Council Receives Budget, Moves Capital Plan Back To Finance Bd.

By John Voket

The Legislative Council received budget books March 16, beginning the third phase of the annual budget process.

Typically referred to as the “political” part of the budget review, it will be the council’s job to apportion sections of the spending plan among several committees to discuss and make final recommendations that will eventually lead to the final budget request to go before voters in a late April referendum.

The council will also receive public comment at a hearing Wednesday, March 23, at 7 pm, at the Newtown Municipal Center. On March 3, the Board of Finance narrowly recommended to the council a town request for $37,922,648 and a school district request for $68,703,427.

Board of Finance Chair John Kortze appeared before the council to hand off the budget request, and he explained his board’s actions of a week earlier. Mr Kortze said the only changes made by finance officials to the school district’s original request amounted to a $497,590 reduction to account for health insurance savings and a slight increase in fuel costs.

The finance board also agreed to a $70,000 increase for a district organizational study that will be shared proportionately by the town, which is contributing $30,000 toward the overall $100,000 study.

On the town side, finance officials approved a reduction of about $274,000 in similarly adjusted health coverage totals; added $5,000 for other increased benefit costs; provided $5,000 to the Labor Day Parade Committee; added $50,572 for equipment fuel, $37,830 in borrowing interest, and $4,500 to underwrite services provided to town residents by Ability Beyond Disability, a regional human services agency.

If endorsed by the council without further change and approved by voters in the scheduled April 26 referendum, the proposed budget would generate a 2.68 percent tax increase next fiscal year, and an increase in the tax rate to 24.64 mills. A mill represents $1 in taxes for every $1,000 in taxable property.

Mr Kortze also briefed the council on a detailed presentation prepared by his finance board colleague Joe Kearney that analyzed how the local budget has swelled in recent years, and incorporated how state and national economic trends will likely impact local residents in relation to proposed local property tax increases next fiscal year.

Calculating from Governor Dannel P. Malloy’s proposed budget, Mr Kearney estimated the average Newtowner would pay $1,400 more to the state next year, while countering federal deductions would be insignificant by comparison.

After clarifying that if passed, the proposed 2011-12 town budget would raise the local tax rate from 24 to 24.64 mills, District 3 Councilman Daniel Amaral telegraphed his concerns clearly. “That’s too much,” he said.

Mr Kortze told the council the increase in this year’s spending request, and its companion tax increase, was primarily driven by three things: increased spending, and about $400,000 in debt service on bonding to complete the Newtown High School expansion. The third factor, a difference in revenue, is primarily tied to the town’s new financial policy eliminating the use of the town’s fund balance or savings to offset tax increases.

Referring to bond agency reports supplied to the council after a February bond sale, Mr Kortze noted that it was the first time a bond rating agency specifically cited the town’s previous use of fund balance for reducing taxes as a disadvantage toward Newtown achieving an elusive AAA, or perfect, bond rating.

He also mentioned that several Connecticut towns have recently had their bond ratings downgraded because of their low, or continued use of, fund balance to offset taxation.

In discussing a $1 million savings advantage the town is applying to the proposal after switching to a self-funded employee health plan, Mr Kortze cautioned the council that part of those savings are due to positive claims experience in recent months.

“We got lucky, but we have to be wary about it,” the finance chairman said.

Global, National Trends

Referring to the close 3-2 vote of the Board of Finance to recommend the budget, Mr Kortze said he would not speak for individual members, but said his board generally agreed that state, national, and global economic trends each played a role in the budget request and proposed spending increase.

He also said the finance board members all recognize there is a trend in Newtown that is showing a shift away from a burgeoning school-age population toward an older demographic, and told the council that “the town needs to address what is happening demographically.”

“We all agree the change is coming, but we’re not in agreement about how we get there,” he added.

Speaking to the current proposal, Mr Kortze looked back to critics who took his board to task last year for proposing a $2.5 million reduction to the school district request, indicating that his board continues to have “a good handle” on financial data that in hindsight, justified the reduction.

“We all agreed that [this year’s request] was tighter, and more efficient,” Mr Kortze said. “And if you look through the data, a lot of assumptions we made last year were manageable.”

At this week’s council meeting, the Capital Improvement Plan was also sent back to the finance board for a final review. The council has been waiting as the CIP was reviewed by the finance board and selectmen as they considered a proposal to cut debt spending from ten to nine percent by the fifth year of the plan.

First Selectman Pat Llodra said she will be making detailed presentations to her board followed by the finance panel and council in the coming weeks, discussing how the town might achieve that goal without severely curtailing much needed, long-anticipated capital projects planned for year five and beyond.

Making such an adjustment will require the town and school district to eliminate $10 million of the $30 million in proposed capital projects requested to be bonded in 2015.

Mrs Llodra said the move to lower the debt cap on borrowing would be part of a larger strategy that would have various parts acting “in concert with each other, combining the right kind of financial thinking we need to affect a better use of our financial resources in the future.”