2022-11-16 FY2024 Budget Summit III-min

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building. She also noted that the PEG Access Special Revenue Fund is beginning to become depleted, so the contribution is being reduced to make this more of a smooth transition.  FY2024 Revenue Allocation (Municipal & School) and Uses of Free Cash Ms. Kosnoff explained that, as of Summit I, the total revenue was projected at $270.7M. Once necessary items were removed from that projection, the amount was reduced to $265.4M. When dividing this up into the correct percentages for the Town (26%) and the Schools (74%), the allocation for the School Department was $3.9M and for the Town was $1.38M. This was a 3.1% increase over last year. The School Department budget, as presented at the last summit, was indicated to be approximately $133.6M, or approximately 4.2% over their last year's budget. This left the School Department with a shortfall of approximately $1.4M. The Town's allocation was $46.4M, with requests from the Departments submitted at $48.5M, a 7.6% increase over last year. This leaves the Town with a shortfall of approximately $2M. The revenue that can be allocated is 3.6%, or $6.2M over last year. This will give the School $4.6M more than last year, and the Town $1.6M more, still leaving both sides with a fairly significant shortfall. Ms. Kosnoff reviewed some of the drivers for the allocation shortfalls. She explained that Lexington’s enrollment at Minuteman is increasing. This assessment is largely driven by the four-year rolling average of the number of students enrolled at Minuteman. For 2023 there are 78 students current enrolled at Minuteman, an increase of 10% over the four-year average. The increase to health, dental and other fringe benefits has a large impact, at a $1.6M increase over last year's budget for health benefits. She noted that the Facilities Department budget has a very significant increase over last year of approximately $1.6M, or 12.5%. The majority of this is driven by energy costs. Ms. Kosnoff noted that the contribution to the Special Education Stabilization Fund has been increased to $1M from free cash. There will also be a continued contribution to the Pension Fund of $50,000/year from free cash. Regarding cash capital, a majority of the $12.2M is coming from free cash, but $700,000 of tax levy funding was also added. Ms. Kosnoff explained that, on the Town side, the trash and recycling contract is projected to potentially go up $1.1M-$1.2M in just one year. Some funds are being held aside, in case that item needs to be dealt with. Also, the HR department would like to do a municipal wage study across all Town Departments to see where Town employees are lining up compensation-wise with other communities. She explained that there is no way to be able to fund any program improvements this year out of the Town's municipal budget. Thus, she and the Town Manager are requesting that this item be funded from free cash, as it is a one-time expense. In response to a question from Mr. Lucente (SB) regarding the increase to health insurance rates, Ms. Kosnoff explained that Lexington is a member of the GIC, the State's health program. This tends to be a bit more stable than market rate plans. A 5% increase in health premiums and a 3% in dental premiums have been projected at this time. The number is based off active employees in the system, with additional leeway for others who may enter the plan throughout the year or change their plan status. In response to a question from Mr. Levine (AC) as to why the tax levy was not used for the operating budget and the free cash used for the tax-free cash capital, Ms. Kosnoff explained that this is based on long-term planning and projections. Dr. Hackett (SC) stated that the share expenses and set asides are a choice. A tiny adjustment in these could make a huge difference in the School budget. She questioned the amount of funding that might be needed to fix air quality issues in Town buildings. She noted that the School Department has returned approximately $6M back to the Town, which then goes into free cash. The following year, the revenue allocation model is applied, and the School gets 74% of what was returned to the Town. The School Department is requesting to adjust the allocation amount from $1M to slightly more than $1.4M, in order to bring the Special Education Stabilization Fund back to $2M.