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HomeMy WebLinkAboutFY 2002 Town Manager's Budget Message�5 MOg ` X775 �o Town of Lexington W � Town Manager's Office z a 3� enaarr^ �FNirvGY � Richard J. White, Town Manager Linda Crew Vine, Assistant Town Manager June 29, 2001 Board of Selectmen Town of Lexington 1625 Massachusetts Avenue Lexington, MA 02420 Dear Board Members: Tel: (781) 862 -0500 x276 Fax: (781) 861 -2921 Submitted herewith is the Town of Lexington's Appropriated Budget for Fiscal Year 2002. The appropriated budget includes funds for the general operation and maintenance of the municipal government and includes the schools as well as a five -year projection of capital improvements. A detailed description of each appropriation request is provided, as well as a complete description and justification for all capital requests. The appropriated budget includes expenditures of $110,499,046 balanced by non -tax levy revenues totaling $39,210,156 and an estimated (non - exempt) tax levy of $69,580,690. Non -tax levy revenue is increasing by 12.7% from the FY2001 appropriation. The Enterprise Funds (Water, Sewer and Recreation) will increase by 5.4 %, while all other non -tax levy revenue will increase by 18.4 %. The tax levy will increase by $1,796,427 or 2.7 %. The $69,580,690 in tax levy funding represents $747,000 short of the maximum increase allowed by law due to the implementation of a Pay As You Throw program designed to better manage trash disposal services, to increase recycling and to reduce the amount of waste products in Lexington. $71,288,890 or 64.5% of all revenue used to fund town services is raised via property tax. The amount the tax levy was raised to pay for the recently approved School Building construction project debt service ($1,708,200 in FY2002) is exempt from the limitations of Proposition 2'/2 and is shown within the budget as a revenue and expenditure offset. A Pay As You Throw (PAYT) program for trash disposal services has been approved for implementation effective July 2, 2001. It is expected that the PAYT program in its first year of implementation will reduce Lexington's waste stream by almost 9% avoiding over $200,000 in tipping fees while generating enough revenue to reduce the real estate tax levy by $747,000. The tax rate for FY2002 is estimated to be $11.66 per $1000 of assessed valuation for residential property and $21.71 for commercial property. Revenue from sources other than the real estate tax can be identified in four broad categories; enterprise, state aid, local receipts and available funds. State aid, local receipts and available funds are pooled together with revenue generated from the real estate tax to fund most municipal appropriations. Revenue generated from the PAYT program is treated as a local receipt. 1625 MASSACHUSETTS AVENUE • LEXINGTON, MASSACHUSETTS 02420 WHY PAY AS YOU THROW? The most ambitious proposal in this budget is the Pay As You Throw program (PAYT). Implementation of a PAYT program will encourage significant refuse disposal life -style changes for most of Lexington's citizens. The primary purpose for implementing a PAYT program is to reduce present and future expenditures by increasing the Town's recycling rate and reducing Lexington's solid waste production. Currently, the entire cost of solid waste management is paid for with revenue from the property tax. Residents can throw away as much trash as they like and the costs of disposal are paid by property tax revenues. The Town's solid waste production has increased in each of the last three years and by over 5% alone in fiscal year 2000. Under PAYT, about 1/3 of the cost is moved from this tax levy to a "pay for service program" using per bag payment. The cost of recycling will continue to be funded through the tax levy. Moving some of the cost for disposal of trash from the property tax to a fee based system provides an economic reward to residents who reduce waste by recycling more. However, leaving 2/3 of the cost of this program on the tax levy will make it unlikely that Lexington's citizens will find it advantageous to switch to private trash haulers. Numerous state, municipal and federal studies have measured municipal experiences before and after implementation of PAYT. A recent study of seven municipalities in Massachusetts showed a 36% increase in recycling in the first year of PAYT. The Environmental Protection Agency reported that the average reduction of solid waste by PAYT communities is between 25 and 45 percent. Your PAYT Committee estimates that PAYT, when fully implemented, will reduce curbside waste by 14% and increase the recycling rate by 8% for a total reduction of 22% in waste sent for incineration. First year waste reduction and recycling savings in Lexington are expected to be significant. The budget anticipates modest amounts of recycling and waste reduction (8.8 %) that will cover the start-up costs for the program. The impact of the PAYT program on waste reduction and recycling