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Consider This: Override protects town services now and for the future

As we look ahead to the many decisions at the upcoming Town Meeting and election, one of the most important is passing the omnibus budget. The budget dictates funding from July 2020 through June 2021 for all town departments, schools, insurance, employee and retiree benefits, and the cost of debt service previously approved by Harvard voters.

In March, the Select Board and Finance Committee approved a budget that requires a $320,000 Proposition 2½ override to balance. This decision was not taken lightly, and was only reached after cutting the initial budget by $500,000 following a line item review of every expense and potential funding source.

Since then, the world changed, and in May, Massachusetts projected a $6 billion loss in revenue for fiscal 2021, which will reduce Harvard’s state aid by $500,000 to $800,000. As a result, the existing $320,000 deficit is projected to be at least $820,000.

Recognizing these financial risks, the Select Board created the Budget Working Group, which includes School Committee, Finance Committee, and Select Board representatives, and town administrators, to address the large potential deficits. The working group initially agreed on $320,000 in cuts in the event of a failed override: keeping a police officer position vacant, skipping this year’s merit increases for town employees, reducing the tree warden’s budget, and not filling three vacant teaching positions (two at HES and one at Bromfield).

Facing at least an $820,000 deficit, the group then agreed that the $320,000 cuts originally intended to occur only if the override failed would be the first cuts to be made. To address the remaining $500,000, the group proposed to use $200,000 from the town’s Stabilization Fund, increase employee and retiree health insurance contributions from the current 20 or 25% to 30% (at least $125,000 in savings), reduce the contribution to the town’s OPEB (Other Post Employment Benefits) fund by $75,000 for one year, and use $100,000 from the the schools’ Devens fund for one year. Ultimately, the Select Board and School Committee will review and act on the plans as put forward by the working group.

So what does the override vote mean? If the override passes, the identified cuts and fund withdrawals will cover up to an $800,000 loss in state aid and no more cuts will be needed. If the override fails, the plans in place will only cover up to a $500,000 loss in state aid, and if the loss is greater (as is likely), we will be forced to cut up to $300,000 more. To achieve cuts of this magnitude, personnel cuts will be required. Due to the severity of the cuts and the unknown aid reductions, more work remains to identify the positions and services to be eliminated.

Several suggestions have been made to help cover the budget shortfall without making drastic cuts—use the general Stabilization Fund, lower our OPEB contribution, use the Capital Stabilization and Investment Fund, even reverse the movement of 2019 free cash and make it available for fiscal 2021.

The Stabilization Fund is currently about $100,000 below the amount dictated by town bylaw, and it would be imprudent to use more than the proposed $200,000. Our annual OPEB contribution is currently below the target amount set by the town with its actuary, so the contribution should not be lowered further than the proposed $75,000. In fact, the reduction is only possible once the health insurance contribution change is in place and our OPEB liability is reduced.

Free cash not an option

Free cash has already been moved by Town Meeting vote and, according to town counsel, no article exists on this Town Meeting warrant that could be amended on the floor to revisit the previous free cash decision. Similarly, the capital fund is unavailable because Harvard bylaws state those funds are to be used for “any purpose for which the town would be authorized to borrow money,” meaning the funds cannot be used for general budget items.

Furthermore, budget constraints at the state level are not a single-year problem. Experts estimate it will take three to four years for state revenues to recover to pre-COVID levels. Harvard needs to plan for lower state aid amounts for the next few years. Emergency use of stabilization and other funds cannot continue year after year. As it is, future budgets may require even more drastic cuts if use of those funds increases this year.

Leaving COVID-19 aside, how did we get to where we are today? Every dollar of town spending is developed in a public process with opportunity for input and is approved (or defeated) by Harvard voters, either at Town Meeting or at the ballot box. Similarly, policies or initiatives approved or defeated by voters have limited our tax base or led to an increase in the tax levy, including:

Zoning decisions that preserve large lots with single-family homes and deter development

Preserving a significant percentage of land as open space

A town vote to not regionalize the school district

Delayed maintenance and capital investments of municipal buildings, resulting in recent costly capital projects.

Other financial impacts that areunavoidable or are largely out of voter control have also reduced revenue or caused operating expenses to increase more than 2.5% each year:

  • Loss of revenues from the Devens base closure
  • Legislation that substantially increased the town’s expenses in special education
  • Addition of a paid EMT/firefighter to address staffing shortages
  • Overtime salaries for police officers to eliminate single-officer shifts
  • Decreasing state aid contributions
  • Fixed expenses that rise at a rate over the 2.5% increase allowed (e.g., pension costs, insurance plan costs, contracted services)

The proposed budget and plans to address the extraordinary fiscal 2021 deficit represent months of thoughtful work by town boards, committees, and departments and already include over $800,000 in cuts. If the override passes, we currently see no further cuts necessary this year and cuts in future years are less likely. If the override fails, additional personnel cuts and reductions in town services will be necessary.

Alice von Loesecke, Select Board chair, and SusanMary Redinger, School Committee, are writing on behalf of the Budget Working Group..

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