Over the last 7 years the Town of South Berwick’s budgeted expenditures experienced annual increases ranging from 3 to 9 percent. The proposed budget for fiscal year 08/09 shows a remarkable and unexpected increase of 16%.
Between 2004 and 2007 the Town has drained its savings in the “Undesignated Fund Balance” by $717,425 without replenishing it.
The savings account, termed the “Undesignated Fund Balance,” is important because it is used to cover “timing” issues. A household example of the “timing” issue that we can all relate to is:
I put into savings every two weeks so that when the time comes I have a large amount of money to pay an upcoming bill such as a property tax bill. After that bill is paid I then continue to replenish my savings account so that I can do it again the following year. In this scenario, as long as I actually do replenish my savings account I am living within my means.
Without replenishing the fund it is simply known as living beyond your means. This is what the Town of South Berwick has been doing.
At this point, along with the knowledge that we need to stop draining savings I see the following as a possible solution to the immediate “budget crisis.”
(1) The Town Council cannot possibly have the detailed knowledge to determine the internal budget of each department. Instead, this year it seems entirely reasonable that the Town Council ask each department head to limit their respective budgets to only a 5% increase.
We have professional department heads and they should be relied upon to recommend to the town manager and town council the choices necessary within their departments to meet the real fiscal constraints this year.
(2) To compensate for the over $700,000 net drain on the Undesignated Fund Balance during the last 3 years, the Town of South Berwick should suspend for one year most of the capital improvements program. This suspension would be for a limited time while savings are returned to the Town of South Berwick and the financial planning is restructured under a new fiscally responsible manager.
If these two steps are taken, the Town of South Berwick’s municipal funding for the following year will fall under the LD1 cap. (LD1: the state law that limits annual growth in each municipality’s property tax levy to the state’s average annual growth in personal income plus each municipality’s property growth factor.)
I must say, the LD1 cap does bring to focus any town that is living beyond its means. Though failure to meet the LD1 cap is not fatal, it may be a worthy goal.
April 12th, 2008 at 5:42 pm
Over the last 7 years the Town of South Berwick’s budgeted expenditures experienced annual increases ranging from 3 to 9 percent. The proposed budget for fiscal year 08/09 shows a remarkable and unexpected increase of 16%.
Between 2004 and 2007 the Town has drained its savings in the “Undesignated Fund Balance” by $717,425 without replenishing it.
The savings account, termed the “Undesignated Fund Balance,” is important because it is used to cover “timing” issues. A household example of the “timing” issue that we can all relate to is:
I put into savings every two weeks so that when the time comes I have a large amount of money to pay an upcoming bill such as a property tax bill. After that bill is paid I then continue to replenish my savings account so that I can do it again the following year. In this scenario, as long as I actually do replenish my savings account I am living within my means.
Without replenishing the fund it is simply known as living beyond your means. This is what the Town of South Berwick has been doing.
At this point, along with the knowledge that we need to stop draining savings I see the following as a possible solution to the immediate “budget crisis.”
(1) The Town Council cannot possibly have the detailed knowledge to determine the internal budget of each department. Instead, this year it seems entirely reasonable that the Town Council ask each department head to limit their respective budgets to only a 5% increase.
We have professional department heads and they should be relied upon to recommend to the town manager and town council the choices necessary within their departments to meet the real fiscal constraints this year.
(2) To compensate for the over $700,000 net drain on the Undesignated Fund Balance during the last 3 years, the Town of South Berwick should suspend for one year most of the capital improvements program. This suspension would be for a limited time while savings are returned to the Town of South Berwick and the financial planning is restructured under a new fiscally responsible manager.
If these two steps are taken, the Town of South Berwick’s municipal funding for the following year will fall under the LD1 cap. (LD1: the state law that limits annual growth in each municipality’s property tax levy to the state’s average annual growth in personal income plus each municipality’s property growth factor.)
I must say, the LD1 cap does bring to focus any town that is living beyond its means. Though failure to meet the LD1 cap is not fatal, it may be a worthy goal.