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Town Financial Update
For my inaugural update, I would like to cover several topics ...
Financial Update – December 2012
During my tenure on the Finance Committee, the members have made an effort to improve communication with residents—including work on a (now-out-of-date) web site, televising Fincom meetings during budget season, giving financial updates at every Town Meeting, filming a pre-Town Meeting financial show for HCAT, participating in Talk of the Town, and holding special meetings of the Fincom for public Q & A prior to Town Meeting. Some of these have been mildly successful (and will be continued) but some have not; given that the Fincom is a volunteer board without unlimited free time (and without administrative support) I have always looked for ways in which the benefit outweighs the extra effort involved. I am writing this financial update to see if this would be an effective means of “getting the word out.” Please comment if you feel that this is a worthwhile effort; if successful I will try to write occasional updates throughout the budget process leading up to Town Meeting next May.
In the interest of full disclosure I want to be clear that I am writing this piece myself, as a member of the Finance Committee; although I will do my best to stick to the facts, any opinions expressed are my own and are not those of the Fincom. Unless explicitly stated, actions mentioned here have not been voted on by the Fincom.
For my inaugural update, I would like to cover several topics relevant to current financial issues in town:
1. Current (FY13) financial status: At the October Town Meeting, the Fincom reported that when the dust had settled on the FY13 budget, the town was left with a small surplus (which implicitly gets passed back to the town via a slightly lower tax rate). Since that time, state revenues have dipped and have fallen below “benchmark” collections assumed when the state finalized its budget. As a result, revenue projections have been revised (read: lowered) and Governor Patrick has already announced that he will seek authority to implement mid-year reductions in local aid. Fortunately for us, from the numbers we have seen the small surplus in the budget will be enough to offset the anticipated reduction in local aid. However, given the renewed uncertainty in the state budget, the Fincom will likely look to restrict spending as much as possible for the remainder of the fiscal year. The Governor has also highlighted the risk to the state from the “fiscal cliff”—yet another factor that will play into the remainder of FY13 should Congress fail to resolve the matter in a timely fashion.
2. FY14 and beyond: At the December 4 meeting of the Finance Committee, the Fincom voted to recommend a 1.5% budget guideline for FY14 along with a plan to get to level funding if the financial situation changes. This means that department heads will be asked to prepare budgets that do not exceed FY13 levels by more than 1.5%, and that they must also chart a course to get to FY13 levels in FY14 if need be. This guideline is based on a financial plan for FY14-FY17 that maintains the funding required for our OPEB liability (see below), reduces and ultimately eliminates the trash fee in 3 years, increases our annual capital appropriation to $550,000 (from the current $350,000), assumes no increase in local aid during the plan period (but does include allowed increases in the tax levy), and results in small budget surpluses in each year (remember, the surpluses ultimately lower the tax rate). Essentially it keeps Holliston on the path to long term fiscal stability that the Committee has been working towards for several years. Of course, the plan is always subject to the vagaries of the economy but the hope is that the planning has been realistic as well as slightly conservative so that we can stick to the plan as long as the economic picture remains stable.
3. OPEB (“Other Post-Employment Benefits”) funding: As part of the financial update I presented for the Fincom at the October Town Meeting, I stated that for the first time, Holliston would meet the “annual required contribution” (ARC) necessary to meet 30-year funding of our benefit liability. This statement was based on the latest audit of the liability; in that audit, a funding schedule was proposed whereby the town could meet its obligation in just under 30 years with an initial funding of $2 million in FY13 followed by annual funding of $1.5 million per year for the remaining term (on top of the “pay as you go” cost appropriated via the benefits/group insurance budgets). Since the report was issued in FY13 and since Holliston has not yet established an OPEB Trust Fund, the audit assumed no contributions were made prior to that time; presently the money “earmarked” for OPEB is “parked” in the Stabilization Fund. The combination of monies already set aside along with the over $1.8 million “parked” from FY13 brings us to the $2 million initial funding in FY13 required by the schedule. Now we must establish an OPEB Trust Fund to hold the money (something for which we are seeking special legislation right now based on action taken at the October Town Meeting), transfer the initial $2 million that is currently “parked” in the Stabilization Fund into the OPEB Trust Fund (which will likely be on the warrant for the May 2013 Town Meeting) and must continue funding the trust with $1.5 million per year going forward. This $1.5 million annual appropriation has been included in budget forecasting for future years so that we can continue to fund the trust according to the schedule provided by the auditor.
4. Compensation and Benefit Study: As was discussed at October Town Meeting, the compensation and benefit study the town funded took longer than anticipated, primarily due to delays in data collection. The Fincom received a large amount of data along with a report just prior to October Town Meeting. After reviewing the data, the Fincom had some concerns about the report and what we perceived as missing or incomplete information. On December 4, the Fincom approved a letter to the consultant requesting clarification or additional data on some issues. We will continue to work with the consultant to resolve the outstanding items. However, the Fincom and the Board of Selectmen are already working together to move forward on areas for which data has already been received. A joint meeting of the two boards has been scheduled for Thursday, December 13, at 7:30pm in Town Hall to discuss actions (if any) to be taken based on the study results.
5. FY14 budget reviews: Last, but certainly not least, is the kickoff of the FY14 budget season. Shortly after the start of 2013 (most likely mid-January), the Finance Committee will begin the formal budget review process that will result in the Fincom recommended budget for FY14. Although the schedule has not yet been set, it will be posted early next year and will cover the entire budget “season” leading up to the Annual Town Meeting in May. It is also the time where all town boards will be meeting to publicly discuss and vote on the budgets they will present to the Fincom; those meetings provide the best opportunity to have your voice heard. Some of these meetings (such as School Committee and Board of Selectmen meetings) are televised on HCAT; most if not all of the finance meetings will also be televised on HCAT.
Have a safe and happy holiday.
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