to avoid overrides for fiscal '08, '09, and '10
while maintaining appropriate levels of service, balancing
service vs. affordability; protecting town property values;
incorporating long-term capital spending; and maintaining the
AAA bond rating. If the 9% property tax increase authorized by last
year's override becomes the norm, taxes will double every eight
The committee is looking at peer towns and working to establish
financial targets for key revenue and expense-drivers.
As one example of cost cutting, the Town Building will be closed
on Thursday nights; meetings may be held in the Public Safety
Building conference room.
AD HOC COMMITTEE TO DISSOLVE
At one of the last meetings of the ad hoc budget advisory
committee on Dec. 20, many items were turned over to the town
administrator to carry out or study further. The committee said it
expects a one-time cash inflow of $300,000 from back taxes. In
addition, a potentially large one-time inflow might come from
using Big Dig waste material for capping the old landfill.
A couple of items were deemed not cost effective to pursue,
including closing of Station 2 and eliminating town-owned
vehicles. The town will proceed with an energy audit of the Town
Building, with an expected payback within two years.
Regarding school expenses, Superintendent Gary Burton said
the teachers' union declined to renegotiate scheduled wages.
He said he did not know if the union had explained the issue to
the members of the union. Fincom members expressed their
disappointment that such an important issue might not have
been taken to the union membership.
Burton did divulge that providing only the required busing
(grades K-6 living more than 2 miles away from a student's
school) would save the town $133,000 annually. He said his
staff had not investigated what revenue the town could receive by
charging a fee for busing grades 7-12 and/or offering paid
busing to those living within 2 miles of the student's school. He
was asked to prepare an estimate for fee-based busing.
Background: Years ago the town decided not to offer busing to
students within 2 miles of schools in order to avoid an override.
Busing is still provided for K-12.
Several peer towns already have fee-based busing. In a
conversation with the Sudbury elementary schools, WVN learned
Sudbury offers fee-based busing for those living within 2 miles of
a school and for grades 7-8. (The regional high school is run by
a separate committee). The fees are $225 for the first
child, $125 for the second child, and the maximum per family is
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Wayland Voters Network
Michael Short, Editor