HomeMy WebLinkAboutAppropriation Committee AdHocFiscalTaskForce-AppendixD-RPTAppendix D: Appropriations Committee 3 -Year Budget
Projection — FY 2011 to FY 21013
In recent years a projection of Town revenues and expenses for the next few fiscal years has been included
as an appendix in the report of this committee to the annual town meeting. A projection can help us
understand the challenges that Lexington will face if, e.g., revenues do not grow as fast as the expenses for
"same service" budgets. The projections are also an opportunity to obtain a better quantitative
understanding of known trends and cost drivers.
For most of those exercises, we showed the results of calculations based on a single set assumption that we
tried to define in the narrative or elsewhere. Last year we also provided an accessory table to provide
information on the effects of changes to a small number of selected line items. We emphasize that the
process of making revenue an d expense projections differs in an essential manner from trying to build
budgets that must be balanced. In the latter process, one errs on the side of caution to help avoid ending up
in a deficit at the end of a fiscal year, or even worse, having to lay off employees in the middle of a fiscal
year. In the projection process, one simply makes best guesses about future revenue and expense changes
regardless of whether they lead to surpluses or deficits. In no case are these assumptions meant to represent
targets or goals. They also do not account for the adoption of new programs or the ending of old programs.
While the process of defining our baseline set of assumptions always involves judgment, this year we find
that the current global financial crisis and major recession has made it much more difficult. Indeed, we
don't know how deep the recession will be, how long it will last, how fast the recovery will be, what its
effects on state and town revenues will be, what interest rates will be and how they will change, how the
prices of goods and services will change, how the depressed job.market will affect wages and salaries, etc.
It should therefore be no surprise that in this environment we have had trouble not only agreeing with each
other on a baseline set of assumptions, but even in coming to individual opinions on what might be
reasonable guesses.
While the rational response to such a situation might be to give up, instead we present here the results of an
exercise that gives some idea of the uncertainties. Thus, two scenarios are presented that show how two sets
of reasonable people arrive at different projections and how small differences in assumptions can change
the bottom line. Scenario 1 is a just a bit more optimistic than Scenario 2. The key assumptions for each of
the two scenarios are given in Table A -1 in terms of either dollar values for the line items or percentage
increases from the previous fiscal year. Dollar values that correspond to these percentages may be found in
Tables A -2 and A -3 where the projection results are given (except for health insurance for which we give
both percentage increases and dollar amounts in Table A -1).
We have only done rather limited investigations to establish the plausibility of the assumptions in Table A-
1, but the fact that two independent groups (both were within the A. C.) came up with similar values tends
to justify them as best guesses. Clearly, these assumptions are uncertain and do not cover the full range of
uncertainty in each area. Since they are formulated to reflect a range of probable cases, these two scenarios
should not be seen as a best case /worst case dichotomy.
In regard to the revenue assumptions listed in Table A -1, the amounts assumed for new growth in Scenario
1 start with the amount assumed for the FY2010 recommended budget, i.e., $1,900K, while the amounts
assumed for new growth in Scenario 2 start with a five -year average of $1,997K. For both scenarios, we
then add in the amounts, net of the tax, increment financing (TIF) agreement, anticipated from the
development of buildings at Lexington Technology Park for Shire Pharmaceuticals. Both scenarios assume
that there will be additional reductions in State aid and local receipts beyond those assumed in the
recommended FY2010 budget, although by different amounts. The two scenarios assume identical
Page 53 of 59
APPROPRIATION COMMITTEE REPORT TO 2009 ATM MARCH 2009
reductions in available funds. Here, the available funds line includes free cash as well as amounts in the
Parking Fund, the Cemetery Fund, etc.
Table A -l: Numeric Assumptions for Scenarios 1 and 2
Category
Scenario
FY2010
FY2011
FY2012
FY2013
New growth
1
$1,900K
$2,714K
$2,020K
$2,096K
2
$1,900K
$2,614K
$1,920K
$1,996K
State aid
1
$9,059K
$8,923K.
$8,789K
$8,833K
2
$9,059K
$8,606K
$8,176K
$8,176K
Local receipts
1
$9,770K
$9,623K
$9,623K
$9,816K
2
$9,770K
$9,526K
$9,288K
$9,334K
Available Funds
1
$6,054K
$4,650K
$4,150K
$4,150K
2
$6,054K
$4,650K
$4,150K
$4,150K
School
1
$55,927K
3.25%
3.25%
3.25%
Compensation
2
$55,927K
3.25%
3.25%
3.25%
Out of district SPED
1
$6,529K
15%
15%
15%
Costs
2
$6,529K
15%
15%
15%
Municipal
1
$18,877K
3%
3%
3%
Compensation
2
$18,877K
3%
3%
3%
Health insurance
1
$20,987K
8 %, $22,662K
8%,$24,479K
8%,$26,437K
2
$20,987K
10 %, $23,085K
10 %, $25,394K
10%,
Note to Table A -1:
a) A percentage reflects the change from the preceding fiscal year.
b) The column "FY2010" is here for reference. It gives the base values to which the percentage increases
in FY2011 are applied.
