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02/12/2018 11:00 PMNow at the height of budget season, the Board of Selectmen (BOS) and Board of Finance (BOF) met for a joint meeting on Feb. 8 to discuss the current state of the town budget and consider new ways to hold down a mill rate increase for fiscal year 2018-’19.
The Board of Education (BOE) approved its proposed budget back in late January for a total of $58,104,483, representing a $1,185,278 or 2.08 percent increase in spending. The town side of the budget, while not yet formally voted on by the BOS, comes to a proposed $25,050,490, an $84,051 or a 0.34 percent increase in spending. Together, the town budgets total $83,154,973, a $1,269,329 or a 1.55 percent proposed increase in spending.
The BOS has until the end of February to vote on a final version of the town budget to be sent forward to the BOF. At the Feb. 8 meeting, First Selectman Tom Banisch reviewed the reductions the BOS had made to the town budget to bring the initial requested increase of 2.69 down to under half a percent.
To trim the operating budget, Banisch said the board has proposed reducing capital by roughly $97,000 and looked to other line-items including private school funding and the library to make significant reductions.
Following the news that Our Lady of Mercy (OLM), a private Catholic school in Madison, is slated to close at the end of this academic year, Banisch said the BOS cut $130,000 from the budget. Those dollars were used to provide transportation and nursing to the school, something the town provides to all private academic entities within the Madison borders. However, Banisch did inform the board that the OLM community is looking to save the school and if it is successful, that number might have to be worked back in.
“If there is a private school in Madison, we are going to have to provide transportation for those kids and the nursing,” he said. “That is something we just need to be aware of going forward. I am trying to keep my eye on the situation and find out where we stand.”
Additionally, the board cut $300,000 from the library operating budget under the rationale that the library will go down to a smaller staff once it moves to a temporary location during building construction.
The Fund Balance
With relatively lean operating budgets, much of the discussion centered around ways in which the town can use the unassigned fund balance to help offset an increase in the mill rate. The mill rate, set each year after the budget passes referendum, is what determines residents’ taxes for that fiscal year. Operating budget increases play a part in the mill rate as well as other factors like the Grand List.
The Town of Madison holds 10 percent of its operating budget in fund balance. The 10 percent reserve ensures the financial health of the town and can be used in case of an emergency like a hurricane; it also provides evidence of good fiscal management that results in receiving premium bond rates when the town goes out to borrow. As of June 2017, the fund balance total was $10,585,680.
The town also holds some money above that 10 percent, money that can be used for things like offsetting the mill rate, which is referred to as the unassigned fund balance. As of June 2017, the unassigned fund balance total was $2,171,920.
The unassigned fund balance has grown over the years and remained largely untouched because, questioning the financial health of the State of Connecticut, which continues to cut municipal aid, officials have built up the balance to help the town in case the state came down with a massive cut late in the budget planning process.
Governor Dannel P. Malloy recently released his last budget, a budget that included a significant reduction in municipal aid for towns like Madison. According to the numbers, which are likely to change once the legislature starts its debates, Madison’s total town aid would be reduced down to $449,441—a drop of more than $1 million from one fiscal year to the next.
Madison officials have prepared for drops in state funding. The total town proposed budget, at a 1.55 percent increase, already assumes the town will not get more in state aid than the $449,441. With that assumption built in, the town is now looking at other ways to use the unassigned fund balance to help the taxpayers.
“It’s taxpayer money,” said BOF Chair Jean Fitzgerald. “We want to give it back to them and not hold onto it if we don’t need to. Going forward, we want to make sure we level out the mill rate and these are ways in which we can infuse money in to do that.”
Options, still up for discussion among the BOS and BOF, include a $1 million contribution to the pension fund, Capital Improvement Program (CIP) cash infusions for future years, and moving $350,000 to a debt service reserve fund to help control the fluctuations in annual debt payments.
The Debt Plan
Each year the operating budget includes a required debt service payment. This year, the payment is $1,207,934, an increase of 4.91 percent. The size of the debt service payment can vary dramatically year to year depending on when certain debt payments, like the high school, start to drop off, or when new payments, like the library, start to come on.
The swings in debt can adversely affect the operating budget increase and, by extension, the mill rate from year to year. Madison is looking toward a significant drop in debt a few years out, so taking into account timing and the unassigned fund balance, Madison Finance Director Stacy Nobitz put forward a plan to try and even out the debt increases and decreases over the next three years.
Taking the $350,000 from the unassigned fund balance, Nobitz proposed using chunks of that money to stabilize the debt swings in the next three years. Once the money is applied, the town would experience changes in debt service in the four- or five-figure range. Without the offset, the town is looking at sizable six-figure swings over the next three years.
“We just smoothed out the impact of debt service because we have so many fluctuations coming up in the next few years,” she said. “We are fronting it out of fund balance and over the next three years we are basically paying ourselves back…rather than pushing out the decrease we are bringing it forward and trying to take advantage of it sooner.”
Pulling together the operating budget increase, use of the unassigned fund balance, and the proposed debt model, the town of Madison is currently looking at a mill rate of 28.05 for fiscal year 2018-’19, a mill increase of 0.75 up from the current year’s mill rate of 27.30.
In the coming weeks, the BOS will finalize its budget and the BOF has until late April to finalize the total budget to be sent forward to the voters at referendum.
The first budget public hearing is set for Monday, March 5 at 7 p.m. at Walter C. Polson Middle School.