as well as the revenue generated from implementing a per bag payment system will be evaluated throughout the coming year. The data gathered during the coming year regarding waste reduction, recycling rates and revenue collections will be very helpful in formulating the PAYT proposal for the FY2003 budget and allow us to be much more aggressive in our PAYT assumptions. There are several converging and critical factors that motivate me to support a PAYT program for Lexington. • Health researchers have uncovered widespread risks from the pollutants produced from trash disposal. It is not unreasonable to expect new risks to be identified as research continues and technology produces new and more precise ways to measure pollutants and detect the cause and effect of disease. • State and federal regulators are already increasing pressures on municipalities to reduce waste and clean up the waste stream. The State Department of Environmental Protection has developed model PAYT programs for municipalities to replicate and has created incentive grants to help communities Page 2 of 14 03/28/02 implement these model programs. Health and community concerns regarding the siting of future waste incinerators and landfills only put further constraints on the options available for waste disposal. Mandating waste reduction and increasing recycling rates will be primary options for regulators in solving this global but very local health problem. • Trash disposal has become very expensive! Disposal costs have more than doubled during the last ten years. The fees we pay for trash incineration are expected to increase 70% by the year 2005. This is not a projection based on a series of assumptions, Lexington's contract with the North East Solid Waste Committee ( NESWC) runs through the year 2005 and the costs of disposal are known and set by contract. The only option available to the Town in mitigating these expected cost increases is to reduce the amount of trash brought to the NESWC facility. The Town has already pursued an aggressive recycling education and curbside recycling program. Serious waste reduction and increased recycling rates can only be achieved with a PAYT program. • Termination of the NESWC contract in 2005 requires that the Town seek competitive bids for new disposal options. Already, factors beyond the Town's control, health and community concerns regarding siting of a new incinerator or other disposal facilities limits competition. It is likely that Lexington may be required to verify its ability to reduce its trash volume in order to negotiate a cost effective disposal arrangement. The Town cannot afford to be cavalier about managing its source reduction efforts as it may affect its ability to secure a long- term disposal contract. Relying on the spot market for refuse disposal in 2005 could place unmanageable financial and administrative burdens on the Town. The mechanics of PAYT implementation have been developed by Department of Public Works staff. The PAYT program will be simple and straight forward. No resident will have to sign up for the program. Every residential dwelling will be provided with 30 tax levy funded stickers free of charge. The per -bag fee is set at $2.00 and the per - barrel fee (good for a fixed six month period) is set at $65.00. Bag tags will be sold at the Town offices building, in super markets, convenience stores and other retail establishments throughout town. There will be no charge for recycled materials. White goods and bulky items will be picked up on a scheduled basis. Households able to reduce waste consumption and increase recycling could avoid paying any per -bag fee. THE PROCESS During the last several years, considerable effort has been made by the staff to develop budget decision - making processes that encourage more collaboration between the staff and the Board of Selectmen, as well as the Board of Selectmen and the various interests that have a stake in the Town's budget development process. This year, the Board of Selectmen and the School Committee, with involvement of the Finance and Capital Expenditures Committees, met in early fall to develop a common understanding of some of the decision - making parameters that would affect the 2002 budget. In addition, the Page 3 of 14 03/28/02 boards and committees communicated clear and coordinated policy guidance to both the school and municipal staff as it related to the development of the fiscal year 2002 budget. The budget development timeline for municipal and school departments were aligned and synchronized. This simple, but logistically complicated adjustment allowed for a carefully planned budget development process that permitted most of the major interests that have a stake in Lexington's budget process to be involved in the budget policy setting and guidance process. A series of five collaborative policy guidance sessions were held during the fall and winter months. These meetings, combined with last year's success, have clearly enriched the