For neither scenario have we assumed that there will be any revenue increases from local taxation of
telephone equipment or from any form of increase in the meals or hotel/motel taxes.
In regard to expenses, both scenarios assume identical increases in school compensation, out of district
SPED costs, and municipal compensation. The compensation increases are intended to include the net
effects of step increases, step decreases due to retirements, and cost of living adjustments (COLAs). The
numbers chosen represent increases wherein the COLAs are positive, and fall into a range of 1% to 2 %.
The two scenarios make somewhat different assumptions about the future escalation of health care costs.
Changes to the expense assumptions would, of course, lead to changes in the bottom lines of the different
fiscal years. The following list gives approximate differences in expenses (up or down) that the described
changes would make if they were to take effect in FY2011. The effect of the changes would be slightly
larger for the first year if it is later than FY2011 and would accumulate over later years.
Page 54 of 59
APPROPRIATION COMMITTEE REPORT TO 2009 ATM —MARCH 2009
• 1% change in school compensation- $560K
• 5% change in out -of- district SPED expenses - $326K
• 1% change in municipal compensation - $189K
• 2% change in health insurance costs - $420K
Tables A -2.and A -3 show actual, appropriated, budgeted, and projected amounts for revenues and expenses
for FY2008 through FY2013 for Scenarios 1 and 2, respectively. While we have provided actual,
appropriated, and budgeted amounts for all sectors we have not projected revenues and expenses for budget
lines that have direct offsets, i.e., exempt debt, enterprise fund direct expenses, and grants and revolving
funds, as they do not affect the bottom line of the General Fund.
The bottom lines for FY2011 in the two scenarios are deficits of about $2,900,000 and $3,800,000. We
guess that the actual range of uncertainty of these numbers considering the universe of possible factors is
very roughly three to four times as large as the difference between the figures for the two scenarios, or
roughly $3M. Thus, the results suggest that while the fiscal picture in Lexington at the time of the
formulation of the FY2011 budget could be anywhere between a level - services break -even situation and a
very substantial deficit condition, the best guess is that we will face a moderate to good -size deficit.
The results in Tables A -2 and A -3 show projected deficits that grow larger with time. The growth is faster
in Scenario 2 than in Scenario 1 by about $1M per year. Because the Town is required to have a balanced
budget, and in reality deficits are not allowed, the projected deficit for each future year can be interpreted
as the cumulative level of budget cuts or new sources of revenue that will be required.
3 -Year Budget Projections
$o
FY2010 FY2011 FY2012 FY2013
($2,000,000)
($4,000,000)
($6,000,000)
($8,000,000)
($10,000,000)
