(10/30/07)  The Select Board met with the Finance Committee, School Committee and Library Trustees at noon on Saturday, October 20th in the Town Room at Town Hall.    Present were Select Board members Gerry Weiss, Anne Awad, Alisa Brewer, Rob Kusner and Hwei-Ling Greeney; Finance Committee members Brian Morton, Alice Carlozzi, Kay Moran, Andy Steinberg, Paul Bobrowski, and Marilyn Blaustein; School Committee members Andy Churchill and Kathleen Anderson; Library Trustee Pat Holland; Town Manager Larry Shaffer; Finance Director and Treasurer John Musante; School Superintendent Jere Hochman; and Library Director Bonnie Isman.

Mr. Morton, the Finance Committee Chair, said the purpose of the meeting was for the other bodies to provide feedback to the Finance Committee about the draft preliminary budget guidelines and policies.  He said this was an important part of the budget process, and that a public hearing would be scheduled in the next couple of weeks to collect further feedback before the Finance Committee issues its preliminary guidelines for FY09.  The preliminary draft guidelines document and the draft Financial Management Policies and Objectives document used at the meeting are available here. (The two documents are in one file; the policy document begins on page 4.)

Municipal Budget

Mr. Shaffer summarized the Select Board’s budget policy meeting, saying that a number of policy issues were discussed, and though no conclusions were reached, progress was made.  He said the Select Board had determined a schedule for achieving priorities, and he said he hopes to have those in time to incorporate into his budget proposal.  He said that the Town administration is looking at making internal changes for increased efficiency and effectiveness, and that those changes are still being evaluated.  He said that the FY09 budget situation involved the good, the bad, and the ugly.  For the good, he said that expected available revenues are up over last year’s 1% increase to 2% or 2.2%, an increase he called “significant.”  For the bad, he said that there had been a 1% cost of living adjustment (COLA) for non-union employees for FY08, and that the COLA was expected to be higher than 1% for FY09.  He said that salaries are the most significant budget factor.  For the ugly, he said that health care costs remain a challenge, but said that the Health Claims Trust Fund is in a little better shape than last year and preliminary projections are somewhat improved.  He said the State’s decision to let municipalities participate in the Group Insurance Commission (GIC) provides a new option to be discussed in collective bargaining with the unions.

Mr. Steinberg asked about the challenges of maintaining the elements identified as most essential with an increase of only 1% for FY08, and an expectation of 2 to 2.2% in FY09. 

Mr. Shaffer said that to level-fund services would require an increase of 5% to 6%, and said that the Town is still in a structural deficit situation.  He said that the budget he submitted last year sought to distribute the necessary cuts as evenly as possible across departments, but that that will not happen this year.  He said that Public Safety is his highest priority, and that while that doesn’t mean it will be untouched by cuts, he said he will be maintaining its service levels.  He said that that has implications for the rest of the budget, and cited LSSE.  He said that a comprehensive analysis of its programs is underway, and that a proposal will be made to fund those that are most critical and those that bring in revenues that help cover the critical ones.  He said to expect dramatic changes with LSSE. 

Mr. Musante said that there was an anticipated gap of about $600,000 between anticipated revenue and the amount that would be needed to fund level services in the $18 million municipal portion of the budget.  He said a budget increase of about 5.5% would be necessary to fund level services, while an increase of only 2% is anticipated.  He said he wanted to emphasize that while a group of experts was being convened to consider the administrative structure of the Town and the Schools, the Town Manager was not optimistic about significant cost savings being found there.  Mr. Musante said some savings and efficiencies were anticipated, but not enough savings to fill the large budget gap.  He said that all parts of the budget were being looked at, and that maintaining Public Safety will have a significant impact on other areas, because Public Safety is such a large portion of the municipal budget.

Mr. Shaffer said that fire and ambulance service continues to be studied.  He said that its budget was about $4.8 million last year, and that 41% of expenses are covered by its own revenue, and that that could grow to about 60%, but probably not much higher.  He said that analysis of fire and ambulance services done for the Strategic Partnership Agreement with UMass will now help direct discussions with the other colleges and the nearby towns to whom Amherst provides those services.  He said he is intent on eliminating any subsidy of those services to outside entities by Amherst taxpayers.  He said the recent Fire Station Study Committee looked at emergency calls in relation to a possible new fire station, and that it was the Town Manager’s charge to determine how to fund a new station. He said that the ambulance part of the budget is $3.4 million, and that $1 million of it is for calls outside Amherst. He said that the other towns and institutions have been notified about his intent to make changes to the fee formula, and that they have been given all the numbers, and that the Town will either increase revenues or shed calls.

