Town ID's $2.6 million deficit in FY2006
Published on December 8th, 2004
STONEHAM, MA - As Stoneham's dilapidated workforce still struggles with the aftereffects of last year's budget cuts, the town's Selectmen strategized last Wednesday on how to tackle another financial cloud: an estimated $2.5 million FY06 deficit.
Unveiling the dire news at the Senior Center during the Selectmen's Annual Goals Meeting, Town Administrator Ron Florino told board members that shoestring operating budgets will force town officials to increase local revenues or layoff additional personnel next year.
"I think as far as operating, it's already been reduced significantly. I don't see too many more cuts there or departments won't be able to function," explained Florino in a post-meeting interview. "Unfortunately, most of these cuts will have to come out of personnel or through additional revenue sources."
While the town's tax levy will increase this year by 2.5 percent - creating a revenue stream over $1 million greater than what was available in FY05 - Florino predicts that entire financial resource will be wiped out immediately.
According to the Town Administrator, because the town used $1.5 million in one-time funds such as free cash and stabilization account savings for the FY05 budget, a mirroring deficit was created in FY06.
And with no other way to address the reoccurring expenses, that $1.5 million hole will be funded with additional monies raised from this year's tax bills, which will jump by $147 for the average Stoneham homeowner.
Three other major expense increases will drive the bulk of of this years deficit: 1) A negotiated 2.5 percent raise for municipal and school employees for a $1 million shortfall; 2) An estimated 15 to 20 percent increase in health insurance costs for workers at a $800,000 price tag; and 3) increases in special education costs, the town's pension liability, and trash budget.
The Budget Approach
Following the town's traditional approach to deficits, the FY06 budget hole will be shouldered equally by both the municipal and school sectors. However, Florino and town officials plan to reduce the burden to $900,000 for each side by tapping into Stoneham's savings accounts.
According to Florino, he hopes to reduce the FY06 deficit to $1.8 million by utilizing $700,000 in one-time funding sources.
Approximately $400,000 of that reduction would be withdrawn from the town's stabilization account, which currently holds over $900,000. The remaining $300,000 would be used from overlay reserve surpluses. Last year, the town spent $200,000 from the overlay reserve and $600,000 from the stabilization account to balance the FY05 budget.
Saying that he will strongly recommend to the town's Selectmen and Finance Board that additional stabilization usage be avoided at all costs, Florino cautioned that overuse of one-time funds last year created a substantial portion of the FY06 deficit.
"The problem this year is that we came to October Town Meeting without a balanced budget. So we were forced into using all the free cash. Now I'm trying to put something in place that prevents us from doing that in the future," said Florino. "I would be strongly opposed to using any more stabilization."
According to Selectmen Tony Kennedy and John DePinto, the town also hopes to streamline its budget process this year by tackling the deficit immediately.
"I want to put more structure in the budget process this year," said Kennedy, who emphasized the need to stick to a strict schedule at Wednesday's Goals Meeting. "I tried again and again last year to create a timeline, but it never happened. We were just never able to stick to our deadlines."
"By doing that this year, it would take away some of the uncertainty and stress [that existed last year] by showing that everybody is working together," Kennedy added.
According to Florino, he will present his budget to the Selectmen by the second week of January, shaving a month off of the schedule followed last year by former Town Administrator David Berry. Agreeing with Kennedy and DePinto, Florino believes morale problems that existed last year will be greatly reduced with an earlier timeline.
"You have to be upfront with people. You have to make the tough decisions early and hope for the best instead of stringing the process along," Florino remarked. "Some people are going to be affected, but there's no other way around it."
While both the Selectmen and Florino wouldn't comment on which departments they think should be cut, both parties agree that public safety and education need to be prioritized.
"I think at this point, a lot of our larger departments have taken a huge hit. So I think we need to look at other areas. It can't be an across the board department cut approach, you have to prioritize what's most important to the town," said Florino.
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