How Should Annual Budgets Be Determined?

Report on the Meeting of the Budget Coordinating Group, September 26, 2024

The meeting of the Budget Coordinating Group was held over Zoom and was recorded.

For the past 20 years or so, Amherst has developed its annual budgets by allotting an equal percentage annual increase to each of four divisions: municipal departments, the library, the elementary schools, and the regional schools. With extreme shortages projected for the regional schools in the coming years, some members of the Budget Coordinating Group (BCG) questioned this method of budgeting.

The BCG is composed of four town councilors, town finance staff, and representatives from the Jones Library Trustees and School Committee, as well as the Superintendent of Schools. Its purpose “shall be to review the financial condition of the Town, revenue and expenditure forecasts, and other relevant information prepared by the Town Manager in order to develop coordinated budget guidelines and calendar and to coordinate the process of budget development” (Home Rule Charter, Section 5.2). The September 26 meeting was the group’s first in the FY2026 budget cycle.

During the meeting, Jones Library Trustee President Austin Sarat and several members of the School Committee questioned whether the flat percentage was a fair way to distribute money for the budget, rather than basing the amount allotted on the needs of each sector. In addition to providing budget guidelines for municipal departments, the library, and the schools, the town allocates 10.5% of its revenue to the capital stabilization fund to finance improvements to infrastructure and equipment and capital projects. 

Comptroller Holly Drake estimates that about 70% of the town’s budget comes from property tax revenue, which is restricted to a 2.5% increase each year due to Proposition 2½. Increased revenue from new growth (new buildings) is estimated to be about $650,000 for FY26, but she said that this is not sustainable long term. The extra income from the debt exclusion for the new elementary school is included in the FY26 budget projection. Drake is still finalizing the FY24 budget, and hopes by the end of the month to have the figures for how much free cash is left over that can be allocated to stabilization funds or other uses. The final report for FY 24 will be presented at the November 4 Town Council meeting, when the financial indicators for FY26 will be discussed.

Town Manager Paul Bockelman, however, said the town already received disturbing news about employee health insurance that is slated to increase by 10-15% . It increased by 9% in FY25. Property and casualty insurance is also projected to increase by 15%. Bockelman’s initial spreadsheet shows a deficit of $468,000 for the year, which he said is not unusual for this early stage of the process. The town has no information on state aid at this time. 

School Superintendent E. Xiomara Herman said that the regional schools face dire cuts in staff and programming if they are held to the 2.5% increase over FY2025. She projects the budget deficit to be about $2.5 million if the base for the increase is the standard budget amount, although the deficit would be trimmed to $1.8 million if the base for the increase includes the extra $355,000 of ARPA money added in June 2024 by town council to the original 4% budget increase. After awarding the extra funds, the council sent a letter to the schools stating that this was a one-time allocation that will not be included in the basis for subsequent budgets, and that the schools will be held to a 2.5% increase in the future. At this level, 35 positions at the region would need to be eliminated. Particularly harmful to the school budgets is the approximately $3 million in tuition that the schools pay for area students who attend charter schools and schools in other districts that is not adequately reimbursed by the state.

Leverett representative to the Regional School Committee (RSC) Tilman Wolf noted that a 2.5% increase does not cover the cost-of-living increases for staff. Amherst representative Bridget Hynes noted that 35% of regional staff positions have been eliminated in the past 20 years. She said, “I am afraid the cuts needed with either the $1.8 or $2.6 million deficit will put us in a downward spiral where we will be providing a mediocre education, and more students will leave our schools. I know budgets have their limits, but we need to think early on how we are going to support our schools.”  Fellow RSC member Irv Rhodes (Amherst) said the regional schools, despite the aforementioned letter from the council, will ask that the $355,000 “gift” for the 2025 budget be added to the base amount on which the 2.5% increase for the 2026 budget is calculated. 

Herman had no projections for the elementary school budget, but said that she and her team will be working on it during October. The elementary schools do receive $200,000 per year from the strategic partnership agreement with UMass. 

“I am worried that we are wedded to a budget model that is not responding to what we are seeing in front of us. We have all these unmet needs, and they’re not evenly distributed.” – Austin Sarat, President, Jones Library Trustees

Sarat noted that the library budget will again be strained by personnel and programming needs. He questioned the model used for creating the annual budget. He said “In one model, entities are invited to submit budget requests that reflect their real needs and then the town can deliberate on how it can meet those needs. Another model, which I think is the one the town uses, is ‘here’s what we can give you; fit your budget to that.’“ He stated, “That may be a very sound way of budgeting, but, in a way, what it does is that it keeps hidden what the real needs are. Maybe those needs can’t be funded, but we at least would have them on the table. It’s a discussion we should have.” He concluded, “It is less about the budgeting model than about what the real needs are. I am worried that we are wedded to a budget model that is not responding to what we are seeing in front of us. We have all these unmet needs, and they’re not evenly distributed.”

