Anticipating a potential revenue shortfall, the Select Board and Finance Committee have asked town departments and committees to prepare level-funded budgets, rather than level-service budgets, for the coming fiscal year, with spending equal to or less than this year’s amount.
The request for level spending is the first in a decade, prompted by fears that a multibillion-dollar drop in state revenue will lead to cuts in state aid in fiscal 2022. In an all-boards Zoom meeting on Oct. 14, which was attended by more than a dozen representatives of town boards and departments, Town Administrator Tim Bragan said he expected state aid could be cut by as much as 10% in the coming fiscal year, which begins eight months from now. According to the nonprofit Massachusetts Taxpayers Foundation (MTF), fiscal 2021 state revenues have already dropped an estimated $4 billion due to the economic impact of COVID-19, and hopes for a rapid recovery have faded.
“The economic recovery will be like a Nike swoosh,” Bragan said, quoting a taxpayers foundation spokesperson and referring to the symbol that appears on Nike products. Instead of the V-shaped recovery that many had hoped for, he said, the recovery will be an elongated V, “a longer and slower recovery than first anticipated.” The Finance Committee and Select Board were wise to start with level funding, Bragan said, “because as the picture changes, as it gets better, we can make changes.” And if it gets worse, the town can make changes that won’t be as draconian as they would have been if the town had budgeted to maintain services and personnel at current levels. But level-funded budgets mean “there’s going to be some tough budget decisions ahead,” said Bragan.
In a three-page, Oct. 19 memo to department heads, boards, and committees, the Select Board was more explicit. The spending requested by any department must be the same or less than this year’s budget. Departments must maintain their current salary levels, unless their employees are entitled by contract to cost-of-living or other increases. Departments must adhere to their employee contracts and implement the increases, but total funding for the department cannot increase, meaning that cuts in expenses and personnel will have to be made elsewhere.
In addition to a level-funded budget, departments are being asked to prepare a “disaster budget,” one that cuts fiscal 2022 spending by an additional 5%, should town revenues fall more precipitously than expected. “What specific line items would you reduce or eliminate? What services could you no longer provide?” the memo asks.
While the level-funded and disaster budgets both anticipate declines in revenue, two sources of revenue will rise: taxes on property and town fees. Proposition 2 ½ allows an annual increase of 2.5% in the levy, which is already built into the town’s fiscal 2022 forecast, and at its regular meeting Tuesday night, Oct. 20, the Select Board voted increases in a variety of fees, from dog licenses to off-premise liquor licenses.
It’s always possible that Harvard’s financial prospects will look a lot better seven months from now at Town Meeting, so Select Board Chair Alice von Loesecke has asked the heads of departments and committees to provide a prioritized list of cuts to personnel and services they would restore first should the outlook improve.
The all-boards meeting is an annual affair that marks the start of the annual budget cycle. The Capital Planning and Investment Committee has already begun to review more than a dozen requests for spending on small capital projects (less than $500,000) it has received. Departments and committees have until Dec.1 to submit their fiscal 2022 personnel and expense budgets. The Finance Committee will begin its review of their work on Jan. 13, 2021.
