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03/28/2017 12:00 AMDespite the Board of Selectmen (BOS)’s initial attempt to reduce capital spending for the coming fiscal year, the Board of Finance (BOF) voted on March 23 to put some projects back in the budget, with some finance board members expressing concerns over the potential ramifications of cutting funding for capital projects in this economic climate.
As approved by the BOF, the combined town and Board of Education (BOE) budget comes to $81,885,644, a $2,084,610 or 2.61 percent increase in spending.
The BOF did not touch the BOE budget, leaving it at $56,919,205, representing a $1,433,001 or 2.58 percent increase in spending. However, the BOF elected to add back close to $200,000 in capital project funding proposed by the Capital Improvement Program (CIP) that the selectmen had originally planned to postpone.
The proposed town budget, as originally approved by the BOS, came in at $24,738,964, a $424,134 or 1.74 percent increase in spending over the current year. After the BOF changes, the town budget is $24,966,439, a $651,609 or 2.68 percent increase in spending.
The funds reallocated for capital spending by the BOF include projects such as emergency communications and water tanks for the fire department. Additionally, the BOF voted to bump the first selectman’s salary starting in Jan. 2018 from $80,250 to $100,000.
The reason given for the BOF’s reluctance to cut back on capital project funding relates to the current financial situation in the state. BOF members said they understood what the first selectman was trying to do by cutting the Capital Improvement Program, but BOF Chair Joe MacDougald said as the state continues to pull back on municipal aid, state budget mandates leave towns in precarious positions—particularly the municipal spending cap.
The cap requires that the state reduce revenue sharing grants to municipalities when spending exceeds 2.5 percent or more of the municipality’s prior fiscal year general budget, calculated after deducting budgetary increases such as debt and special education. MacDougald said that if the town reduces its contribution to the capital account, with the municipal spending cap in place, it would be increasingly difficult to rebuild the capital fund in later years without having to tax above the cap.
“Once the budget base comes down, it gets very, very hard to build it back up,” he said. “This year we had good news—health insurance was relatively good news and we didn’t have any big legal settlements. It would take us years to build [the capital account] back up and it would take us years of good news to build back up.”
CIP and BOE Chair Jean Fitzgerald said the projects that are restored are projects that need to get underway.
“These are not ‘nice to have’ projects,” she said. “These are projects that need to be done, so you are only kicking the can down the road.”
The Town and Schools Budgets
Prior to the BOF meeting and budget adjustments, a small crowd—primarily town and school officials—gathered at Walter C. Polson Middle School on March 22 for the first public hearing on the 2017-’18 fiscal year budget.
Both the town and school budgets as well as the CIP were presented to the public. At the meeting, MacDougald explained the budget process to the public before First Selectman Tom Banisch and Superintendent of Schools Tom Scarice explained the rationale behind, and various components of, their budgets.
Scarice said the BOE begins its budget process in October and this year’s budget increase is primarily driven by health insurance, special education, and staffing. However, he said the standout feature of this budget is a reduction of 7.5 certified teaching positions across the district, a move designed to respond to declining enrollment and dwindling state funding.
“In anticipation of a reduction from the state…we have reduced four teaching positions at the high school,” he said. “This is a pure programmatic cut. We are hoping to maintain courses, but I am pretty certain class sizes will have an impact up at the high school next year.”
On the town side, Banisch said the goal was to develop a responsible budget that continues to support existing programs and helps keep the mill rate stable. To hold the mill rate and keep taxes down, Banisch said he wants to keep the tax collection rate at 98.75, cut back on some capital project spending, and use $750,000 from the fund balance to offset the budget increase.
“All of these are to hold down the tax rate for next year in light of the fact that the state is totally unpredictable and we don’t know what to expect,” he said.
Concern over the situation with the state budget was a major theme affecting all of the budgets. Under Governor Dannel Malloy’s proposal, Madison and many other municipalities would see a reduction in state aid and would be asked to contribute to the teachers pension plan. If the governor’s proposal were to pass, Madison would receive $2,275,237 in state aid in the next fiscal year, but would contribute $2,602,739 to the teacher pension plan, effectively netting out any sort of monetary state aid. In the end, the town would end up owing the state $327,502.
Residents asked about the viability of the governor’s proposal to shift approximately $400 million in teacher pension contributions to municipalities.
Benefits for teachers work out to two percent of the average of the three highest years of a teacher’s salary multiplied by years of service, with benefits not to exceed 75 percent of the salary in a teacher’s highest paid years. For years, teachers have contributed six percent of their salary to their pension and the state has committed to funding the remainder. However, the system was notoriously underfunded for decades, so while the state has been fully funding the plan since 2008, contribution rates are about to skyrocket.
Banisch said he doesn’t believe the pension proposal will hold this year.
“The state was supposed to be funding this at the same time the teachers were,” he said. “For them to turn around at this point and tell us as towns that we should dip into our savings to make up for the shortfall they have created is just ridiculous. As first selectman I will not stand for it.”
The reality is while the governor’s proposal may change, Madison will not have answers before the budget referendum. After testifying in Hartford this week, Scarice said the word is now that the state may not resolve its budget until Labor Day.
With so much uncertainty, MacDougald said the key is flexibility.
“I think it is highly likely like last year that if there is a change with the state, we will probably be in this room again saying here is how we have to respond to it,” he said.