Library Budget

Bonnie Isman, Library Director, talked about spending cuts made last year by the libraries, including cuts to staff in the ESL program and reductions in hours at the branch libraries.  She said that ESL and North Amherst library cuts were restored through private fundraising, but that the South Amherst library cuts remained, and that that facility is now open five days a week rather than six.  She said that office staff was reduced, and that an automated phone system would be covering some of those reductions.  She said that fines for overdue audio-visual materials had increased due to a change in policy from such fines being collected on the honor system to being intentionally collected.  She said that Library Trustees still want a revolving find established to enable the library to keep those overdue fines, rather than having them go to the Town’s general fund, and that there would be no incentive to pursue the new policy and collect fines unless they know it will help maintain library services. 

Ms. Isman said State aid to libraries is expected to be static, and that a new analysis of the aid program might have negative consequences for Amherst because it looks to measure the contribution of municipal funds to the purchasing of new library materials.  She said that such materials are purchased through the Jones Trust rather than with municipal funds, and that she has launched a protest with the State about that issue, and that Amherst is not the only library in that situation.  She said she expects a change to that policy, but that she still expects no increase in State aid for FY09. 

She spoke of the library’s endowment, which she said was “healthy” and had grown at pace with inflation.  She said the investment adviser is optimistic, but cautioned against deviating from the 5% spending rule.  She said that 5.5% is currently being used, and that Library Trustees intend to reduce that by one-tenth of a percent per year until it is down to 5%, seeking to spend only 5.4% in FY09. 

She said that new spending cuts hadn’t yet been contemplated, but that after years of “trimming,” she was not optimistic about the ability to trim more.  She said that more revenues were needed to fill the gap.

There was discussion about the endowment: that the spending guidelines are based on three-year growth averages; and that Trustees are working to promote planned giving in an effort to increase the endowment.

Ms. Awad said there might be ways of handling the State’s aid to libraries through Town bookkeeping changes that better align with the State formula. 

Mr. Churchill asked how the libraries prioritize the branch libraries in relation to the Jones, and whether if necessary, cuts would be spread evenly among them or if a branch might close or staff might be shared between the two branches.   Ms. Isman said that branch libraries are very popular and politically difficult to close, citing an example of a Springfield politician opening a branch library due to the popularity. She spoke of how old the branches are, saying the South Amherst one dated to the 1930s, and the North Amherst one predates the Jones.  She said that closing either would be a radical step and would requires significant community input for the Library Trustees to make such a decision.  She said that there is a State mandate requiring that the libraries be open at least 63 hours per week, and that the Jones is open 59 hours, and duplicate open hours among different libraries are not counted.

Ms. Brewer said that there could be no “sacred cows” in the budget because there isn’t enough money to fund all the programs and services, and it was necessary to take a hard look at all spending.

Ms. Holland said that the branch libraries have received significant private money from citizens, and that many people depend on the branches.  She said she doesn’t think there is currently any support among the Trustees for closing the branches. 

Mr. Kusner suggested that a fundraising campaign could focus on the popularity of the branch libraries and seek to build long term support for the whole library system.

School Budget

Dr. Hochman spoke about the Schools’ efforts to “do more with less,” citing a new internship program developed with the Chamber of Commerce to replace senior study halls with an educational opportunity.  He talked about the various challenges to fulfilling the Schools’ mission and maintaining programs in the sixth year of State aid cuts, and with increased regulatory requirements.  He talked about subcommittees being formed to study issues such as the organizational boundaries of the elementary schools, and how reports show continued achievement improvements.

He talked about the budget process within the schools and said that budget expectations and targets would be presented to the School Committee in January.  He talked about the Budget Coordinating Group (BCG) seeking expert analysis and advice on the question of possibly sharing administrative structure with the Town, and said he wanted that question answered and to then move forward.  He said that he can’t promise that the Schools can keep “doing more with less,” and must look at “doing less with less.”

Dr. Hochman said the school priority categories are for the best course schedules and course offerings and class sizes; staff and staff negotiations;  support, supervision, evaluation and professional development of staff; and response to the committees studying school reorganization, food services and other issues that would impact school budgets and school functions.

Mr. Churchill talked about the decreases in State aid and increases in costs such as health insurance, and the implications of continued cuts to budgets that are made up primarily of people.  He said that cost savings and other benefits had come from bringing children with special education needs back to local schools from expensive distant placements.  He said that a committee is looking at the Regional agreement and considering how school bus transportation is paid for and the possibility of ending the use of money from the Regional Schools budget for Elementary School transportation.  He said that such a change would relieve pressure on the Regional budget and have implications for the Elementary Schools budget, but for Amherst he said it might mean only a shift of money from one budget to another.   He talked about the oft-stated concern about having too many administrators in the school system, and said that with the high student achievement expectations placed on teachers, it is necessary to know how the teachers are doing, how their curriculums are working, and to ensure that they are supported, in order to keep the best teachers from leaving the Amherst schools.  He said he was concerned that past administrative cuts had gone too far, and cited the problems with leaving the Assistant Superintendent position vacant for the last few years, requiring the Superintendent and others to cover those duties. He said that he looked forward to the arms-length analysis by the BCG’s committee, and stressed the need to have adequate managerial support in order to hold teachers accountable to high standards.

