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BOARD OF FINANCE
DECEMBER 16, 2003
REGULAR MEETING
1. CALL TO ORDER
The Regular Meeting of the Board of Finance was called to order at 6:04 P.M. in the Board of Education Conference Room at the Simsbury Town Hall. The following members were present: Chairman Paul Henault, Peter Askham, Nicholas Mason, Kevin North and Michael Wade. Also present were Board of Education member Richard Hogan, Board of Education Business Manager David Holden, Finance Director Kevin Kane, Superintendent of Schools Joseph Townsley, First Selectman Thomas Vincent and other interested parties.
2. APPROVE MINUTES
November 18, 2003 Regular Meeting
Mr. Wade moved to move the approval of the minutes to the end of the meeting. The motion was seconded by Mr. Askham and carried unanimously.
3. EXECUTIVE SESSION
Pursuant to Connecticut General Statutes Section 1-200 (6) (B) to discuss Meadowood Pending Litigation
Pursuant to Connecticut General Statutes Section 1-200 (6) (D) to discuss selection and purchase of a site by a political subdivision
Mr. North moved to enter into Executive Session at 6:05 P.M. The motion was seconded by Mr. Mason and carried unanimously.
The meeting room was vacated by all but the Board of Finance members, Mr. Kane and Mr. Vincent.
The Regular meeting reconvened at 7:20 P.M.
4. BUDGET TRANSFER FROM RESERVES
Mr. Mason moved to table this agenda item. The motion was seconded by Mr. Askham and carried unanimously.
5. PROPOSED ACCOUNTING FOR SPECIAL EDUCATION EXCESS COST GRANT
Mr. Holden reviewed his 12/11/03 memo, "Special Education Cost Grant" (Addendum I) which included a description of the current practice and a proposed change. The proposed change would be that any excess cost grant revenue received in a fiscal year over and above what was budgeted in that fiscal year would, upon receipt, be transferred by the Director of Finance into the BOE's State and Federal Grant account against which the excess expenditures would be incurred in that year. After discussions with Mr. Kane, it was decided that excess cost grant revenue could be handled either as described above or be deposited into a special fund, whatever the auditors would recommend. This would be to avoid having to come back on a potentially annual basis for a supplemental appropriation.
In answer to Mr. North's question, Mr. Kane stated that he felt the change should take place 7/1/04 and not in this fiscal year. He added that the rule in the Charter says that if any additional funds are needed within a fiscal year, a letter needs to be written by the BOE to the BOS to amend their budget. He felt that the rules shouldn't be changed in the middle of the year.
Mr. Mason brought up his previously expressed opinion about the budgeting process. He stated that the Town budgets for the next year based on the prior year's budget rather than doing it based on what actually happens. He stated that he feels it doesn't make sense. On the issue at hand, he stated that there is a process in place and that no change should be made at this time.
Mr. Askham stated that other towns put reimbursements back in the budget but that Simsbury doesn't do it that way because of a Charter provision.
Mr. Mason moved that no change be made in the accounting process at this time. There was no second, and the motion could not be brought forward.
Mr. North moved to adopt the proposed change outlined in Mr. Holden's 12/11/03 memo (Addendum I) that we match revenue and expense starting, for budgeting purposes, in the 04/05 fiscal year. Mr. North clarified his motion: That the BOE be allowed, commencing with the 2004/05 fiscal year, to receive the applicable revenue grant from the State to match excess revenues with excess expenses and deposit it in the BOE State and Federal Grant Fund as restricted revenue or in a Special Revenue Program Fund.
The motion was seconded by Mr. Mason.
Mr. Askham stated that the Connecticut Statutes are clear on what should be done. The Charter provision in question goes against the Statutes. Mr. Henault stated that the cost of Special Education has become so steep that what it does to their budget needs to be addressed. Mr. Askham stated that matching excess revenues with excess revenues is better. Mr. Wade stated that it would be much more effective to do it now and not wait for the new fiscal year.
A vote was taken and the motion passed with 4 YES votes and with Mr. Wade voting NO.
Mr. Henault reminded Mr. Holden that the BOE should make a request, and it would have to go to the BOS and then to the BOF.
6. DISCUSSION ON CNR 2004/05 BUDGET APPROPRIATIONS
Mr. Kane reviewed his 12/11/03 memo, "CNR Fund - Projected Affordable Annual Expenditures" (Addendum II).
Mr. North asked if there were any objective standards about what makes a project eligible for CNR funding versus Capital. Mr. Henault answered that there is a CNR guideline. Mr. Kane offered to get a copy of the policy to Mr. North.