Town's budget decision making competency. The FY2002 budget includes a school appropriation that is representative of the actual needs of the schools as represented by the School Superintendent and approved by the School Committee. The FY2002 budget is the second consecutive year in which the leadership of the Town, both elected and appointed, met together to collectively develop and agree upon budget policies and resources. FISCAL POLICIES Developing coherent fiscal policies relating to enterprise funds, cash reserves, cash capital and large capital projects have consumed much of the discussions during the last three years. From 1980 -1997 much of our management of Proposition 2 1/2 has come at the expense of developing clear and coherent standards for retaining sufficient cash reserve to insure fiscal stability in the event that the Town's funding environment or regional economy were to change unexpectedly. During this period, investment in small and large capital projects has been inconsistent and unpredictable. Our infrastructure has suffered as a result. Finally the politics of funding tax levy supported programs during the last 20 years has created some very inconsistent policy related practices that have compromised the fiscal integrity of the Water, Sewer and Recreation Enterprise Funds. Over the last three years, considerable effort has been made to develop policies, procedures, and operational practices so as to avoid future temptation to compromise the integrity of these very important funds. The Town will be well served and fiscally healthy for many years to come if it has the self - discipline to follow these important policies adopted by the Board. FY2002 is the second year in which all of these policies have been in place and dealt with comprehensively. A. Enterprise Fund Policies Water, Sewer and Recreation Enterprise Funds were created in the late 1980's. These three services are operated on afee- for - service basis. Water, Sewer and Recreation operations cannot function properly without purchasing support and services from other Town operations. Since 1989, Enterprise Fund revenue has supported annual appropriations to other town budgets where service and oversight are provided (pensions, health insurance, engineering, revenue office, etc.). During the fall of 1998, a utility rate expert was engaged to examine the inclining block rate structure used to recapture the costs of providing water and sewer services. This was the first rate study conducted by the Town since the Water and Sewer Enterprise Funds were created. As Page 4 of 14 03/28/02 a result a number of timely and important recommendations were adopted that will protect the financial integrity of the water and sewer funds for the foreseeable future. These recommendations as implemented are identified below: 1.) The number of inclining block rates was reduced. 2.) Rates within the first two block rates were increased to cover the costs of water charged by the MWRA. 3.) The water rate for separate irrigation connections was adjusted to reflect the cost of the service - to better represent the discretionary nature of the service and to encourage water conservation. 4.) In -lieu of tax payments ($500,000 and $250,000 respectively) have been built into the water/ sewer rates for FY2001 and will appear within the rates in FY2002. 5.) The current rates adopted by the Board of Selectmen have been in place for eighteen months. Rate setting schedules have been adopted so that rates will be set prospectively. New water /sewer rates will be set in June. They are proposed to increase by less than 5% and less than the rate increase passed to the Town by the Massachusetts Water Resource Authority. 6.) An income -based rate subsidy program was adopted in FY 2000. Past policy initiatives, such as allowing for the installation of separate irrigation connections and purposely setting the first two block rates low to subsidize water and sewer services provided to seniors and low income users, compromised the financial integrity of the water and sewer funds. As a result, retained earning balances and/or cash reserves for these funds are at their lowest levels in history. The implementation of these six recommendations strengthened the financial integrity of these funds. Four years ago, our fiscal policies regarding the Recreation Enterprise Fund were adjusted to reduce operational subsidies paid to Public Works and other Town operations. An in -lieu of tax payment and a large indirect appropriation to support Public Works' field maintenance efforts were compromising the financial integrity of the Recreation Enterprise Fund. At the time, it appeared certain that the Fund would show a deficit unless policy changes were made. As a result, you proposed and Town Meeting approved the elimination of the in -lieu of tax payment that was charged against the Recreation Enterprise Fund. In addition, the indirect appropriations that supported Public Works' field maintenance efforts were