He said the 1% negotiated salary increase in FY08 was an “extraordinary contribution” by employees to help close the budget gap.  He noted that the Town Manager has said that it was not realistic to expect that again this year.

Mr. Kusner also expressed appreciation to employees for the 1% agreement.  He said that there is a perception in the community that there are too many administrators, and that whether or not it represents reality, the perception needs to be addressed.

Mr. Churchill agreed and said the BCG’s panel would address that.  He said the community’s priorities also need to be considered, and said that the Master Plan shows conclusively that schools are the top priority.  He said that schools need to be as efficient and effective as possible, and said that people need to recognize that schools are the major budget item in every community because providing for the education of children is what towns do.  He said that high expectations for the schools is a key value for Amherst.

General Discussion

Mr. Weiss said that State aid amounts are 60% below 2002 levels when adjusted for inflation, and said he figured the loss to Amherst to be about $10 million from what flat funding at 2001 levels would have yielded.  He said it was true that schools were the top Master Plan priority, and said that fire and ambulance was second, and that he was interested and “pleasantly surprised” that libraries, open space, social services and affordable housing tied for third priority.

Mr. Weiss said that Amherst is not alone in its State aid and health care cost woes.  He said that the Select Board’s priorities were determined prior to the new Town Manager, and that he was hired to address those priorities.  Mr. Weiss said that departmental reviews and collaboration with the University were among the priorities the Select Board had set for the Town Manager, and that progress was being made.

Ms. Carlozzi said that it was important to consider what the public wants and thinks is needed, and that it is also important for elected officials and appointed bodies to recognize that there are some elements of the budget that have no constituencies, and to make sure those are funded adequately.

Mr. Morton said that core non-constituency functions are at “dangerously low levels” and cautioned that mistakes could result that would damage the Town’s credibility in its reporting to the State.  He said that the assembled bodies have a fiduciary responsibility to the Town to not only spend its money wisely, but to make sure that it is accounted for in a responsible manner.

Mr. Weiss said that the FY08 budget lowered the structural deficit and increased reserves.  He said that all budget areas had done an “admirable job” of absorbing the cuts with minimal pain and much creativity, and said that the executive managers of the Town, Schools and Libraries deserved praise for that.  He said that the percentage of the tax share paid by residential property had declined slightly, by one tenth of one percent.  He said that that hadn’t happened in a while, and that it has typically risen by that much.  He said the single-family tax bill rose 4.2%, which he said was also the State average.

Mr. Morton said that the reserve increase was based on one-time funds.  Ms. Awad and Mr. Weiss both emphasized that that money went to reserves instead of being spent.

Ms. Greeney talked about the Master Plan and the priority order Mr. Weiss had cited.  She said that almost 50% of the respondents to the Master Plan survey had household incomes of more than $75,000, and that almost 10% had incomes of $150,000.  She cited some poverty statistics for Amherst school children and said that people who returned the surveys were not representative of the town’s general population, and said that their priority list was also not necessarily representative. 

Mr. Musante said that he found the Master Plan survey results useful and said that they included a range of issues, but that the survey was not designed to ask about every program and service of the town.  He said its results could be helpful for thorny development issues, and would be one piece of a larger puzzle going forward.

Mr. Churchill said he didn’t want to use the Master Plan as the sole tool for decision making because it was not designed for the purposes this group was dealing with, and agreed with the earlier points about core functions lacking constituencies.  He said he didn’t think that poor people had less appreciation of school quality than richer people, and that they might even have more to gain from better schools, and he was confident that any survey would show schools to be an important priority for Amherst.  He said that the BCG was looking to contract for a survey to guide priorities going forward, and to gauge community priorities and the ability to pay for them with additional tax funds.  He said that a survey provides guidance, but that it only measures what people are thinking about, and doesn’t measure what they aren’t thinking about. 

Financial Policies

Mr. Morton moved the discussion to the topic of seeking feedback on the draft document outlining the guidelines the Finance Committee uses for its planning and recommendations. 

Mr. Steinberg talked about the Capital Plan and ongoing infrastructure needs.  He said the draft calls for a target of using 10% of the tax levy for capital, and to use not less than 8%.  He said there needs to be a determination about whether or not there is agreement on that range, and that that determination needs to be relayed to the Joint Capital Planning Committee (JCPC.) 

