It’s tempting to say the balanced fiscal 2024 budget that attendees will be asked to approve at Saturday’s Town Meeting is a miracle. But no miracle was involved. Instead department heads, volunteer boards, and the town administration labored for weeks to keep spending within the bounds of expected revenues and guidelines set by the Finance Committee and Select Board at the beginning of budget season last fall. The result exceeded expectations, but in the words of Finance Committee Chair Jennifer Finch, it was a budget “cut to the bone.”
To understand the fiscal 2024 budget, which takes effect July 1, requires a journey through the 2023 Annual Town Meeting booklet, including the well-written and detailed reports of the Finance, Capital, and Community Preservation committees as well as the warrant articles themselves. The expenditures that make up the budget are distributed across the booklet’s pages. Not all are paid for with the levy. Some mental assembly is required.
Introducing the recap
If you’re a reader who enjoys a deep dive into the town’s finances, the best place to begin your journey is with the five-year budgeted revenue and expense projection, sometimes referred to as the “recap,” that appears on page 18 of this year’s Town Meeting booklet.
The recap is prepared by the Finance Department and summarizes on one page the income and expenses expected in the coming fiscal year—fiscal 2024 —and the five years that follow. The document lists the town’s sources of income, divided between the levy—the amount charged to taxpayers—and other sources, such as state aid, local excise taxes, fees, and grants. At the bottom you’ll find what the town proposes to spend, but not in any detail. All of that spending will be paid for with money in Harvard’s General Fund, where the town’s income is deposited.
The Press has prepared its own version of the recap to show the town’s operating expenses in greater detail, a breakout that aligns with the eight categories of the omnibus budget (see the table, “Comparing fiscal 2023 and 2024 income and expenses,” at right). The Press version also simplifies the list of revenue sources shown in the town’s recap. Both show how much income will come from taxpayers, and how much from the state and other sources. But the recap in the warrant booklet lists all of Harvard’s outstanding debt, while the Press version does not.
As stated earlier, the Press recap sorts expenses into the eight major spending categories that match those of the omnibus budget. Added to that are a $21,129 small warrant article, a $350,000 transfer to replenish the Reserve Fund—an account FinCom uses to cover unforeseen expenses—a transfer of $105,000 from the General Fund to the sewer enterprise fund. This item was originally in the omnibus budget, but the Department of Revenue requires it be handled differently.
Add up the expense lines of either the Press or town version of the recap, and you’ll get the same number: $32,552,534, the amount that town departments and the schools ask to spend from the General Fund in fiscal 2024 to deliver municipal services and educate Harvard’s children. If Town Meeting approves everything, total spending in fiscal 2024 will increase a modest 2.3% compared to the current fiscal year, which ends June 31. Last year, spending surged 4.7%. And while the income the town expects to raise in fiscal 2024 barely covers the increase in spending, it is sufficient, for the moment, to leave an estimated surplus of $1,001.
Where the money comes from
The money that fuels Harvard’s municipal engine comes mostly from the town’s property owners. In fiscal 2024, Harvard taxpayers will pay 83% of Harvard’s expenses, approximately $27 million, with 95% ($25.7 million) coming from residential property owners, the same percentage as in fiscal 2023. This money is supplemented by income from sources that make up the other 17% ($5.5 million), largely state aid, excise taxes, and other forms of relief. It all flows into the General Fund.
In addition to this income, the town can also draw on a number of reserves—saving accounts, essentially—to cover expenses that would otherwise unbalance the budget. The most important of these are the General Stabilization Fund, the Capital Stabilization and Investment Fund, and the Community Preservation Fund. A withdrawal from one of these funds allows a project or expense to be paid for without levying new taxes. That’s a virtue when it comes to balancing a budget.
But a reserve fund must be replenished. The General Stabilization and Capital Stabilization and Investment funds are topped off each year with free cash, money left unspent from the previous fiscal year. And the Community Preservation Fund is refilled annually with money collected by the 1.1% community preservation tax surcharge, (which Question 3 on this year’s Town Election ballot asks voters to increase to 3%).
Revenue first
This year FinCom, acting on the advice of Town Administrator Tim Bragan, Assistant Town Administrator Marie Sobalvarro, and Finance Director Jared Mullane, tried something new. During the summer of 2022, the trio of administrators prepared a detailed forecast of fiscal 2024 income. Their work set an upper limit on what could be spent without asking voters for a tax override, an increase in taxes beyond the 2.5% levy limit allowed by the state’s Proposition 2½. This year’s accomplishment was staying within that limit; the initial round of budget requests submitted by departments and committees exceeded forecast revenues by more than $700,000.
