Building Harvard’s budget is a balancing process that begins late summer and ends just before Annual Town Meeting. It starts with an assessment of available revenue and a projection of expenses, from which budget guidelines can be developed.
For years, departments were invited to request budgets based on continuing existing services, allowing for growth in salaries and supplies. New or expanded services were often presented to voters as separate warrant articles, before adding them to the ongoing budget. When continuing and new expenses were added up, if revenue were insufficient, an override question would be put before voters, to decide whether to raise taxes to cover the difference.
In 2008, that all changed in a big way. When the economic crisis hit in September, and state revenues began to collapse, town officials quickly reacted by freezing hiring and discretionary spending. Last January, when it became clear that local aid (from the state) was going to be cut, an emergency Saturday “tri board” meeting decided to reduce spending for the remaining five months of fiscal 2009 by $350,000―the anticipated level of the local aid cut. Layoffs and reductions were implemented immediately, even though budgets had not been changed. When the actual cuts were less ($180,000), officials decided to stay with the larger reductions, anticipating that this fiscal year would be worse, and the reduced spending levels would help Harvard ride out the difficulties.
At an October, 2009 FinCom meeting, Finance Director Lorraine Leonard gave the committee a recap report showing what the fiscal 2011 budget would be, based on revenue projections for property tax (as allowed by Proposition 2½), local receipts (forecast to be $150,000 less than fiscal 2009), and “Cherry Sheet Receipts” (aid from the state, anticipated to drop a further 15 percent); and expense projections based on all town boards and departments staying at their fiscal 2010 levels, plus an estimated 7 percent increase in benefits and insurance costs. If all assumptions proved true, the result would be a deficit of $320,424.
In subsequent months, updates to the recap report have forecast a narrowing of the deficit. The forecast will continue to evolve as forecasts are replaced by hard numbers, especially when the Cherry Sheet arrives. In a recent visit to the Board of Selectmen by Massachusetts Senator Jamie Eldridge and Representative Jen Benson, they suggested there is a push in Boston to get Cherry Sheets to cities and towns as quickly as possible, recognizing how difficult it is to build budgets without knowing local aid levels. Eldridge said that guidance from the Senate Ways and Means Committee is to expect local aid levels to be 10 percent below fiscal 2010, and to expect Cherry Sheets in early March, but to also expect revisions after that. Benson said she would rather have them come later but not be susceptible to revision.
In November, the forecast improved by $40,000, to a deficit of $280,701, when the actual value for the prior year’s new growth in taxable property was available. Previously estimated at $100,000, the actual figure was $119,616. For fiscal 2011, $100,000 is again being used as the estimate for new growth; actual growth will not be known until November, 2011. In prior years, with more development activity, new growth has contributed as much as $300,000 growth in revenue from the permanent tax base.
In the forecast given to FinCom last week, the deficit narrowed to $162,332. The biggest improvement came from changing the local aid forecast to a 10 percent reduction, rather than 15 percent predicted in October. Partially offsetting the improvement is an increase in the expected cost for benefits and insurance, previously forecast to grow 7 percent, but, based on more recent input, now expected to grow nearly 9 percent. Other factors have become hard numbers, including the final settlements from FEMA and MEMA for ice storm cleanup costs. The effect of these reimbursements is in fiscal 2010 local receipts, but does not improve anticipated receipts for next year.
Progress in narrowing the fiscal 2011 gap has come from factors beyond the town’s control. Narrowing the deficit to zero, which must be done before town meeting, will come from adopting budgets that add up to the available revenues, or from identifying additional revenue sources, or both. Not yet part of the budget discussion is $422,000 that was certified as free cash after the close of fiscal 2009. Also not yet part of the discussion is an assessment of this year’s budget performance. More than $400,000 is in the reserve fund, to be applied as needed to unanticipated expenses such as snow removal and special needs placements. To date this year, only $5,000 has been authorized from the reserve fund, to cover the cost of auditing more than $500,000 in federal reimbursements for last year’s ice storm damage. If the relatively storm-free weather continues, and no other unexpected contingencies occur, the town may be looking at another year with a healthy free cash balance to carry over to future years.