Ms. Moran said input is also needed about distribution of the projected 2.2% total budget increase.  She said that using the same distribution as the past would mean 2% increases for the Elementary Schools, Libraries and Town budgets, and 3% for the Regional Schools.  She said that last year didn’t work out exactly that way, with 1% increases going to the Elementary Schools and Libraries, 0.9% to the Town, and 4% to the Region. 

Ms. Awad said that 2% to the three areas and 3% to the Region seemed fair.  Ms. Brewer said she wondered if this was the time for considering whether evenly sharing the cuts across budget areas should be reconsidered, and noted that departments within each budget area were not going to see an even distribution of cuts. 

Mr. Morton said that was a good question, and that there needs to be a mechanism to have that kind of conversation, and that the current process doesn’t provide for it.  He said it wouldn’t be right for the Finance Committee to unilaterally make such a change, and that all four boards would need to participate in such a decision.

Dr. Hochman said such a determination could either be driven by perceptions and opinions or by standards and expectations.  He said he is glad the BCG panel will look at school administrators so that the reality of the situation, instead of perceptions about it, will be known.  He said some people simply want school budgets cut, but that it is important to consider the community’s standards and expectations for its schools, as well as the State and Federal standards that drive them.  He said that funding decisions based on standards should replace those based on perceptions, and that the same is true for public safety and other budget areas.

Mr. Morton said that the draft financial policies document brings together the practices and guidelines that the Finance Committee bases its budget guidelines on, but which had previously been unwritten.  He said it was important to gather those all in one place so that people could know and understand them.  He said that this version is a draft and that some elements need to be changed or added over time, but that the goal is to make this a document to guide financial planning for the next decade, not just the next year.  He said it requires that all stakeholders understand and buy in to its policies and guidelines so that it can be used for all of Amherst’s financial plans.

Ms. Greeney expressed concern about the increasing capital spending for 7% to 8%, and said the Select Board had not discussed that yet or considered the individual capital items on the list.  She said she was reluctant to increase the capital budget with FY09’s “gloomy” budget outlook.  She said she thought the group should not commit to spending an extra $250,000 over FY08 amounts for capital expenses, but should use that money to maintain flexibility to meet critical needs that won’t be known until the end of the budget process. 

Mr. Morton said that that was a draft guideline for seeking feedback from JCPC.  He said that when guidelines are issued in November, they are drafts by necessity because not everything can be known at that time.  He said they are never etched in stone, but rather are works-in-progress intended to provide the different budget planning entities with information about what is possible. 

Ms. Awad thanked the Finance Committee for the document.  She recommended establishing a policy to change the audit firm every three to five years.  She said that would help municipal standards align better with federal accounting standards, and talked about other benefits to changing firms, such as getting a fresh perspective, and not developing too comfortable a relationship with any one firm.  Mr. Musante said that there has been some discussion about that in the audit committee, and said that it makes sense that the policy document should at least mention consideration of rotating the audit firm.  He said that his professional trade association recommends considering but not mandating such changes. 

There was discussion about what elements should and should not be counted as part of the percentage spent on capital, such as some Community Preservation Act expenditures, and how some spending blurs the line between the capital and operating budgets.  This included discussion of the growing list of unfunded capital needs and how having an agreed upon guideline would allow capital spending decisions to be less reactionary and more planned.  Specifics of the Town Hall repair project and proposed CPAC funding for it were discussed as well, as was the desire by some to weigh specific operating budget items against specific capital items.

Mr. Morton reiterated the point that the policy document was intended for the long term.  He said that some funds available today might not be available in the future, and that new ones might later be available.  He said that the document required some generality in order to stay applicable over time. 

Ms. Moran, Mr. Morton and Ms. Isman talked about the decreasing percentages put toward capital and the growing list of deferred maintenance items.  They explained that when the JCPC was formed, the infrastructure situation was bleak and that 10% was determined to be the amount needed to keep up with old needs but was not enough to cover new ones.  They said that as the percentage has been reduced, the new and accumulated needs have increased, such that $300 million is currently required to fund a list that doesn’t even include all projected needs.

Mr. Shaffer said that a fixed percentage for capital attempts to address the needs of continual appreciation and depreciation of assets.  He said those that are unfunded become liabilities.  He said there is an optimal time to make investment in capital, and that after that time, the costs of the repair, maintenance or replacement increase. 

Mr. Churchill suggested that the policy document include more explanation about the range of target percentages of the operating budget which the reserve funds should represent.  He also suggested including information about enterprise funds and why that model is used for certain budget sectors. 

After some further clarification of document details, Mr. Morton thanked the group for their feedback and requested that they offer additional comments in writing. 

The meeting adjourned just before 2:00 p.m.  It would be followed after a brief break by a meeting with representatives invited from Shutesbury, Pelham and Leverett.

-- Stephanie O’Keeffe