Fiscal Year
--9 Scenario 1 f Scenario 2
Page 55 of 59
APPROPRIATION COMMITTEE REPORT TO 2009 ATM--MARCH 2009
TABLE A-2 Scenario 1
Revenue Summary FY 2008 FY 2009 FY2010 FY2011 FY2012 FY2013
{ Actual Appropriated proposed Modeled Modeled Modeled
1 Tax Levy
2 Property Tax Levy $ 96,012,202 $ 104,879,746 $ 110,106,445 $ 114,759,106 $ 120,341,931 $ 125,370,109
3 Allowable 2 1/2% inc.
/ $ 2,400,305 $ 2,621,994 $ 2,752,661 $ 2,868,978 $ 3,008,548 $ 3,134,253
4 New Tax Levy Growth $ 2,485,650 $ 3,276,649 $ 1,900,000 $ 2,713,847 $ 2,019,630 $ 2,095,834
5 Voter Approved Override $ 3,981,589 $ -
6 Tax levy limit $ 104,879,746 $ 110,778,389 $ 114,759,106 $ 120,341,931 $ 125,370,109 $ 130,600,196
7 State Aid $ 9,064,275 $ 9,963,453 $ 9,058,898 $ 8,923,015 $ 8,789,169 $ 8,833,115
8 Local Receipts $ 12,189,265 $ 9,395,065 $ 9,770,000 $ 9,623,450 $ 9,623,450 $ 9,815,919
9 Available Funds $ 4,216,097 $ 5,620,168 $ 6,053,619 $ 4,650,000 $ 4,150,000 $ 4,150,000
10 Revenue Offsets $ (1,897,006) $ (2,540,476) $ (1,836,461) $ (2,036,900) $ (1,884,457) $ (1,907,691)
11 Enterprise Funds (Indirect) $ 1,752,885 $ 1,710,887 $ 1,662,522 $ 1,620,250 $ 1,578,929 $ 1,541,022
12 Total General Fund $ 130,205,262 $ 134,927,486 $ 139,467,684 $ 143,121,745 $ 147,627,200 $ 153,032,561
16 Other Revenues
17 Revolving Funds $ 923,529 $ 2,107,778 $ 2,168,530 $ - $ - $ -
18 Grants $ 134,112 $ 173,390 $ 161,168 $ - $ - $ -
19 Enterprise Funds(Direct) $ 13,663,715 $ 15,311,025 $ 16,227,345 $ - $ - $ -
20 Exempt Debt $ 5,372,873 $ 5,632,643 $ 5,879,523 $ - $ - $ -
j 21 sub-total Other Revenues $ 20,094,229 $ 23,224,836 $ 24,436,566 $ - $ - $ -
22 Total Revenues $ 150,299,491 $ 158,152,322 $ 163,904,250 $ 143,121,745 $ 147,627,200 $ 153,032,561
23 Expense Summary FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Actual Appropriated Proposed Modeled Modeled Modeled
24 Education
25 Lex. Pub Schools Compen. $ 49,786,875 $ 54,407,961 $ 55,926,576 $ 57,744,190 $ 59,620,876 $ 61,558,554
26 Lex. Pub Schools Expenses $ 4,892,865 $ 4,506,308 $ 4,502,485 $ 4,615,047 $ 4,730,423 $ 4,848,684
27 Out-of-District SPED $ 5,514,040 $ 5,499,870 $ 6,529,232 $ 7,508,617 $ 8,634,909 $ 9,930,146
28 sub-total Lex. Pub.Schools $ 60,193,780 $ 64,414,139 $ 66,958,293 $ 69,867,854 $ 72,986,209 $ 76,337,384
29 Minuteman Reg.School $ 1,194,216 $ 1,510,598 $ 1,713,163 $ 1,930,097 $ 2,155,261 $ 2,380,425
30 sub-total Education $ 61,387,996 $ 65,924,737 $ 68,671,456 $ 71,797,951 $ 75,141,470 $ 78,717,809
31 Municipal
32 Municipal Compen. $ 16,955,919 $ 18,086,154 $ 18,876,550 $ 19,442,847 $ 20,026,132 $ 20,626,916
33 Municipal Expenses $ 8,695,673 $ 7,602,257 $ 7,649,737 $ 8,245,136 $ 8,490,946 $ 8,736,756
34 sub-total Municipal $ 25,651,592 $ 25,688,411 $ 26,526,287 $ 27,687,983 $ 28,517,078 $ 29,363,672
Page 56 of 59
APPROPRIATION COMMITTEE REPORT TO 2009 ATM--MARCH 2009
35 Shared Expenses
36 Benefits&Insurance $ 23,425,240 $ 26,782,252 $ 27,890,276 $ 29,856,805 $ 31,812,379 $ 33,919,795
37 Debt(within-levy) $ 3,572,204 $ 4,017,541 $ 4,471,432 $ 4,350,000 $ 4,350,000 $ 4,350,000
38 Reserve Fund $ - $ 532,500 $ 550,000 $ 550,000 $ 550,000 $ 550,000
39 Facilities $ 8,994,689 $ 8,869,428 $ 8,932,703 $ 9,426,917 $ 9,785,009 $ 10,157,570
40 sub-total Shared Expenses $ 35,992,133 $ 40,201,721 $ 41,844,411 $ 44,183,722 $ 46,497,387 $ 48,977,365
41 Revolving Funds $ 923,529 $ 2,107,778 $ 2,168,530 $ - $ - $ -
42 Grants $ 134,112 $ 173,390 $ 161,168 $ - $ - $ -
