Tuesday, October 27, 2009

When Government cries wolf...

It has become a common belief that government at all levels is filled with patronage and wasteful spending. I can tell you that is not universally true. It is probably the least true at the local level.

However, in Massachussetts, the local level is the only one that voters can actually have a direct input. Many communities have either a representative or open town meeting form of government. This allows residents to vote on nearly every decision (especially fiscal decisions) made for their town. While this is the most democratic format for decisions to be made at the local level, it is also the one place that voters can take out thier anger at the waste and patronage they see in the news.

Massachusetts also has a law called Proposition 2 1/2. This law requires that no city/town property tax revenue can be increased by an aggregate value of 2 1/2% in any given year without a ballot question being approved at the voting booth. In theory, this is a great law. It requires local governments to contain expense growth within 2 1/2% or justify a higher amount to the voters (referred to as an "override vote").

Our state government doesn't have that restriction. In fact, just last August the sales tax was increased from 5% to 6.25% without a ballot question. The sales tax was also expanded to cover items that had previously been excluded...no ballot question there either. No, the Governor and Democratic majority in the legislature told us that they had turned every stone and pinched every penny...there was no reform left to do. There was no choice but to raise taxes.

And now, we see just another example of a rock they missed.

One of the secondary consequences of news reports of wasteful governement is that people tend to dismiss any request for increased funds out of hand. This immediate dismissal is felt most at the local level when instances arise that do require an override question to be placed on the ballot. Its unfortunate because many of the people who always vote "no" on overrides are the same people who, like I, favor smaller/local governement over bigger government.

I would much rather pay more taxes to town hall knowing I can influence how its spent instead of sending more money to the state and federal government so they can create 35 departments that serve the same function. Funny how the Senate President is just realizing that...

Senate president: Consolidate economic agencies to save money

Monday, October 26, 2009

Another pay cut for municipal workers...

Once again, the people who provide the most basic services in our communities are going to be forced to take a pay cut. No, they're salary isn't being cut. Instead, they are going to have a deductible added to their Health Insurance Plan. If not a deductible, than a higher premium to be deducted from their paycheck. These are the options being discussed by the GIC (Group Insurance Commission) to compensate for being $50 million short based upon the actual claims processed this year.

Sharing the costs of increased premiums or adding a deductible to the employee's portion of the costs is not out of the norm for most companies these days. In fact, my own company entertained that idea just two weeks ago as we discussed plan changes for next year. The problem I have with this proposal is that it is going to be effective in February...mid-year!

One option that is being discussed by the GIC is to add a $750 deductible for single members, and $2,250 for family plans. Given the timing, it could basically eliminate municipal employees coverage for the second half of the fiscal year.

How could this happen? The GIC increased premiums by 3% for the current fiscal year...only 3%!!! While everyone enjoyed the good news (myself included), it appears that more questions should have been asked about the low increase. Or, did the state assume more communities would choose to enter the GIC plan...thus underestimating the premium revenue that would be generated. Wouldn't be the first bad estimate by those on Beacon Hill this year (see tax revenue).

Either way, once again it is the municipalities that will absorb the burden of bad estimates and planning by those on Beacon Hill.

Thursday, October 15, 2009

Too little, too soon

Last night I was joined by two other members of the Millis Finance Committee in voting against raising the meals tax charged by town businesses from 6.25% to 7.0%. Our opinion was a majority 3-2.

In addition to my general concern about further burdening residents and businesses, and the competitive advantage I feel exists for towns that do not increase this tax. I made two other arguments:

My primary contention is that the amount that is to be generated for this year will not be sufficient (Too Little) to avoid having to utilize town reserve funds when local-aid is cut in the next few week. Based on the current level of reserve funds the town has put aside, the money generated by this tax increase for the current will not make a difference in the Town's ability to save a job.

I also believe that any tax increase should be considered as part of a comprehensive plan to address the impending shortfall in the Town's budget due to decreases in state-aid. Unfortunently, Millis is projected to start the FY11 budget process with a $1 million deficit. This deficit is due to the amount of federal stimulus money (and other one-time funds) that were used to balance the current budget. The federal stimulus money was required to be spent on education to save jobs. Only problem is that the state doesn't have enough funds to replace this money for next year. Without a comprehensive plan (Too Soon) we run the risk of having to ask residents for multiple tax increases, knowing the first request isn't enough.

