2012-03-ATM-SPTM-AC-rpt - Laserfiche WebLink

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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2012 ATM & STM Town's self - insured benefits program will be terminated as of July 1, 2012, and benefits- eligible Town employees will have the option to subscribe to one of several health insurance plans offered by the Massachusetts Group Insurance Commission (GIC). The Town will use the GIC for at least the following three years, after which time the Town will have the option to renew its contract with the GIC for three more years. The financial impact of this change on the Town budget will largely depend on how many employees enroll in the GIC and which plans they choose, but we have been advised by the Town Manager that there will be a significant reduction in costs — in the vicinity of $3 million — for each of the fiscal years FY2013 -2016. For more details, see the discussion of Program 2000: Shared Expenses under Article 4. The FY2013 Budtet The Town Manager has estimated new growth conservatively at $2,000,000 this year, a 10% increase over last year's original estimate. The Town's Free Cash certified as of June 1, 2011, was approximately $8.1 million, up about 15% from last year. Overall, the Town's projected revenue for FY2013 is growing by 4.7% over FY2012. Town staff have proposed a level - service budget without the need for an operating override. The revenue allocation model used as a starting point for the level - service budget began by funding shared expenses, then allocating 71.9% of available new funds to the schools, and the remaining 28.1% to municipal departments. Overall, the proposed FY2013 budget has increased 5.9% over the previous year, but this large growth rate requires some explanation. The full budget is inclusive of the operating budget (education, shared expenses and municipal departments) and cash capital, senior tax work -off and OPEB. Cash capital is being used as a temporary parking place for the $3,379,821 surplus that resulted from the reduction in the health insurance budget (this occurred late in the budgeting process when the Town entered the State GIC), and the $1,254,980 residual balance of free cash that has been set aside for as yet unidentified capital spending. The annual increase for the operating budget alone is 2.6 %. The appropriation request for schools represents an increase of 4.3 %. The Town's assessment for Minuteman Regional School fell by over 17% due to a decrease in the enrollment (particularly in the post - graduate program) of students from Lexington. The request for shared expenses represents a smaller than average increase of 1.3% (see the discussion under Article 4). In aggregate, the requests for all municipal departments increased by 3.17 %. When preparing the budget, the Town Manager must make an estimate of the year's State aid well before the amount is finalized by the State government. This year's recommended budget assumes that FY2013 State aid will be level - funded, i.e., the same as the amount of State aid actually received in FY2012. Based on the State's budget situation, Town staff foresees a possibility that FY2013 State aid will be flat or declining. The motion under Article 4 will likely include a provision to set aside funds as a hedge against reductions in State aid. This provision would allow some or all of these funds to be applied without requiring a Special Town Meeting to appropriate them. The Town's debt service will rise slightly in FY2013 as the Town begins to pay off debt incurred for the initial design and engineering work at Bridge and Bowman Elementary Schools. Assuming that the construction of a new Estabrook Elementary School proceeds as planned, the Town will issue more debt for all three school construction projects during FY2013. This will significantly increase the Town's debt service obligations in FY2014. In the budget being considered by this Town Meeting, the Town still faces some unresolved questions on how best to use over $4.5 million in unallocated funds. The Committee hopes to discuss this at a budget summit prior to action on the financial articles by Town Meeting. XT