reduced, shifting most of those costs to the tax levy, while the Recreation Enterprise Fund capital investment was limited to those capital facilities that support revenue producing programs. Other Recreation related capital investments were required to compete for tax levy funding. These adjustments, made through your initiative and Town Meeting's support, combined with record golf revenue receipts, have created a healthier Recreation Enterprise Fund. Retained earnings and /or cash reserves have increased and will provide the Town with significantly more flexibility in serving the recreation consumer in Lexington. Additional revenue will only increase our ability to add to and maintain existing capital assets. Page 5 of 14 03/28/02 Accounting for the Water, Sewer and Recreation Enterprise accounts is done on an accrual basis. An end of the year examination (June 30, 2000) done by the Massachusetts Department of Revenue of balance sheets submitted by the Finance Department has resulted in a preliminary estimated certification of available funds for the Recreation Fund at $750,000, the Sewer Fund at $1,400,000, and the Water Fund at $150,000. As you know, this certification is just a moment's snap shot of the funds and does not account for the fact that by June 30 every year the Recreation Department has collected all of its revenue for its summer programs but has not expended funds for the implementation of their summer program effort. The available fund balances for the Water and Sewer Funds represent a rate structure that is tight but accurate. B. Cash Reserve Policy The Board voted, and Town Meeting supported, the establishment of a cash reserve policy. Originally a ten -year plan or strategy was adopted by the Board to accumulate a cash reserve of 5% of the tax levy in FY1997. Operating budget needs caused the Board of Selectmen to suspend this policy in FY2000, extending its ten -year plan to another year. FY2002 is the fifth year of the plan. The Board of Selectmen and School Committee have reconfirmed their commitment to this policy during their planning sessions this past fall and winter. In fact, this year our generous free cash position allows us to go back to a ten -year program and make up for the budget problems incurred during FY2000. CASH RESERVES POLICY - 10 YEARS Projected Free Cash Balance — assume 0.5% of Tax Levy added to Free Cash Balance each year Page 6 of 14 03/28/02 FY1998 FY1999 FY2000 FY2001 FY02 +CatchUp FY2003 Prior Year Balance 290,000 576,527 864,397 864,397 1,174,925 1,833,177 Add 0.5% of Levy 286,527 287,870 defer one year 310,528 658,251 362,929 Balance After Appropriation 576,527 864,397 864,397 1,174,925 1,833,177 2,196,106 Free Cash Balance as % of Tax Levy: 1.03% 1.49% 1.49% 1.92% 2.70% 3.12% Page 6 of 14 03/28/02 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 Prior Year Balance 2,196,106 2,570,609 2,956,974 3,355,498 3,766,486 4,190,248 Add 0.5% of Levy 374,503 386,365 398,524 410,987 423,762 436,856 Balance After Appropriation 2,570,609 2,956,974 3,355,498 3,766,485 4,190,248 4,627,104 Free Cash Balance as % of Tax Levy: 3.54% 3.95% 4.34% 4.73% 5.10% 5.46% Page 6 of 14 03/28/02 C. Large Capital Projects and Cash Capital Bonded Capital Projects — the graph below indicates that the Town will experience a significant drop in tax levy supported debt service in the fiscal year 2003. This drop in debt service presents us with a tremendous opportunity if we can discipline ourselves to strategically schedule our bonded capital projects. As a result, I have not proposed any long term debt service authorizations for tax levy capital projects in FY2002. A policy was developed by the staff and later adopted by the Board of Selectmen that holds great promise for future capital investment. The policy has two basic and connected pieces. 1) Debt Policy: Exclude all Future Debt from the Tax Levy. The FY2002 Appropriated Budget projects unusually large debt service needs in the near future. Future operating budget needs will be so large, and the need for allocation of cash to capital projects so compelling, that it is difficult to see how the operating budget can continue to absorb new debt service requirements without significant reductions in school and town operating programs. Therefore, with some extraordinary exceptions, all future general fund debt should be excluded from Proposition 2 1 /2. Road and elementary school reconstruction projects and a prospective Senior Center building proposal may be considered by a Special Town Meeting sometime during FY2002 and should be part of a Proposition 2 '/2 debt exclusion override. 