Ultimately, town residents will decide whether they are willing to increases their taxes when Town Meeting is held on November 2, 2009. I hope they agree that its "Too little, too Soon".

Friday, October 9, 2009

Collaboration should be a first choice

Millis-Hopedale football teamwork working out well - Milford, MA - The Milford Daily News

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Due to a number of people putting the needs and desires of high school kids above all else, two communities can take pride in one high school football team.

Millis HS could not field a team...
Hopedale didn't have a program...

Some school administrators would have given up and both schools would have lost. Instead, a relationship has been established. There were no terrotorial or financial hurdles deemed to large, and no beaurocratic red tape delayed the process.

This is how communities should be utilizing each other...especially when it comes to educating our kids. In order for it to work, though, we need adminstrators and policy makers exploring all options and putting the kids first!

State will pass most of the buck to Cities/Towns

State budget gap could grow from bad to worse - Milford, MA - The Milford Daily News

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The more open about it they are the more of a guarantee it is...

Elected officials always down-play bad news.
  • If they say "its not an option right now"...that means its possible.
  • If they say "its possible"...its probable.
  • If they say "its likely"...its definite!

State Rep. John Fernandes, D-Milford, said current-year budget cuts are inevitable, and warns communities to take care on discretionary spending.

"Local officials need to be cautious in budgeting, and how they handle their financing, because there is so little funding," said Fernandes.


State officials are admitting there is no more rainy day funs or federal stimulus money. They are saying that local aid cuts are likely, so they're definite. Oh, the state says they'll make cuts too.

I'm sure it will be the same across the board, non-targeted, degree of cuts that will only ensure higher inefficiencies (see RMV wait times). What needs to be done are specific reductions that improve the efficiency in state government. There also needs to be a review of the purpose and necessity for all state agencies. Those that are no longer needed or are unsuccessful should be eliminated.

We don't need all state employees to share equally, we need the state beuracracy to be steam-lined.

Until this happens, local governments should not be left holding the bag.

Friday, October 2, 2009

Municipalities will have to make tough choices

Scaling The Hill: September Revenues in Free-Fall

It appears the state of Massachusetts is once again in the early stages of a budget crisis. And the cities and towns of the Commonwealth will be left holding the bag.

A year ago at this time, tax revenues (it was capital gains taxes last year) were missing estimates and the politicians on Beacon Hill began searching for any extra money.

Well, they found some. Most of it came from our newly elected President, and the rest came from rainy day funds that were not going to be replaced. That was last year...

Here we are, a quarter of the way through FY10, and revenues are missing expectations again. This year its the JUST INCREASED sales tax that is falling short. Ok, so let's just go back to the well...only problem is that the wells are dry! The "rainy day" funds were virtually depleted in order to balance the current budget and there doesn't appear to be another "Stimulus Package" coming from Governor Patrick's good pal in D.C.

What does this mean? If the sales tax increase isn't generating the necessary funds for THIS YEAR, how is it also going to make up for the Stimulus Funds AND Rainy Day funds that will need to be covered in FY11.

Answer: Tax increases or Shifting the burden to cities and towns

Given that we are in an election year, I would expect it to be the latter of the two. Meaning, the state will shift an even larger portion of the expense burden to the 351 municipal governments in Massachussetts. The burden will be shifted most obviously through cuts to local aid. However, it will also be shifted through state-mandated increases to certain categories of expenses.

Given the current revenue trends at the state level, I believe that all mandated expense formulas (such as the "foundation level" for education) should be reduced to the FY09 levels. This will ensure that the state can maintain its proportional obligation to cities and towns. Until the state can keep up with its responsibility to the municipalities, there should be no expense increases mandated from Beacon Hill.

In lieu of this adjustment to mandated expense levels, municipalities will be forced to either cut positions beyond safe levels. That is unless, residents vote to increase their property taxes in excess of the Prop 2 1/2 limit (yes...OVERRIDES!).