Last week we launched Harvard by the Number$ with an overview of the budgeting process―who does what, and when. This week we review last year’s process, including the complication of an unplanned mid-year cut in local aid payments from the state. Soon, the process of developing next year’s (fiscal 2011) budget will begin, and when it does, we will review the guidelines and calendar, as well as the projected budget if all guidelines are followed.
As different budgets are reviewed by the Finance Committee, we will report on those negotiations and keep a running tally of changes in the projected budget.
At Town Meeting last May, voters approved a fiscal 2010 budget that, for the first time in recent memory, was smaller than the prior year’s budget. This was possible in part because of a new revenue source—revenue for educating Devens students in Harvard schools—but was also driven by mid-year spending cuts enacted when Governor Patrick, acting on his 9C authority [see sidebar] ordered mid-year cuts to local aid. This was the first time in many years that the state rescinded its financial commitment to cities and towns in the middle of a fiscal year.
Town officials responded
to fiscal crisis
At its Oct. 7, 2008, meeting, the Board of Selectmen responded to the financial crisis by voting to freeze all town hiring and spending. Town Administrator Tim Bragan reported at the meeting, “We are about $90,000 in the hole for 2010 as we speak.” Bragan further explained that receipts for the current fiscal year were well below predicted levels, particularly the motor vehicle excise tax, which accounts for nearly 50 percent of all local receipts.
When the Board of Selectmen and the Finance Committee recognized the magnitude of the potential fiscal 2009 budget shortfall, they discussed using the town’s reserve fund, stabilization fund, and/or free cash reserves [see sidebar] rather than cutting budgets. But with budget projections for fiscal 2010 indicating that the problem could be even worse this year, officials decided that the town should take immediate action to cut spending, and hold as much cash in reserve as possible.
Officials made the assumption that, seven months into fiscal 2009, cuts by the state in local aid to Harvard would be $300,000. Bragan and Finance Committee Chairman George McKenna both recommended using $350,000 as a target figure in looking for cuts, including an estimated $50,000 in projected lost income from excise taxes and interest. Establishing the urgency of acting quickly, at the beginning of the emergency Jan. 24, 2009 meeting of the Finance Committee, School Committee, and Board of Selectmen Bragan said, “Every week you wait means another $250,000 in payroll.” Board members agreed that cutting $350,000 in spending with only five months left in the fiscal year would be difficult, but it had to be done quickly.
After day-long deliberation, reviewing each committee’s plan for accomplishing its share of the reductions, the combined boards agreed to a $350,000 budget-balancing spending plan for fiscal 2009 that included layoffs and reduced hours in several town departments. The boards followed their customary formula in allocating the requested cuts: 70 percent ($245,000) from the schools and 30 percent ($105,000) from other departments.
State figures released in late January confirmed that Harvard would lose $179,606 in local aid, not $300,000 as was feared. Nevertheless, the three boards agreed that the town needed to cut spending as much and as soon as possible to prepare for an even larger shortfall in fiscal 2010.
Officials ‘agreed to underspend’
Town boards and departments cut $350,000 from their budgets by agreeing not to spend funds appropriated at Town Meeting.
This approach, “agreeing to not spend,” raised the issue of whether town officials had the right to cut deeply into departmental budgets without first getting Town Meeting approval. As reported in the Feb. 20, 2009 Press, Town Administrator Tim Bragan and Finance Committee Chairman George McKenna said yes, they could do that, as long as department heads voluntarily agreed to cut spending, rather than having their budgets cut without their consent.
Town passed fiscal 2010 budget
With staffing and spending reductions made, attention returned to preparation of the 2010 budget. The Finance Committee completed a review of revised budgets, based on lowered spending rates, and presented to Town Meeting a budget that could be funded without an override. Debate about the omnibus budget at Town Meeting was minimal, and by 9:40 a.m., the fiscal 2010 budget was approved.
Developing next year’s budget
According to the Massachusetts Municipal Association, Gov. Deval Patrick’s Oct. 29, 2009 announcement of mid-year state budget cuts will not touch Chapter 70 education aid or the major general municipal aid account. Harvard’s Finance Committee is about to begin negotiations with boards and departments with budget responsibility for town services (schools, public safety, general government, etc.), to create a strategy for dealing with this year’s cuts.
At recent Finance Committee meetings, discussions around a strategy for coping with lower fiscal 2011 revenue have focused on continuing to reduce budgets for most departments and maintain large amounts of cash in both the reserve fund and the stabilization fund to backfill diminished funding sources. Within the next few weeks, Bragan will distribute budget instructions, and the fiscal 2011 budget process will be underway.
All Harvard by the Number$ articles are available online
at www.harvardpress.com, About Harvard, Harvard Wiki.
