’20, ’21 Budgets Appear Solvable But A ‘Juggernaut’ Of Debt Faces Belmont in ’22

Photo: Patrice Garvin, Belmont Town Administrator

With a combination of hiring and discretionary spending freezes, using the town’s free cash account (aka the fiscal piggy bank), and “kicking the can down the road” on capital projects and street repair, it appears Belmont just might be able to endure the anticipated collapse of local and state revenues to its fiscal year 2020 and 2021 budgets.

“I see [the budget] as solvable,” said Patrice Garvin, the town administrator who will be presenting an updated forecast of the town’s budget at a joint meeting of the Select Board and School Committee at 7 p.m. on Monday, April 27.

But the budgetary outlook for Belmont is fiscal ’22, which starts on July 1, 2021, is about as dark as Garvin can imagine as a massive tsunami of red ink heads towards the town.

“I am calling fiscal 2022 the juggernaut of budgets,” said Garvin. “I’m not looking forward to doing that budget at all” noting without the passage of a Proposition 2 1/2 override to pump needed income into town coffers, the town will be forced to rely on layoffs and cuts in essential services to balance that year’s books.

FY 2020: Put the budget in the freezer

Garvin said Belmont needs to prepare for a drop in town revenues – from parking fees, meals taxes, building permits, and payments to the Recreation Department – for the rest of fiscal ’20 by slowing the rate of spending.

“We don’t feel it’s going to be a significant shortfall but a shortfall just the same,” said Garvin. The effort will also

In its first effort to stabilize the budget for the remaining two and a half months in fiscal ’20, the Select Board on April 14 endorsed Garvins’ four steps to controlling expenses:

  • Freeze non-essential spending, excluding capital items, revolving funds, and existing contracts. The school district will also apply a freeze to purchases through the end of June, said Phelan.
  • All expenditures must be reviewed and approved by the town administrator before being submitted to the town treasurer.
  • All overtime must be approved by the town administrator, excluding requests by the police and fire departments.
  • Emergency expenditures are permitted but must be reported to the town administrator immediately after the bill is sent.

The town could save approximately $271,000 for the remainder of the fiscal year, said Garvin. On the school side, additional savings will be generated by the district’s idle buildings as they are not using electricity, water or heat, Phelan said.

The Select Board’s Adam Dash said while the amount of money being saved with the freezes are not large, “the money not spent will fall into free cash which we can use next year.”

“I think this is a no-brainer,” said Dash. “I don’t like the idea of … belt-tightening but I think under the circumstances we have no choice.”

Larger savings still could come from a hiring freeze of 13 open positions – nine full-time and four part-time – for the remainder of the fiscal year with potential savings in salaries and benefits of $463,726.

But the catch to realizing that savings are that four town departments – schools, assessors, library and cemetery – have authorization over hiring matters. In addition, Garvin has received some pushback on a total freeze on hirings as each department with a vacant position will contend “[the job] is critical.”

The Belmont Police Patrolman’s and the Belmont Superior Officers’ associations sent a letter on April 13 to the Select Board to allow for the immediate hiring of two of the vacancies; assistant police chief and captain.

“Leaving those gaps unfilled would not be good managerial practice in normal circumstances,” said the letter. “In the current context, doing so, in the view of the BPPA, is simply indefensible. The Department needs strong leadership at all established levels of the chain of command if it is to weather the tremendous strains now being imposed on it.”

Saying it is “a very charged environment,” Garvin created an independent five-member panel to recommend to the board which jobs should remain vacant and, essentially, “to take some of the politics out of [the process].” It will also make “it less about the individual department and more the need of the community,” said Garvin, adding that the board should consider extending hiring reviews through June 30, 2021.

Recommendations of the New Hire Advisory Committee will be submitted before the Monday, April 27 joint meeting.

At the school committee meeting, Phelan said the district would not be hiring new staff for the remainder of the school year, noting the two new elementary school principals selected this spring along with an interim principal for the middle school will not start until July 1.

Garvin said while proposing a freeze is unsettling to those affected, all departments are acutely aware of the hardships facing the town government.

“We have a good working team here,” said Garvin. “I think everyone realizes the fiscal challenges of the town and I’m encouraged to think they see the challenges and they want to help out” in building up reserves to be utilized in the next fiscal year.

FY 2021: A painful fiscal environment but doable

While the town and schools are set to conclude the fiscal year in good financial shape, to achieve a similar level of success in fiscal 2021 will require cuts, delays, and a great deal of finesse dealing with an uncertain future.

“As we start to unpack in the coming weeks the options before us … are not good options,” said the Select Board’s Tom Caputo looking forward to fiscal ’21.

