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APPROPRIATION COMMIT fEE REPORT-NOVEMBER 2005 Article 5: Supplementary Funds Funding Committee Appropriations Requested Source Recommends $847,396 Free Cash, State Approval (9-0) Aid, Transfer In July 2005, a review conducted by the new Superintendent and his staff of the current fiscal year (FY 2006) budget of the Lexington Public Schools revealed that a number of areas of the budget are substantially underfunded. In August the total shortfall was estimated to be in the vicinity of$1.3M. In September this shortfall was later confirmed by an independent consultant, whose evaluation suggested that this estimate was still a bit low. A thorough review of all expenses by the administration identified an additional $226,861 of special education related shortfalls, raising the underfunding to about $1.5M. The School Committee, Superintendent, and School administration have addressed these budgetary issues by 1) increasing the price of school lunches to raise additional revenue ($257K); 2) cutting positions and the associated services ($414K); 3) cutting a program in which staff from Minuteman Science/Technology High school conduct a program in the Lexington middle schools ($57K); and 4) proposing that the remaining about $790K shortfall be funded by a supplementary appropriation. (The actual motion will request funds of$847,396, of which $57,000 represents a transfer from the Minuteman Tech budget to the school budget;the balance is $790,396.) We believe that it is the prudent course of action to correct the school budget in a timely manner so that with responsible management there is a reasonable expectation that at the close of the fiscal year expenditures will not exceed the appropriated amount. If a supplementary request is not approved under this article, we recommend that a corresponding level of positions and expenses be cut from the school budget. In short,the operating plan and appropriation need to be consistent. If the decision on a supplementary appropriation were to be postponed until the Annual Town Meeting next spring, the Superintendent would need to manage the budget until next April assuming that no supplementary appropriation will materialize at that time. This effectively means that the planned level of services to the students must be reduced. The reduction would occur even in the case that the anticipated deficit is managed by encumbering funds. If, alternatively, the Superintendent were to assume that a supplementary appropriation would be approved next spring and the appropriation did not come through, the schools would be put into a particularly difficult situation in the last few months of the year. This Committee strongly recommends that such an assumption not be adopted and that this request for a supplementary appropriation be granted now. It should be emphasized that a decision under this article creates a clear understanding for all involved as to the spending level that the Town Meeting is willing to support. If there is no decision made under this article, misunderstandings are bound to occur. We favor approval of the supplementary appropriation for the following reasons: 1) The positions and services represent important components in the provision of services by the School system. 2) The services in question are highly likely to be included in the budgets for the ensuing school years. 3) It is difficult to change the level of services in the middle of a school year. None of the supplementary appropriation is requested to improve programs or services beyond those planned when the budget was approved last spring. Rather, some reductions have been made, and the School Committee has taken the position that further reductions are highly undesirable. Page 5 of 11