2) Strategically Set -Aside Cash Capital. The Town's investment practice as it relates to its capital infrastructure has been synchronized and structured to ensure reliability and predictably. Operational capital requests, generally referred to as cash capital (usually requiring an investment of less than $1,000,000 i.e. equipment, road resurfacing, roof replacement, re- roofing) will see larger appropriations in the future. Under this new policy, the Town will dedicate 5% of its general fund revenues to cash capital needs and to paying debt service in fiscal year 2002 and beyond. During the next three years, much of the 5% appropriation will go toward retiring outstanding debt service. In fact, so much so that in the next three years, this plan proposes to fund some critical cash capital projects by floating temporary bonds and paying those bonds off before permanent bonding is required (3 -5 years) . By FY2004, debt service will drop 36% from its FY2002 rate (a reduction of $1,248,669). This will create tremendous funding opportunities for capital equipment and road Page 7 of 14 03/28/02 resurfacing investment in the future if the companion piece to this policy of excluding all future debt from the tax levy is successfully implemented. BUDGET FORMAT We continue to make incremental improvements to our budget process and budget document. Each year, we try to assess what has worked, what hasn't, and identify the unique information requirements that each year presents us. We have been fortunate that in each of the last five years we have received the Distinguished Budget Presentation Award from the Government Finance Officers Association (GFOA). This is a special recognition for the staff and represents over twelve years of effort to try to develop a budget format that meets the GFOA's award criteria. The program format was introduced during the FY1990 budget process. Each year we have built upon our efforts in an attempt to properly, appropriately and effectively communicate the funding needs as expressed by the staff. The GFOA reviews the budget document using established criteria in four overall separate categories. Our document is evaluated as a policy document, financial plan, operations guide and communications devise. Although the four overall categories do not change frequently, GFOA consistently updates the evaluative criteria within each overall category. Our attempts to meet the GFOA's standards can only reinforce our desire to embrace continuous improvement as an operating value for the organization. Next year, we expect to complete our efforts to tie our performance measurements to the goals of each program with a time frame for achievement. We expect that this part of our budget process will be completed for the FY2003 budget submission. This project should complete this budget's evolution from a pure program document to a program/performance document. Accounting for health insurance has been simplified. Health Insurance costs are displayed in the Lexington Public Schools budget and for all other departments in the shared expense category of the Operating Budget. THE OPERATING BUDGET The FY2002 appropriated budget increases by $7,266,228 or 7 %. Tax levy related expenses will increase by $6,952,567 or 8.2 %. BUDGET ASSUMPTIONS The following budget assumptions have been made: • $800,000 in new construction revenue. • 2 1 /2% real estate tax revenue increases generating $1,695,797. • $1,528,496 increase in state aid over the FY2001 appropriation, leaving $747,000 in unused tax levy. • $1,947,146 increase in local receipts over the FY2001 appropriation. • 100% funding of all direct and indirect water and sewer appropriations through user fees. Page 8 of 14 03/28/02 • $1,191,923 allocation of Free Cash to the operating budget, some $345,800 more than FY2001. • A $500,000 in -lieu of tax payment transfer from the Water Fund, $250,000 from the Sewer Fund to the General Fund. These payments were built into the rate for the first time in FY1999. • 100% funding of all direct and some indirect recreation appropriations through user fees. • A PAYT program that generates $960,000 of which $213,000 will help finance operating expenses while $747,000 be earmarked to reduce the real estate levy. There are several issues within the budget that are worthy of mention. They are: 1.) Wages — A 3% wage adjustment increase has been budgeted for all municipal employees. All municipal contracts expire on June 30, 2001. 2.) Health Insurance — The 2002 recommendation for School/Town benefits is estimated at $9,115,000, a $2,307,944 increase over what will be appropriated for 2001 costs. Health insurance costs in Lexington have increased substantially since 1999 due to changes in plan administrators (one time run -out costs incurred in 2000), increased enrollments, claims, escalating administrative and reinsurance costs compounded by medical cost inflation. Getting a handle on the funding demands for the Town's health insurance program requires a look at the past five years of health care funding history. Page 9 of 14 03/28/02 FY1994 to FY2000 Lexington's health care costs remained relatively stable from FY1994 through the beginning of 2000. Each year the amount expended was lower than the amount appropriated despite increased subscriber enrollment and medical inflation. 