In late April of 2016, I sat in Conference Room E in the Municipal Center, to the right of my two opponents for seats on the Board of Selectmen. It was the annual League of Women Voters debate, and we were asked about whether Grafton might face challenges in the future paying for core services like schools, roads and public safety.
“We fixed it,” the crowd was told by one (winning) candidate, referring to the 2014 override that increased our annual levy capacity by $2 million dollars to continue to pay for schools. “And we’ll continue to fix it.”
From the other (winning) candidate, we heard that the future was unlikely to be very disconcerting, and that any potential issues could be resolved by sitting down with the school department and figuring out how to reign-in costs.
When my turn came, I explained that Grafton was in a “structural deficit,” where annual ordinary costs outpaced annual revenues, and that if we didn’t get out in front of that, we might regret it by the year 2020, which I said could be a “scary” time.
In the years since, members of the Board of Selectmen have had some fun mocking my dire predictions, accusing me of fear-mongering, and even have taken jabs at the term “structural deficit,” routinely proclaiming that the town is in “great fiscal shape.”
Last night, the laughter ended and, in a joint public hearing on the proposed fiscal year 2019 budget from the Town Administrator, no one proclaimed the town to be in terrific financial shape. And for the first time in years, members of the Board of Selectmen began to acknowledge that an override may be necessary to continue to provide for schools, roads and public safety in the near future.
And so it was that on February 20, 2018, that the seeds of the next override proposal were planted.
Before I get into the substance of the joint Finance Committee/Board of Selectmen budget presentation, let me just say that I don’t point all of this out for my ego. Please. I only point it out to demonstrate, again, what a shame the past five years have been, and how unfortunate it is that we didn’t get out in front of this sooner. Because all local budgeting is a zero-sum game that pits the poorest residents against the neediest ones. And when we get this wrong, people from one of those two groups suffer.
And before I delve into meeting details, let me set the background so that everyone knows what the rules are.
First, every single municipal budget in Massachusetts has to be balanced each year. Municipalities cannot run budget deficits. So, when the town tells you they are presenting a balanced budget, that’s not an overwhelming achievement. It’s work, for sure, but it has to be done. Every year.
The hard work part of it is trying to pay for everything we all say we want (Good schools! Smooth roads! A safe community!) with an income stream that only increases 2.5% per year under Proposition 2.5 (plus “new growth,” which typically comes to a total of 2.8%), while key costs increase much, much faster than that. Our out-paced costs and artificially-limited income sets the backdrop for our battle over what one selectman once infamously termed as “the crumbs.”
This Year’s Crumbs
The proposed FY19 budget comes in at $61,708,405. That’s an increase of 4.9% over fiscal year 2018 (the budget we’re presently running under right now). Those of you keeping track from the last paragraph may wonder how we can afford a 4.9% budget increase this year while only increasing our revenue by 2.8% under Proposition 2.5.
That’s a really good question. The answer to that is that we have extra “levy capacity” (ability to tax) from the 2014 override, and we’re starting to make cuts to core services. With the FY19 budget, we will have officially “used” the remaining override money, meaning that right now we’re roughly in the same spot we were in 2013. The school department is so far planning to cut six full time positions from its roster, including an administrator at the Millbury Street School.
The largest percentage increases in the proposed FY19 budget are schools, at 5.25% (as agreed upon when the override was passed), 3.2% for public safety, 4.95% for “unclassified” which is largely healthcare, and a 16.9% increase in debt service, which is mostly the result of borrowing for the new sewer treatment plant.
State aid, which used to make up 28% of our budget back when healthcare costs and special education costs were relatively small, now makes up only 23% of our budget. Thanks, Beacon Hill!
In the coming months, the Finance Committee will sit down with department heads who submitted their budget requests to determine the propriety of each request, and then make recommendations to town voters on the budget for town meeting in May.
It can’t be said enough: this technically is the Finance Committee’s budget. Grafton town government has an executive branch and a legislative branch just like the state and federal governments. The Board of Selectmen is a five-headed executive. Town Meeting is the legislative branch. Finance Committee is simply the Ways and Means Committee, presenting you all with a balanced budget to vote on. That’s why it’s so important that this process be transparent, and you all know how these figures are arrived at.
- I know Bruce Spinney first uttered the “O” word a couple months ago, but it was really something to hear it come from Selectman Hanna. I’m by no means celebrating override talk, but it’s nice that reality is starting to seep in. I’m going to ignore the fact that some of these guys are late to the party and just choose to embrace the fact that they came at all. Welcome to our nightmare, fellas.