Most, but not all, of the spending proposed for fiscal 2024 is spelled out in Article 11, the omnibus budget (see pages 39 through 45 of the Town Meeting booklet) and by Article 12 (see page 36), an extra one-time appropriation, also known as a small warrant article.
But the warrant contains other expenditures that don’t appear in either the omnibus budget or the recap, including Articles 3 through 6 (pages 36-37) and Article 8 (page 37). Articles 3, 4, 5, and 6 would normally appear in the booklet as small warrant articles, paid for with tax dollars. Instead, they will be paid for with money drawn from the General Stabilization Fund. Article 8 would normally be included in the omnibus budget as an insurance benefit expense, but instead will be paid for with free cash. All told, these articles allow the town to spend an additional $139,326 without increasing the levy.
The purpose of the omnibus budget is to pay the recurring costs of operating Harvard’s departments and committees, including the wages and benefits paid to the people who staff them. Cost-of-living increases, and new Department of Public Works and teacher contracts will substantially increase the personnel costs of every town department next fiscal year. Inflation that averaged more than 8% last year has driven up the cost of purchased services and supplies. Employee benefits and town insurance continue to increase—5.4% next year—and the addition of a parks and recreation director is responsible for a jump of 10.3% in the culture and recreation line of the budget.
Small warrant articles, like those listed in the previous paragraph, are typically one-time requests for equipment or work that’s above and beyond the day-to-day responsibilities of a department, such as extra money for tree-trimming or the first-year salary of a newly created position. This year’s warrant contains only one such article paid for with fiscal 2024 dollars. Had the pending contract with the DPW union workers been negotiated in time, any additional money needed to pay increased wages would have been paid for via Article 13.
Tapping reserves and debt
In addition to drawing on the General Stabilization Fund and free cash, the town’s Capital Planning and Investment and Community Preservation committees have proposed an additional 21 projects with money from their respective reserve funds with no immediate impact on taxpayers.
The capital committee has proposed using $1,510,000 in the capital fund to pay for 14 projects (see Article 14 on pages 38 and 46 in the Town Meeting booklet), while the Community Preservation Committee has recommended an additional $375,202 to pay for seven expenses (see Article 19 on pages 47 and 48.) Together these appropriations, if approved, will pay for additional goods, services, and projects worth nearly $1.8 million.
A final note: Passage of Article 16, which would authorize the borrowing of money to pay for a $240,000 heavy-duty dump truck, would ultimately affect taxpayers, who would foot the bill for its principal and interest. Those payments, however, would not become due until fiscal 2025 and thus have no impact on fiscal 2024. As this issue of the Press was being prepared it seemed possible that FinCom and the Select Board would recommend paying for the truck with capital fund money, given the current high cost of borrowing.
Achieving balance
State law requires that town budgets balance—that revenue equals or exceeds expenses. But the most important source of revenue, property taxes, is constrained by Massachusetts’ Proposition 2 ½, which allows only a 2.5% increase in the tax levy per year, plus any new tax revenue due to new housing and home improvements. To exceed that limit requires an override vote at Town Meeting and Town Election. While the officials and administrators who prepared this year’s budget managed to dodge an override, town expenses continue to rise faster than revenues, creating a so-called structural deficit.
Asked in a recent interview if the administration was proud of this year’s budget, Town Administrator Bragan was sanguine: “We did what we had to do,” he said.
Steps taken included sacrifices by both the town and schools. Police Chief James Babu agreed to postpone for another year the long-sought hiring of an additional officer; the schools “paused” their curriculum director position, eliminating the slot and losing an experienced administrator to preserve teaching and “forward-facing” staff positions.
But there were gains as well. A parks and recreation director will join town staff later this summer, a position approved by Town Meeting in October. The schools added a half-dozen positions, including a new special education teacher at the Bromfield School, to meet the needs of an increased number of special education students, and a middle school health teacher, while converting the position of business manager to full time. And if Town Meeting approves this year’s capital spending requests, the new COA building will get solar panels on its roof and the town’s municipal buildings, including the new senior center, will finally be served by a single Voice over Internet Protocol phone system.
As the authors of the Finance Committee Spotlight wrote (see page 1 of the Town Meeting booklet), building this year’s budget was “difficult,” the final result possible only through the collaboration of town and school leaders and their willingness to make hard choices for the good of the town.
