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APPROPRIATION COMMITTEE 2 " REPORT, April 21, 2007, TO 2007 ATM
<br />offered by the Town. For a further explanation of the multiple reasons underlying this continuing
<br />increase, see page ii of the Town Manager's Report in the Brown Book.
<br />For the first time, the FY2008 budget identifies what portion and percentage of the projected health
<br />benefit costs are attributable to municipal, school and retired employees. (See page IV -4 of the Brown
<br />Book.) The projected percentage increase of health costs for municipal and school employees is the same,
<br />10.4 %; the percentage increase attributable to retired employees (which includes spouses) is
<br />approximately 1.2% less. This is because most retirees have only individual, as opposed to family, plans.
<br />Individual plans for retirees are less expensive than individual plans for active employees. The total dollar
<br />amounts of the FY2008 estimates for municipal ($3,256,000) and school employees ($9,595,000) differ
<br />because a significantly greater number of individuals are employed on the School side.
<br />During budget development, the estimate for health costs in Line 2130 was premised on the same number
<br />of active employees as existed on both Municipal and Schools sides in FY2007, and did not take into
<br />account either new employees who have been added to the Schools' protected, not -at -risk, list for
<br />FY2008, or new school employees who will be added if any of the projected school override questions
<br />are approved by the voters. The health benefits for those new employees were included in the Schools
<br />budget numbers. However, for purposes of actual appropriation, all health benefits will be carried in
<br />Line 2130 and the Schools budget, Line 1100, will be adjusted accordingly. This will be the case whether
<br />the override succeeds or fails.
<br />A number of current School employee positions are placed at risk in the upcoming School override
<br />questions. Should those questions be rejected by the voters, and those employees' positions consequently
<br />eliminated, the projected health benefits for those employees will not be incurred. Accordingly, there will
<br />be a decrease in total, projected, health expenditures for FY2008. However, the Town will face a statutory
<br />liability for unemployment compensation payments for those employees who are laid off, an amount
<br />which will approximate the savings in health benefit costs. The current budget, in Line 2140, carries a
<br />higher number for unemployment benefits than in past years to address, in some degree, those benefits in
<br />case of a failed override. At the time of the printing of this Report, it cannot be determined whether that
<br />amount will, by itself, be sufficient to cover unemployment compensation costs imposed on the Town
<br />should the override fail.
<br />The second largest figure in this section of Shared Expenses is Line 2110, $3,449,284. It represents the
<br />amount to be paid by the Town to the Lexington Retirement Trust Fund, managed and overseen by the
<br />Lexington Retirement Board, pursuant to an ongoing program to fund the Town's liabilities for current
<br />and future pension payments to retirees. The State requires that municipalities fully fund all such
<br />liabilities by 2028. Based on the annual payments the Town has made, and is projected to continue to
<br />make, the Trust Fund should be fully funded by 2015.
<br />Debt Service
<br />Debt service includes interest and principal payments for within -levy long -term debt (bonds) and for
<br />temporary borrowing. The budgeted debt payment recommended for FY2008 is $3,779,937, which is
<br />$59,876, or 1.61 %, higher than in FY2007. The total amount is broken down as follows: temporary -
<br />borrowing interest payments of $242,125; long -term debt interest payments of $703,832; and long -term
<br />debt principal payments of $2,833,980. The long -term debt interest payment is 11% higher than in
<br />FY2007, offsetting percentage decreases in long -term debt principal and temporary - borrowing payments.
<br />It is anticipated that this section of the budget will appreciably increase in FY2009, when substantial
<br />long -teen within -levy debt is issued.
<br />Reserve Fund
<br />The amount recommended to be put into the Reserve Fund, from which this Committee approves
<br />transfers and payments for extraordinary and unforeseen expenses, is $450,000. This is $50,000 more
<br />than was appropriated for FY2007, continuing a process in which the amount appropriated to this Fund
<br />has been increased over the past several years. An appropriation of $150,000 for FY2005 was approved
<br />by the 2004 Annual Town Meeting, but then was increased to $300,000 by means of a supplemental
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