- You know where a discussion is headed when the Town Administrator begins a conversation by comparing your tax bill favorably to other communities’ tax bills and mentions that we’re all a lot wealthier than we think we are. I don’t remember having this conversation last year, but I do remember having it in 2014 just before YESGrafton.
- We keep hearing about the Town’s “double A” bond rating, and that it means we’re “in great fiscal condition” (it’s mentioned again in this year’s budget book). Yes and no. It’s important that we not mislead about what that rating means. Right now, we’re able to pay all our bills, and our debt service for capital projects is a manageable percentage of our annual budget. So, credit ratings agencies will lend to us at favorable rates. That’s your AA+ bond rating. It’s the second highest you can get, which is really swell. Except 80% of Massachusetts communities have a AA or better rating, so bragging about it is sort of like bragging about hitting for par in golf. Nice, but so what? It doesn’t have anything to do with whether your kid’s class will have thirty kids in it next year, or whether the fire truck will break down on the way to a fire.
- Brand-new Finance Committee member Mat Often brought up a great point about capital planning last night that was predictably shouted down by the old guard. Mat recommended that we examine whether we’re spending enough on capital maintenance on a yearly basis, since the amount we spend annually never really increases, but our maintenance back-log does. If you believe, as I do, that deferred maintenance costs are more expensive than addressing costs as they come up, then it makes sense to develop a capital plan that puts maintenance on a data-driven schedule. We were told that it wasn’t worth doing this.
- If you’re interested in getting into the weeds a little bit, there was an interesting discussion about a $130,000 “capital” request from the schools to buy new computers. Selectman Dauphinais believes, strongly I think, that this request isn’t really a capital request but should instead come out of their operating budget.
Why does this matter? Well, because “capital” items are typically paid for out of “left over” unspent money from the year before from an account called “free cash.” If the schools have to pay for the computers from their operating budget, then they have to find $130,000 in their budget, somehow. Something, or someone, gets cut.
Why is it important that computers are either capital or operating budget items? Don’t we just want kids to have the right equipment? Well, yes, of course we do. But there are some pretty good rules we set down for budgets that keep us out of trouble in the long run, and one of them is that recurring (or operating) costs shouldn’t be paid for with non-recurring (or one-time) money. And, much as I hate to admit it, I think Craig’s probably right here. Computers are replaced so routinely in 2018 that some of them are starting to look like ordinary operating expenses.
Which is more bad news for the school budget.
- The conversation that I can’t stand, and it keeps coming up, is what percentage the schools take up in the overall budget. If you do the math one way, it’s 50%. If you do it another way, it’s 57%. If you do it another way, it’s 80%. I just have one question about this conversation, and it’s this: Guys, who f*cking cares?
We’re a small town. We really only do three big things: schools, public safety and roads. We do other things, sure, but those are the big ones. And we’re a rural town of 19,000, consistently rated as one of the safer places to live in the state. So, it’s not as though we’ve got an enormous police budget we have to contend with. We don’t even have a full-time fire department. We have a DPW of like ten guys doing $1.5 million in roads.
In other words, of course we spend most of our budget on schools. Of course we do. And you know how we determine what that budget is? By figuring our how many teachers we need for how many kids we have, and then paying them as close to market rate as we can afford. The same way we pay the police as close to market rate as we can afford. The percentages are what they are. The dumbest thing you could do is cut one department or add to another to artificially make the percentages more even.
What a useless conversation that is.
- Tab 8 of the proposed budget book includes long range projections out to FY25. Long-time readers know that I’ve been fighting to publicize these, and to make sure our assumptions on income and expenses make some sense. It’s been a struggle.
For instance, last spring, the administration insisted that the long-range predictions show school budget growth at 4%. I insisted that any meaningful prediction show school growth at 5.25%, since that is what it’s been since 2014. And what was growth a year later? 5.25%.
This year’s projections show us $86,907 in the hole twelve months from now as we prepare the FY20 budget. Importantly, to get to that number, the administration insists that we’ll get “new growth” of $1,000,000 in FY20 and in FY21. This, in theory, will be accomplished by developing private property off of Route 30, to the tune of $190 million in property improvements.
Super, but color me skeptical. We’re twelve months away from including that imaginary money in a budget, and no one has so much as submitted an application before the Planning Board for development. Good luck with all that.
If I’m right, and I hope I’m not, that $86,907 deficit is a lot closer to a million dollars.
But we’re in great financial shape, and these are just the crumbs.
- I’m sure this was unintentional, but Finance Committee was completely left off of the administration’s government organizational chart.