4 :1= C $6.0 O 5 $3.0 C $0.0 Me This allowed the Trust Fund Balance to grow from $1.3 million in 1994 to almost $3.7 million in 1999. This clearly afforded the Town a unique opportunity to accommodate the growth in enrollment impact. ' $4.0 0 $3.0 • $2.0 N 0 $1.0 0 2000 1800 1600 1400 1200 1000 Trust Fund Balance Page 10 of 14 03/28/02 1994 1995 1996 1997 1998 1999 2000 M110 NOR M110 110 WAIIIIII WAIIII ■ FY2000 $5,258,431 was appropriated for health related benefits for FY2000. Actual total costs to the Town were $9,311,423 when all sources of revenue were reflected (appropriation and employee contributions) and the accounting was completed. $2.6 million was drawn from the Health Care Trust Fund to make up this difference (see chart 1). The difference between actual cost estimates can be explained and categorized in three ways. a.) Massachusetts Interlocal Insurance Association (MIIA) informed the Town it would no longer serve the Town as plan administrator on a self - funded basis. The contract between the Town of Lexington and MIIA for plan administration terminated at the end of February 2000. The Town, in cooperation with its employee group solicited bids from health insurance administration companies. Blue Cross /Blue Shield was awarded a contract effective March 1, 2000. The Town incurred a one -time $1.4 million cost for claims run -out (claims incurred but not paid by February 29, 2000) as a result of MIIA terminating its relationship with the Town. A reminder: billing cycles in the health care industry are not like those for other services. For example it is conceivable that the costs incurred from my hospital visit in April of 2000 may not show up as an invoiced expense until a July billing (received of course by the town in September). Under the law this is a legitimate FY2001 expense even though services were provided to me in April of 2000. Changing plans (moving to a different plan administrator or moving to a premium based financing arrangement) requires that the Town keep separate the accounting for health claims. The change in plans is recognized by paying off all of the run out claims incurred while MIIA was administering the plan in FY2000 even though these bills were received well after February 29th. This one -time cost amounted to $1.4 million. We fully fund our plan by keeping approximately two months of claims dollars in the trust fund to fully account for the claims run out. We used these funds exactly as they were intended to be used. b.) The remaining $1.2 million cost increase can be categorized as increases in claims (14 subscribers met reinsurance (stop loss) levels compared to the usual 3 or 4). The Town's contract with MIIA capped increases in administration and reinsurance costs. The termination of the contract ended that cost containment security. It is estimated that administrative and reinsurance charges increased from 10% to 20% of claims as a result of this change. Estimated increases for administrative and reinsurance costs account for approximately $400,000. c.) Increased subscriber and claims history increases account for the remainder of the $1.2 million dollar increase. Coincidentally, the administrative and reinsurance quotes were not finalized until August 2000 (two months into FY2001) because of market and other business related conditions. Page 11 of 14 03/28/02 FY2001 The Town will not experience a claims run out ($1.4 million) again in FY2001, but it will have to account for FY2000 claims history, as it builds it FY2001 funding strategy. In addition, we have experienced a 27% increase in claims and administrative charges beyond what occurred in FY2000. Current projections anticipate that the Town will need $6,988,315 to pay for health benefits in FY2001. This is estimated to be $1,202,434 above what was appropriated. We are managing this projected problem in several ways. Already the School Department has transferred $542,100 to compensate for the new school employee subscribers enrolled in 2001, a mid -year subscriber increase added an estimated $87,000. In addition, Town Meeting approved $42,148 in additional lottery funds received and available for FY2001 appropriation and an allowance of $500,000 in free cash to supplement the trust fund. FY2002 In developing the FY2002 preliminary estimate for benefits we need to build upon almost $800,000 in adjustments to the 2001 base we have made to account for the claims incurred in FY2000 and anticipated FY2001 and be sensitive to the increased subscriber enrollment issues (400 + since 1995). Currently, we are accounting for 1,875 total subscribers (75 more than FY2001), increases in administrative and reinsurance costs, and a projected claims increase of 18% or $1.4 million. We are not in a position to take risks with this appropriation as we have in other years (lower trust reserves). 