43 Capital &Reserves
44 Cash Capital (inc of roads) $ 1,355,000 $ 1,520,750 $ 1,545,719 $ 1,553,150 $ 1,570,729 $ 1,588,747
45 Stabilization Fund $ 1,000,000 $ 1,000,000 $ - $ - $ - $ -
46 Other(SrWorkOff,OPEB) _ $ 390,000 $ 519,000 $ 835,690 $ 795,000 $ 795,000 $ 795,000
47 sub-total Capital&Reserves $ 2,745,000 $ 3,039,750 $ 2,381,409 $ 2,348,150 $ 2,365,729 $ 2,383,747
48 Enterprise Funds
49 Water $ 5,549,471 $ 6,487,028 $ 6,686,570 $ - $ - $
50 Wastewater(Sewer) $ 6,658,544 $ 7,062,609 $ 7,704,170 $ - $ - $ -
51 Recreation $ 1,430,700 $ 1,676,083 $ 1,725,605 $ - $ - $ -
52 Enterprise Capital $ 25,000 $ 85,305 $ 111,000 $ - $ - $ -
53 sub-total Enterprise Funds $ 13,663,715 $ 15,311,025 $ 16,227,345 $ - $ - $ -
54 Exempt Debt
55 Municipal $ 3,927,422 $ 3,081,223 $ 2,974,264 $ - $ - $ -
56 School $ 1,445,451 $ 2,551,420 $ 2,905,259 $ - $ - $ -
57 sub-total Exempt Debt $ 5,372,873 $ 5,632,643 $ 5,879,523 $ - $ - $ -
58
59 Total Expenses $ 145,870,950 $ 158,079,455 $ 163,860,129 $ 146,017,806 $ 152,521,664 $ 159,442,592
60 Balance (Deficit) $ 4,428,541 $ 72,867 $ 44,121 $ (2,896,061) $ (4,894,464) $ (6,410,031)
FY 2008 FY 2009 FY2010 FY2011 FY2012 FY2013
Actual Appropriated proposed Modeled Modeled Modeled
Page 57 of 59
APPROPRIATION COMMITTEE REPORT TO 2009 ATM--MARCH 2009
TABLE A-3 Scenario 2
Revenue Summary FY 2008 FY 2009 FY2010 FY2011 FY2012 FY2013
Actual Appropriated Proposed Modeled Modeled Modeled
1 Tax Levy
2 Property Tax Levy $ 96,012,202 $ 104,879,746 $ 110,106,445 $ 114,759,106 $ 120,242,086 $ 125,167,923
3 Allowable 2 1/2% inc. $ 2,400,305 $ 2,621,994 $ 2,752,661 $ 2,868,978 $ 3,006,052 $ 3,129,198
4 New Tax Levy Growth $ 2,485,650 $ 3,276,649 $ 1,900,000 $ 2,614,002 $ 1,919,785 $ 1,995,990
5 Voter Approved Override $ 3,981,589 $ -
6 Tax levy limit $ 104,879,746 $ 110,778,389 $ 114,759,106 $ 120,242,086 $ 125,167,923 $ 130,293,111
7 State Aid $ 9,064,275 $ 9,963,453 $ 9,058,898 $ 8,605,953 $ 8,175,655 $ 8,175,655
8 Local Receipts $ 12,189,265 $ 9,395,065 $ 9,770,000 $ 9,525,750 $ 9,287,606 $ 9,334,044
9 Available Funds $ 4,216,097 $ 5,620,168 $ 6,053,619 $ 4,650,000 $ 4,150,000 $ 4,150,000
10 Revenue Offsets $ (1,897,006) $ (2,540,476) $ (1,836,461) $ (2,036,900) $ (1,884,457) $ (1,907,691)
11 Enterprise Funds (Indirect) $ 1,752,885 $ 1,710,887 $ 1,662,522 $ 1,620,250 $ 1,578,929 $ 1,541,022
12 Total General Fund $ 130,205,262 $ 134,927,486 $ 139,467,684 $ 142,607,139 $ 146,484,407 $ 151,594,992
16 Other Revenues
17 Revolving Funds $ 923,529 $ 2,107,778 $ 2,168,530 $ - $ - $ -
18 Grants $ 134,112 $ 173,390 $ 161,168 $ - $ - $ -
j 19 Enterprise Funds(Direct) $ 13,663,715 $ 15,311,025 $ 16,227,345 $ - $ - $ -
20 Exempt Debt $ 5,372,873 $ 5,632,643 $ 5,879,523 $ - $ - $ -
21 sub-total Other Revenues $ 20,094,229 $ 23,224,836 $ 24,436,566 $ - $ - $ -
i
22 Total Revenues $ 150,299,491 $ 158,152,322 $ 163,904,250 $ 142,607,139 $ 146,484,407 $ 151,594,992
23 Expense Summary FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Actual Appropriated Proposed Modeled Modeled Modeled
24 Education
25 Lex. Pub Schools Compen. $ 49,786,875 $ 54,407,961 $ 55,926,576 $ 57,744,190 $ 59,620,876 $ 61,558,554
26 Lex. Pub Schools Expenses $ 4,892,865 $ 4,506,308 $ 4,502,485 $ 4,615,047 $ 4,730,423 $ 4,848,684
27 Out-of-District SPED $ 5,514,040 $ 5,499,870 $ 6,529,232 $ 7,508,617 $ 8,634,909 $ 9,930,146
28 sub-total Lex. Pub. Schools $ 60,193,780 $ 64,414,139 $ 66,958,293 $ 69,867,854 $ 72,986,209 $ 76,337,384