Town Councilor Andy Steinberg (at large) replied, “The reality is that, ultimately we have a 2.5% cap that has been in place since 1980, and we have to live within that.” He noted that the flat percentage method was put into place during the days of Town Meeting when it didn’t seem feasible to discuss which department needed more funds during the annual town meeting. He admitted that the current model doesn’t deal with need.

Bockelman also responded, “We know we have a certain amount of money available, how do you want to divide up the pie? We could start with a zero-base budget where everyone starts at zero and then have to justify every dollar they need. That is a way more complex process. The challenge is that, other than a Proposition 2 ½ override, there aren’t other sources of income. There are departments that are paying for fuel that stopped buying other things, so we’re documenting that. But my personal thing is that you live with what you’re given, but politically it doesn’t serve my employees very well.”

Drake noted that 88% of budget revenue in FY24 was comprised of property taxes and state aid, which are out of the town’s control. She said, “I, personally, don’t want to see people fighting over the money. When the town decided to distribute the money evenly, it seemed like a good idea at the time, it still seems like a good idea to me, but it is hurting the other folks. And it’s not that nobody cares.”

New Finance Director Melissa Zawadzski said she met with each department head over the summer, and many told her they wanted to be a team player and to live within their means. She told them, “You can’t get what you don’t ask for.”  She is keeping track of the true needs of each department.  

Town Councilor Mandi Jo Hanneke (at large) said, “The schools are very good at discussing what their needs are. Town departments are less so. This gives a potentially distorted picture of how our limited budget affects all four sectors. Maybe if it were presented better, there would be a different discussion at BCG and the council on how to better distribute the funds to the four sectors.”  She added that she worries about all the vacant positions in the town and wondered if it was because the salaries are too low. “We cannot afford to decrease the amount we devote to capital, “she said, “There isn’t a lot of money out there to meet the needs of all 40,000 Amherst residents without an override, and we hear that Amherst is already unaffordable. I don’t know how we are going to fit the needs in to become the kind of community Amherst residents say out loud they want, a town that is a wide range of economic level, a wide diversity of culture, but that requires property taxes and rent to remain affordable, meaning we have to live within our budget, and I don’t know if we can.”

But Rhodes countered, “it’s not only staffing we are talking about in the schools. Students bring individual needs to the classroom. Those needs cannot be ignored, so our needs rise from a different place, because we have to service individual students every day. Those needs are reflected in our budgeting process. Some people say we have to ‘live within our means’. That’s the kind of story that’s been told to a lot of low-income people all the time. And what happens is that ‘living within their means’ means that those students go without. And that’s not something I think Amherst is willing to do.”

School Budget Discussion Continued at October 1 Finance Meeting
The following week, the Finance Committee of the Town Council continued to discuss the massive shortcoming in the Regional School budget, even if grades 7-12 were housed in one building, as was proposed as one option by superintendent Herman. Non voting member Bernie Kubiak cited the funding of charter schools, which requires the student’s home district to pay the full charter school tuition. Steinberg was glad that Superintendent Herman was “thinking outside the box” for solutions, not just starting with a level funded budget. 

Non-voting member Tom Porter stated that the schools can’t afford to live within the 2.5% limit, although that is the state law. He said, “We can’t afford to lose students to charter schools. It breaks my heart. We want to give our students the best, but we can at least give them the basics.”

Councilor Cathy Schoen (District 1) suggested looking for places in the budget to save money, such as decreasing the amount added to the capital stabilization fund or decreasing the number of CRESS responders. But she acknowledged that a 2.5% increase was probably not adequate for any sector of the town. 

“the schools have known for several years that this cliff was coming, and no plan was made to deal with it.” – Paul Bockelman, Town Manager

Bockelman was less sympathetic. He expressed frustration that “the schools have known for several years that this cliff was coming, and no plan was made to deal with it.” 

The next Finance Committee meeting is scheduled for October 15, but the free cash from the FY 2024 budget will be certified at the November 4 Town Council meeting, when the FY26 budget indicators will be discussed. The Finance Committee will continue its discussion of budget matters during November.