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Policy Context <br /> <br />The major fiscal issues facing Lexington government as we strive to sustain public <br />services (municipal and school), retain the skilled and valued people who provide those <br />services, and maintain the physical assets/infrastructure on which we depend are: <br /> <br /> •heightened economic uncertainty, making it much more difficult to plan sound <br />budgets; <br /> <br /> •the likelihood of an immediate cessation in the growth of revenues during the <br />upcoming fiscal year, with a possibly prolonged period of depressed state aid thereafter; <br />and <br /> <br /> •the risks that recent decreases in employment and individual wealth will erode <br />residential construction and renovation (further weakening a principal source of revenue <br />growth in recent years). <br /> <br />Another risk, subject to considerable uncertainty, is that the present period of <br />extraordinarily low inflation and interest rates may be followed at an unknown time by <br />substantially higher inflation and interest rates. That would put upward pressure on wage <br />and benefit costs while depressing the housing market. It would also make borrowing for <br />capital projects more expensive. <br /> <br />This task force has been asked by the Selectmen to advise on fiscal policy in the <br />relatively near term. In doing so, we recognize that the need for putting Lexington’s <br />financial decisions on a new basis may extend for a protracted period of time. Accordingly, <br />we make recommendations reflecting both the uncertain duration of the current economic <br />challenges and their uncertain severity. <br /> 11 <br /> <br />