29 Minuteman Reg. School' $ 1,194,216 $ 1,510,598 $ 1,713,163 $ 1,930,097 $ 2,155,261 $ 2,380,425.
30 sub-total Education $ 61,387,996 $ 65,924,737 $ 68,671,456 $ 71,797,951 $ 75,141,470 $ 78,717,809
31 Municipal
32 Municipal Compen. $ 16,955,919 $ 18,086,154 $ 18,876,550 $ 19,442,847 $ 20,026,132 $ 20,626,916
33 Municipal Expenses $ 8,695,673 $ 7,602,257 $ 7,649,737 $ 8,245,136 $ 8,490,946 $ 8,736,756
34 sub-total Municipal $ 25,651,592 $ 25,688,411 $ 26,526,287 $ 27,687,983 $ 28,517,078 $ 29,363,672
Page 58 of 59
•
APPROPRIATION COMMITTEE REPORT TO 2009 ATM--MARCH 2009
35 Shared Expenses
36 Benefits&Insurance $ 23,425,240 $ 26,782,252 $ 27,890,276 $ 30,276,544 $ 32,727,409 $ 35,415,912
37 Debt(within-levy) $ 3,572,204 $ 4,017,541 $ 4,471,432 $ 4,350,000 $ 4,350,000 $ 4,350,000
38 Reserve Fund $ - $ 532,500 $ 550,000 $ 550,000 $ 550,000 $ 550,000
39 Facilities $ 8,994,689 $ 8,869,428 $ 8,932,703 $ 9,426,917 $ 9,785,009 $ 10,157,570
40 sub-total Shared Expenses $ 35,992,133 $ 40,201,721 $ 41,844,411 $ 44,603,461 $ 47,412,418 $ 50,473,482
41 Revolving Funds $ 923,529 $ 2,107,778 $ 2,168,530 $ - $ - $
42 Grants $ 134,112 $ 173,390 $ 161,168 $ - $ - $
-
43 Capital & Reserves
44 Cash Capital (inc of roads) $ 1,355,000 $ 1,520,750 $ 1,545,719 $ 1,553,150 $ 1,570,729 $ 1,588,747
45 Stabilization Fund $ 1,000,000 $ 1,000,000 $ - $ - $ - $ -
46 Other(SrWorkOff,OPEB) $ 390,000 $ 519,000 $ 835,690 $ 795,000 $ 795,000 $ 795,000
47 sub-total Capital&Reserves $ 2,745,000 $ 3,039,750 $ 2,381,409 $ 2,348,150 $ 2,365,729 $ 2,383,747
48 Enterprise Funds
49 Water $ 5,549,471 $ 6,487,028 $ 6,686,570 $ - $ - $
50 Wastewater(Sewer) $ 6,658,544 $ 7,062,609 $ 7,704,170 $ - $ - $
51 Recreation $ 1,430,700 $ 1,676,083 $ 1,725,605 $ - $ - $
52 Enterprise Capital $ 25,000 $ 85,305 $ 111,000 $ - $ - $ -
53 sub-total Enterprise Funds $ 13,663,715 $ 15,311,025 $ 16,227,345 $ - $ - $ -
i 54 Exempt Debt
55 Municipal $ 3,927,422 $ 3,081,223 $ 2,974,264 $ - $ - $
56 School $ 1,445,451 $ 2,551,420 $ 2,905,259 $ - $ - $ -
57 sub-total Exempt Debt $ 5,372,873 $ 5,632,643 $ 5,879,523 $ - $ - $ -
58
59 Total Expenses $ 145,870,950 $ 158,079,455 $ 163,860,129 $ 146,437,545 $ 153,436,694 $ 160,938,709
60IBalance(Deficit) $ 4,428,541 $ 72,867 $ 44,121 $ (3,830,405) $ (6,952,287) $ (9,343,717)1
FY 2008 FY 2009 FY2010 FY2011 FY2012 FY2013
Actual Appropriated proposed Modeled Modeled Modeled
Page 59 of 59