Garvin and her staff have been spinning out fiscal models that correspond to different levels of revenue losses on the town budget due to a reduction in state aid and local receipts. One such revenue line item that will be hit is new growth – the additional tax revenue generated by new construction, renovations, and other increases in the property tax base – with revenues falling nearly by half to $500,000 from earlier projections.

The end result: Belmont can expect to see revenue wane in fiscal ’21 anywhere between $3.4 to $4.6 million, said Garvin. Yet she told the Warrant Committee that she sees balancing the fiscal ’21 budget as doable.

“I believe that I can take a very large portion of [the expected deficit], defer [expenses] in FY ’21” to later years while using the savings the town made in fiscal ’20, said Garvin. “But I’m not gonna lie, it’s gonna come with some pain,” she said.

One area of savings being suggested is a significant reduction in capital expenditures. The new fire truck, upgrades in infrastructure and repairs can be delayed for a year or so while reductions in town contributions such as the OPEB (other post-employment benefits) funds “are adjustments we don’t necessarily want to make but would have to,” said Caputo.

One area of savings in fiscal ’21 that is not on Garvin’s radar screen is layoffs or furloughs due in large part to the complexity of negotiating job reductions within the existing union contracts. In addition, any agreement will need to be approved and ratified by the time Town Meeting meets in late June.

There is a major X factor facing Garvin in her calculations: what the economy will be at any time in the future. Until this year, changes in state aid and town revenues were fairly predictable allowing budgeting to be pretty straight forward. Today, said Garvin, “I have no idea what the economy is going to look like” in six or seven months.

And even if residents are willing to “plug our noses” and accept the cuts, “in order to get to four million [dollars], you’re going to have some impact in services in some way,” said Caputo.

FY 2022: An unprecedented budget challenge

While the outline of a plan is being formulated that allows the town to limp through June of 2021, the first long-range forecast for fiscal 2022 is all rough weather ahead.

“The budget problem is FY ’22, it has always been FY ’22,” said Garvin. “And everything we do in ’21 is going to impact 22.” And with many of the reductions in spending simply deferrals of necessary payments, “those decisions we’ll be making in ’21 are just going to create a bigger challenge in ’22,” said Caputo.

Just how bad could the deficit be for fiscal ’22. Garvin wouldn’t even speculate before the Warrant Committee just that it will be “unprecedented.”

Garvin has hinted at the need for the passage of the operational override, similar to the Proposition 2 1/2 measure the Select Board had favored placing on the November 2020 ballot. If that isn’t successful, the remedy to the deficit will be job cuts.

“Right after the June Town Meeting … we just start right in on ’22 with a plan [in which] we don’t receive the operational override because if layoffs are required, we have to have that time to figure out how we are going to approach the unions,” said Garvin. “Something like this doesn’t happen overnight.”

Budget Bloodbath: Belmont Finances ‘Severely Impacted’ Due To COVID-19; Cuts In Basic Services, A Call For Layoffs, Furloughs

Photo: Patrice Garvin, Belmont Town Administrator

It’s ugly. And it’s likely to get uglier.

That’s the first impression of Belmont’s town finances after initial estimates of the impact on the current and next year’s budgets by the COVID-19 pandemic, according to Town Administrator Patrice Garvin speaking before the Warrant Committee via video conference on April 1.

With all town departments already “running lean” before the pandemic struck “another cut is going to severely impact the operations and the services we provide the residents of the town,” said Garvin.

While there are “too many uncertainties” to make any good estimates of the likely shortfall, it’s nearly certain that the anticipated pronounced loss of revenue will place a strain on the current fiscal year 2020 budget while triggering real pain in next year’s fiscal 2021 budget – which begins July 1 – from lose of basic government services and likely layoffs and furloughs of town workers, according to Garvin.

“Direr but probably realistic,” said Warrant Committee Chair Laurie Slap hearing members reiterate their belief that revenues will drop significantly with resulting cuts in expenditures.

The sudden shut off of the revenue spigot comes as the town was close to finalizing the fiscal ’21 budget that was going to be brought before Town Meeting by the Select Board. The last draft presented to the Warrant Committee, the Town Meeting’s financial “watchdog,” projected the ’21 budget at $136.6 million.

For instance, a 10 percent cut in just one line item, total state aid in fiscal ’21, would force the town to slash $1.2 million from the budget that has a revenue gap of $5.6 million. Garvin noted state aid was reduced by 20 percent between 2008 and 2009 when the last economic downturn occurred.

The town is currently looking back at town budgets in 2008 and 2009 when the country last entered into recession to get an idea of how revenues took a hit.