3.) Debt Service /Capital — A $106,241 net increase in (non- exempt) debt service sub - program 2200 and cash capital is accommodated in this budget. School technology, portable classrooms, building envelope, street repairing, Department of Public Works equipment, a new school -town financial system, water main cleaning and relining, water distribution system improvements, ambulance replacement, Pine Meadows Golf Course improvements and playground upgrades are all funded within this budget. 4.) The FY2002 budget accommodates additional staff support for the Town's building maintenance effort by adding a skilled position preliminarily identified as Building Maintenance Technician. It also provides additional staff support to the Planning Department so that it can properly and appropriately respond to current development Page 12 of 14 03/28/02 service demands and provide important planning work associated with the Metropolitan State Hospital, the Middlesex County Hospital and the comprehensive planning process. 5.) Education — The following assumptions have influenced the development of the FY2002 budget: a.) Lexington's Core Values Our Statement of Core values describes three interconnected commitments: • individuality and diversity, • shared responsibility, and • continuous improvement. Together these commitments evoke a powerful image of a community of adults and children focused on learning. The core values were made explicit through a process that engaged the school community in substantive discussion of its hopes and aspirations for the children and young people it serves. These values form the underlying philosophical and pedagogical underpinnings for this proposed budget. This year, the schools add the insights of another community -wide process, namely the 2020 Vision Planning Process, which identified lifelong learning and community /school partnerships as community goals. The School Department embraces these concepts, which complement their core values. b.) Commitment to Quality Teacher - Student Relationships The School Committee sets "preferred" class sizes of 18, 22 and 24 students in grades Kindergarten, first and second, and third through fifth grades respectively. In its collective bargaining agreement with the Lexington Education Association (LEA), the School Committee supports the assignment of two -hour per day classroom aides to classes that exceed 20, 24, and 26 students in grades Kindergarten, first, and second through fifth respectively. Contractual limits for Special Education caseloads are also followed in the development of the FY2002 budget. For budget purposes, we have established a zero -based approach for elementary staffing. This means some classes that have enjoyed low numbers will not automatically continue. Instead, the School Department is holding elementary funds in reserve until June, when Kindergarten registration and September enrollments are more certain. This strategy is an effort to limit unexpected staffing requests after the budget is approved. The commitment to favorable class size at the secondary level is expressed in terms of maximum teacher loads and preferred school -wide student - teacher staffing ratios. c.) Acknowledgement of Fiscal Constraints The School Committee and Superintendent have continued to collaborate with the Board of Selectmen, appropriations and Capital Expenditures Committees, and Senior staff to reach agreement on realistic revenue estimates and budget goals. The goals of this Town - School collaboration for FY2002 have been: Page 13 of 14 03/28/02 • to limit and shape parameters for projected budgets within anticipated revenues; • to present school and town budgets within the same timeframe; • to reach agreement by late January /early February on a budget plan for FY2002 that all groups can recommend to Town Meeting. d.) Realities of Contract Negotiations This year four out of five Associations within the Lexington Schools will be engaged in negotiating multi -year contracts. These include teachers (LEA), secretaries /aides (LESA), tutors (LEXED), and Assistant Principals (ALA). Contract settlement will likely occur after Town Meeting, because of the nature of the negotiations process. This budget presentation anticipates a settlement, but actual numbers under contractual obligations are estimates. APPRECIATION This budget and associated participation process is a job well done by the staff and they deserve our thanks and gratitude. I would like to extend my personal and professional thanks and appreciation to John Ryan, Finance Director; to Candy McLaughlin, part-time Management Analyst, to Patrick Leopold and Rachael Herrup- Morse, the dynamic budget duo, to former School Superintendent Pat Ruane and Acting Superintendent Joanne Benton, whose consistent support has kept us together as one unit and on schedule. This year's budget process, along with last year's, has been most enjoyable and rewarding for me and the staff because of the cooperative relationship that has been developed between the School Committee and the Board of Selectmen. My thanks to you and the School Committee for your leadership and guidance during this process. Sincerely, Richard J. White Town Manager Page 14 of 14 03/28/02