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APPROPRIATION COMMITTEE—2.020 ATM 25 March 2020
<br /> Appendix A: 5-Year Budget Projections
<br /> For the past two decades,the Appropriation Committee has prepared budget projections that were presented
<br /> in appendices to the Committee's annual ATM reports. At the time those projections started, Town staff
<br /> did not publish any comparable projections. More recently, however,the Town's Finance Department has
<br /> begun to prepare its own forecasts for use in the Budget Summit process in preparation for the next fiscal
<br /> year's proposed budget. Projections for FY2021were presented at the first budget summit held on October
<br /> 30, 2019. Subsequently, the department made modest revisions to reflect the proposed budget for FY2021
<br /> presented in the Brown Book.
<br /> Rather than prepare separate projections for Town Meeting, this year we summarize the Finance Depart-
<br /> ment's projections and discuss their implications in planning for future Town budgets.
<br /> Budget figures in the tables in this appendix are given in thousands of dollars.
<br /> Summary of Proiections
<br /> Table A-1 summarizes total revenues and expenses, showing actual results for FY2018-19, revised budg-
<br /> eted figures for FY2020 (still underway),the proposed budget for FY2021 presented in the Brown Book,
<br /> and projected figures for FY2022-FY2025. The bottom line shows the net surplus(deficit).For FY2018 and
<br /> FY2019, the Town ran substantial overall surpluses, about 4% of expenses in FY2018 and almost 5% in
<br /> FY2019. These surpluses were then available for the Town in the next year in the form of free cash. For
<br /> FY2020, currently underway,the revised budget shows income and expenses in balance, as required under
<br /> state law.However,it is likely that the fiscal year will end with a surplus because Town budgets are gener-
<br /> ally conservative in the sense that they strive not to overestimate revenues or underestimate expenses to
<br /> ensure that the Town does not run a deficit (which is forbidden under state law). Similarly, the recom-
<br /> mended budget for FY2021 is balanced, and it seems likely that the final actual figures will result in a
<br /> surplus as a result of the Town's conservative approach to budgeting.
<br /> Table A-1. Actual and Projected Revenues and Expenses
<br /> FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025
<br /> Actual Actual Revised Proposed Projection Projection Projection Projection
<br /> Total Revenues $ 216,614 $ 224,456 $ 229,337 $ 237,621 $ 243,178 $ 249,870 $ 258,298 $ 266,032
<br /> Total Expenses $ 208,347 $ 214,002 $ 229,337 $ 237,621 $ 249,716 $ 258,980 $ 269,554 $ 276,650
<br /> Revenue-Expenses $ 8,267 $ 10,454 $ (0) $ (0) $ (6,538) $ (9,110) $ (11,257) $ (10,618)
<br /> As percent ofexpenses 4.0% 4.9% 0.0% 0.0% -2.6% -3.5% -4.2% -3.8%
<br /> The projections beyond the FY2021 budget under consideration show projected expenses exceeding pro-
<br /> jected revenues,yielding deficits ranging from 2.9%of expenses in FY2022 to 4.4%in FY2024.However,
<br /> any projection of revenues or expenses is subject to considerable uncertainty,as we discuss in greater detail
<br /> below. When the time comes to prepare a budget for one of those years, if the projection still indicates a
<br /> deficit, changes will have to be made to bring budgeted expenses and revenues into line with one another.
<br /> We note that the projections originally presented at the first budget summit in October 2019 for FY2021
<br /> showed a deficit of just under $2 million, but a combination of adjustments, including limited program
<br /> improvements and reduced contributions to some reserve accounts,brought that budget into balance.
<br /> Projections, particularly those several years out, are subject to substantial uncertainties, however the pro-
<br /> jected deficits suggest a modest revenue increase and the need to control costs. We present the projections
<br /> in more detail below.
<br /> Projected Revenues
<br /> Table A-2a shows projections of various revenue categories and provides notes on the assumptions behind
<br /> those projections. Property taxes dominate revenues, accounting for 78%of total revenues in FY2018 (ac-
<br /> tuals) rising to 84% in the projection for FY2025. As a result, the assumptions concerning property tax
<br /> revenues are critical to the projections.
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