Acton Voters Group

1
Acton Voters Group

• The importance of balanced budgets
• How Acton can provide relief to taxpayers in FY10
  and beyond.
• Allen Nitschelm
• March 4, 2009

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What is a balanced budget?

• REVENUES EXPENSES
• Mass. Dept. of Revenue (DoR) counts all
  Available Funds as revenues.

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DoR Definition Available Funds

• Available Funds are non-recurring revenue
  sources. As a matter of sound practice, they are
  frequently appropriated to meet unforeseen
  expenses, for capital expenditures, or other
  one-time costs. Examples of available funds
  include free cash, stabilization fund, overlay
  surplus.

4
So while the DoR allows towns to use Free Cash as
a revenue source, this practice is strongly
discouraged if used to fund operating expenses.
5
How does using reserves contribute to a larger
override?(Theoretical example)
The FYX6 override (4.7 million) appears to
come out of nowhere. And the deficit is so large
(over 5 of the entire budget) that reasonable
reductions can no longer be made.
6
With expenses growing at 4.5, it takes 4-5 years
for a large override when starting with healthy
reserves.
7
With expenses growing at 5.5 instead of 4.5,
the deficit creates a larger override
earlier. Actons budgets increased over 6 last
year.
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Acton Override History

• In 2006, we passed a 3.8 million override when
  we ran out of reserves after two years of deficit
  spending. In 2004, a 3 million override was
  approved.
• Today (just 5 years later) these two overrides
  add over 1,000 every year to the average
  single-family property tax bill in Acton.

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The ALG Plan Future

• History will repeat itself. The ALG Plan uses
  Actons reserves to fund operating expenses in
  FY10, FY11, and FY12.
• In FY12, nearly all available reserves will be
  depleted.
• Then what? An override becomes inevitable unless
  another windfall like NESWC occurs.
• Is this the best plan for Acton?

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Consequences of the ALG plan

• We will lose the opportunity to make reasonable
  budget cuts if we wait until the deficit is too
  large.
• If we spend reserves, we will be unprepared for
  any emergency.
• Our borrowing costs could increase if we have no
  reserves left (Moodys).
• The override might fail. Recent overrides have
  failed in places like Newton and Sudbury.
• A large, failed override would force Draconian
  cuts to the budget.
• A successful override would mean a large increase
  in taxes. This is a no-win scenario.

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Solutions

• Never approve a budget with a true deficit.
  Either increase revenues (ask for an override) or
  decrease expenses. Dont hide the deficit from
  taxpayers.
• Save reserves for emergency use, one-time capital
  projects, or taxpayer relief, as DoR suggests.
• It is better to reduce spending in small steps
  over time than to have to make large cuts all at
  once.

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Why is all this important?

• We need to take steps now before the deficit gets
  too large. If we wait until later, it will be too
  late.
• Taxpayers need relief. Town officials need to
  reduce the growth of spending so that tax
  increases can be moderated.
• Actons property tax rate (16.53/k) is higher
  than many other wealthier towns such as Sudbury
  (15.29), Lexington (12.97), Wellesley (9.47),
  Weston (11.02), and Concord (11.90). Acton has
  the 9th highest tax rate in the Commonwealth.

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Under the AVG proposal, Actons property taxes
would not increase for three years. The average
taxpayer would save over 1,200 (and much more if
you count an override in the third year).
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Conclusion

• If we reduce the growth in expenses to 2 -4
  per year (instead of 5 - 8), we can have
  balanced budgets, protect the reserves, give
  taxpayers some relief from ever-increasing taxes,
  and avoid operating overrides. But steps need to
  be taken immediately to achieve these goals.