Mr. Mason stated that they are tending to use CNR to house items that should be within the budget process, even if they are paying them back. Mr. Henault answered that this way allows them to plan and phase in a project.
7. DISCUSSION ON 2004/05 BUDGET CAP AND POSSIBLE ACTION
Mr. Henault asked Mr. Holden where the BOE Budget Sub-Committee is in their talks. Mr. Holden answered that the meetings will start on 1/6/04 and will continue on a weekly, and sometimes biweekly, basis.
Mr. Henault noted that the BOF members have received a number of letters from residents. He stated that they read the letters and appreciate the feedback.
Mr. Holden explained that there has been a tremendous increase in medical insurance expenses.
Mr. Kane handed out his "Projected Mill Rate" worksheet and presented it on an overhead display. He worked with the Board to produce several different scenarios by plugging in varying budget cap percentages for the BOE and BOS and varying amounts of surplus assumptions which resulted in changes to the % increase in property taxes and the amount of appropriations. Discussion followed each new scenario. With a BOE budget increase of 4.25%, Dr. Townsley stated that they would have to let staff go. Mr. Henault expressed concern about using up surplus again. He stated that he didn't think any of the BOF members were willing to go back to a guideline instead of a cap.
Mr. Mason stated that he'd prefer to see a tax increase of below 4%. He stated that if the Town increases taxes by 7.2% continually, taxes will be doubled every decade. He noted that it is important not only for the BOE but also for the BOS to be able to provide services to the Town. He added that he is not against the use of some surplus in order to keep the overall tax increase down.
Mr. North stated that over the past six years, the taxpayers in Simsbury have seen expense growth of 5.3% which is almost twice the rate of inflation and more than twice the rate that Social Security payments go up. He added that he believes the rate of expense growth has to slow down because it is not a sustainable pace. He stated that he shares Mr. Mason's sentiment in that he would like to see the increase in property taxes be below 4%. Mr. North further stated that the Catch 22 is that the Town's revenue problem is caused by an extraordinarily high rate of taxation already. He guessed that between benefits and wages, probably 70-75% of the local expense between BOS and BOE is ultimately wages. He stated that he thinks it is unfortunate that employees have to face the prospect of layoffs
when they could consider the prospect of lower wage increases as an alternative or a contributing solution to the problem.
Mr. Askham stated that he would like to see a property tax increase of around 4%. He noted the lagging Grand List growth and decline in revenue. He speculated that until the Grand List Growth reaches 2-2&1/2% a year, they are facing tough budgets. He stated that he would be inclined to use some surplus but not the $800,000 as used in some of the preceding scenarios. He stated that he would still like to hear some more information on the budget.
Mr. Wade stated that he thinks surplus should be used this year. He added that around a 4% tax increase is reasonable. He suggested the possibility of differential budgets.
Mr. North stated that he is comfortable with using $500,000 from Surplus. He added that he recognizes that Surplus may need to be used for the next year or two until things turn around and that an imprudent amount should not be spent this year.
There were more scenarios produced and discussed.
Mr. Henault stated that the BOF could decide on a cap tonight or wait until they had some more facts to make a decision. Dr. Townsley stated that the BOE needs around $2.8 million to maintain the same programs as now. He noted that the budget committee starts meeting in January, and it would be helpful if the BOF could give them as much direction as they can as early as possible. He suggested that the BOF attempt to come up with some kind of agreement tonight.
Mr. Hogan stated that he is worried that budget restrictions are starting to harm the school district. Dr. Townsley added that around 190 students never got the electives they had chosen for this year because they hadn't been able to staff them.
There were more scenarios produced and discussed.
After much discussion, Mr. Henault stated that he was hesitant to take action at this time. He suggested scheduling a Special Meeting to have further discussions. Mr. Mason stated that he was disappointed that a decision couldn't have been reached at this meeting.
Mr. North asked if any one of the Board were comfortable at this point with establishing the principal of using surplus and an amount because it is a critical piece in looking at the numbers further. Mr. Wade stated that he doesn't see any way around it, therefore he is in favor of using Surplus. Mr. Henault stated that he is comfortable with using Surplus, but his number would have been $400,000. Mr. Askham stated that he is in favor but would like more information.
8. APPROVE MINUTES
November 18, 2003 Regular Meeting
Mr. North moved to table the approval of the minutes. The motion was seconded by Mr. Wade and carried unanimously.
9. OTHER BUSINESS
No other business was discussed.
10. ADJOURNMENT
Mr. North moved to adjourn the meeting at 9:29 P.M. The motion was seconded by Mr. Wade and carried unanimously.
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Paul Henault, Chairman Roxanne Farrell, Clerk
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