Re: State of the Town Message Monday, May 8, 2017
To: Tim McInerney
Cc: Anita Patel
Guys, I just took a look at the “goal” scenario.
I’m not comfortable teling the town that this is realistic. Not only are we assuming $1M in new growth in 2020 and 2021, but we’re also assuming municipal aid increases and $55 per pupil c. 70 aid. As near as I can tell, this is hopes and dreams.
If I’m going to do that, I also need a “scenario” that accurately reflects our recent experience. 5.25% school growth and level aid.
If you’re interested in the “inside baseball” on where our present debate on Grafton’s financial projections started, this sixteen-month old email is the root of it.
At the time, I was days away from giving the 2017 State of the Town message as Chair of Finance Committee, and Town Moderator, Ray Mead, had issued an edict that FinComm “collaborate” with the Board of Selectmen in writing the message. In keeping with this directive, I reviewed four months worth of budget work, the budget book, and my own notes from FinComm’s meetings with the Town Administrator, the Superintendent and department heads. Then I sent my draft to the TA for review.
Because, at the end of the day, FinComm is tasked with financial trend monitoring, it was important to me that I not only tell Grafton Town Meeting voters what the current status of the town’s financial position was, but also what it would be going forward. And, since the 2014 override, I knew we were running through the extra taxing capacity that the override afforded us. In other words, I knew by 2020 that we wouldn’t have enough override money to pay for all the services that we now enjoy without some major intervening revenue influx.
When I said that, however, I got push-back. In the draft State of the Town message (SoTM) that I sent to Rebecca Meekins, I had included Sections entitled “Long Term Fiscal Projections”, “Per Capita Revenue”, “Economic Growth,” and “Reliance on one-time revenue in operating budget”. I included these sections because, according to people at the Massachusetts Association for Municipal Finance Committee Members, this is best practices.
Anyway, I got an email back from Rebecca indicating that I was NOT to include either the long term revenue projections section or the one-time revenue sections in the SoTM. They were deemed needlessly negative. I did not heed her advice in my presentation.
Following that email exchange, I received three sets of long term, 10-year projections from Tim McInerney and the Town Accountant, Anita Patel. They were dated May 8, 2017, and were entitled “Goal Scenario”, “Scenario 1” and “Scenario 2.” None of the three long terms views of Grafton’s finances for the next three years, never mind the next ten, were at all realistic in my opinion.
Clearly, then, the “Goal Scenario” blatantly misused the word “goal”. A goal is something that you can work toward within a defined period of time, the outcome of which is at least somewhat within your control. But the Goal Scenario presented really no realistically attainable goals at all, and no clear rational of how we could possibly achieve those goals.
Goal Scenario made a number of questionable assumptions, the result of which showed Grafton sailing into the Golden Age of Grafton finances. First, that we would receive $1,000,000 in new growth for FY20 and FY21, up from an average of $450,000 in the preceding years – without ANY explanation of where that money was coming from at all. Next, that our projected unrestricted municipal aid would increase by 5% annually over that period, when in reality it had been a point and a half lower recently. Next, that projected c.70 aid would increase by $55 per pupil, almost twice what it had been. And finally, most significantly, that suddenly our schools would increase only by 4% annually, down from 5.25%.
If we could at all control state aid, or if we had better control over (or could even rationalize the figure for) economic growth, you might be able to call these “goals.” But those aren’t goals. They’re “hopes”. As in “I hope I win the lottery,” and not, “It’s my goal this year to win the lottery.”
Sure, school growth at 4% is a goal. But it’s hard to achieve that goal without talking about stemming cost drivers that also are at least somewhat out of our control, like the increased cost of health insurance and special education.
I rejected this scenario as plausible.
Scenario 1 had many of the same draw-backs, but was mildly more pessimistic about state aid, which it brought to 4%, and c.70 aid, which increased “only” to $35 per pupil. Again, school increases and new growth were conveniently optimistic. This also was fantasy, and I rejected this projection as feasible or realistic.
Scenario 2’s state aid numbers were actually realistic, with unrestricted aid at 3%, and per pupil spending at $20 per. But again, new growth and school spending – the big ticket items – were the same as the goal scenario, and saved the end result of the projections from being too dire. Scenario 2, by the way, showed us in the red by $556,486 in FY20. And, again, that was without accurate new growth and school numbers.
Goal scenarios like that are useless. They don’t tell the community anything about what is coming, or the difficult choices we may need to make in the future. They provide a false sense of security until such time as someone delivers the bad news, and tells you that you have two choices: cut services or raise your taxes.
Following Town Meeting ’17, and my May 8 rejection of their scenarios, Town Accountant Anita Patel and Dan Gale, the schools’ Director of Finance, reached out and asked if I would be interested in meeting with them to go over the projections and come up with something that we all could agree on. “Hooray,” I thought! Someone finally gets it. I told them I’d be happy to. We rolled up our sleeves and got to work.
The premise was simple: the fixed numbers, like personnel costs were fairly well set for the next few years. The trick was estimating the variables, like new growth, state aid, education and healthcare.
And, by early October, we almost had it. We almost were there. When I sensed we were getting close to something, I wrote to Tim McInerney and asked if he would be okay if we presented the numbers at October Town Meeting. That’s when he got spooked and pulled the plug on the project. I never met with Anita and Dan on this again.
At the time, Anita, Dan and I had agreed to bring new growth down to something more reasonable, to average the last five years of state aid as a rough approximation for what we could receive, give us $30 in increased per pupil state aid in keeping with what was likely, and to grow the schools at 5.25%. That gave us a deficit of $1,734,118 for FY20 (which begins July 1, 2019 – just ten months from now).
So… do you understand why I’m pushing so hard for this? Do you understand why I’m not willing to take the Town Administrator’s numbers at face value? Do you understand why it’s better when all of the stake holders, the Finance Committee, and the School Committee, have a seat at this particular table?
Everything that I have been working for in Grafton since 2014 has been about what the community would do, and what it would look like subsequently, once the override money was gone. Our first step in planning for that future was to get accurate projections. But we blew it. It’s now a year after the project ended unceremoniously, and as a sitting member of this town’s executive board, I really have no idea what next year is going to look like.
What I do know is this: we need participation from the Finance Committee and the School Committee to make sure that it never happens again where the people most responsible for your town’s financial future are so far apart on where it’s all going.
Do we have financial projections? Yes. Yes we do. Are they based in reality? Depends on which set you’re looking at and who you’re talking to. The Town Administrator has his. The School Committee has theirs. FinComm is just trying to understand what’s going on.
That’s not exactly the goal scenario for Grafton.