Override in doubt?

In addition to services, Belmont, according to Select Board Chair Tom Caputo “will need to think long and hard about whether or not … our plans for an override in November still, in fact, make sense.” The proposed “operational” override – in the $6 million range – was seen as critical in meeting town services and needs by the school district in managing a continued surge in enrollment.

The rapidly moving series of events of the past six weeks due to strategies to halt the spread of the coronavirus has Garvin and her staff attempting to hit a moving target to provide the Warrant Committee some semblance of confidence it is receiving figures it can analyze.

When the seriousness of the spreading pandemic was fully understood two weeks ago, “we quickly came to the realization that fiscal year ’21 and some of fiscal ’20 could be severely impacted” most notably by the loss of state and local revenue, said Garvin.

Now and moving forward, the town has been “scrambling” to review its revenue projections from its February budget estimates, said Garvin.

Caputo said the massive disruption in the economy from the coronavirus requires the town “to rethink our [fiscal] ’21 budget that we laid out several months” which “was one that was going to work if everything remained as we had hoped” before the COVID-19 virus caused commerce and life to be upended.

While the largest sources of revenue, real estate property taxes with an estimated revenue of $92.2 million in fiscal ’21, continue to show high compliance levels, the town is preparing for significant reductions in the aforementioned state aid and local revenue collected from fees and services.

In a four-page overview of the ’21 budget, the town has been working on, the majority of line items are color-highlighted as likely to experience a drop in revenue.

Areas where revenue numbers will shrink from the February earlier estimates will be in new growth (expected at $920,000), meals ($234,000) and excise taxes ($3.7 million) and as will parking tickets and fees from building permits. The Recreation Department was seen as generating $1 million into the town’s coffers yet now could see receipts plummet if the Underwood Pool can not open for the summer recess.

While many of the fees are relatively small – from a few thousand to over a million dollars – if each takes a significant hit, they will add to a larger deficit in the fiscal year ’21 budget projections.

“In a nutshell, [fiscal year] ’21 is just a work in progress,” said Garvin. “We’re going to just keep running different scenarios … and seeing where the [Select] Board and the Warrant Committee wants to go.”

Warrant Committee member Ellen Schrieber noted that losses in fees and other revenue in the current year will likely damped estimates of the number of reserves – mostly from the town’s free cash account – which was expected to be passed forward into fiscal ’21 to fund gaps in the budget.

Garvin agreed, saying free cash “is where we’re going to get the hit next year.”

Hiring Freeze, Layoffs Possible

While the budget outlook is far from clear, the town is already formulating “initiatives” to begin filling the gulf of red ink facing the town. The likely first step will be a “thoughtful” hiring freeze, according to Caputo, as well as keeping a cap on overtime payments with the exception of public safety and a possible town-wide spending freeze with only “the most critical and essential items.” according to Garvin.

One significant area the town and Select Board are “brainstorming” to reduce expenses is looking hard at salaries which is the “primary” expenditure in the budget, said Caputo.

Warrant Committee member Geoffrey Lubien breached the topic of possibly furloughing town employees, noting that while not ideal, it would allow those individuals to secure unemployment benefits.

Garvin said that such conversations are occurring with the Belmont town counsel as nearly all the employees are union-represented and there needs to “decipher” the difference between a furlough and a layoff.

Lubien did followup saying reducing the workforce should be a last resort since “to let people go and then try to get them back is very difficult.”

One area of town that was only briefly touched but which looms large in town finances was schools. Yet Warrant Committee member Chris Doyle was blunt on her view that significant savings should come from the district that she believes isn’t functioning at full capacity with the schools closed and students being taught remotely.

“There is zero chance that teachers are spending anywhere close” to the same time they were in school “and it makes me want to be very encouraging for a broad furlough in the school department,” said Doyle.

Mike Crowley, the school committee representative to the Warrant Committee, felt layoffs “isn’t going to help the kids” during a difficult and at times problematic transition from educating students in a classroom setting to one at home in front of a computer.

The town is also discussing the possibility of using a provision in Gov. Charlie Baker’s Declaration of Emergency which allows municipalities to run a budget deficit due to “natural disasters on direct coronavirus expenses” The law gives a city or town breathing room to recover from a calamity by allowing the deficit to be paid off over the subsequent three fiscal years.

But for now, Garvin will be meeting with department heads and the school district to discuss where cuts can be made in an already lean program while waiting for more information from the state and town.

“There’s a lot of uncertainty and we’re just kind of moving along, keeping our eyes on what we think is going to be most impacted and go from there,” said Garvin. “I could put something together for today and a month [from now] it could be completely different.”