What has happened so far…
The Three Board meeting in January is the first joint forum where the initial projections for the next fiscal year FY24 (July 2, 2023 – June 30, 2024) are presented to the Board of Finance by the Boards of Selectmen and Education.
The initial projections are developed during the fall by the respective administrations. At the same time, Finance monitors the process as the Boards collectively work to manage the numbers towards a reasonable and hopefully tolerable outcome.
The municipal operating budget projection sent to the Board of Finance indicates a 4.98 percent increase. This is driven by payroll, health insurance, the overall cost of energy and fuels, trash and recycling pick up, and the overall impact of inflation across numerous expenditure line items. Just as we all find at home and work, everyday things cost more than they did a year ago when the current budget was built. The same pinch in the home wallet affects local government as well.
This holds true on the education side, whose initial look ahead at next year shows a change of 5.94 percent. Half of this is driven by essentially a million dollar increase in special education, which is expected to be offset on the revenue side by a half million dollar increase in the state excess cost grant. The remaining half is driven by payroll, health and energy costs, and the same impact of inflation on existing operations.
Next steps
On the revenue side of the equation, Finance awaits two key pieces of information: the net additions to the Grand List and the state revenue numbers from the governor’s budget. While the Grand list of Oct. 1 will show a significant increase due to the revaluation process, that does not increase taxes. Once the list is finalized and adjusted through the appeals process, a rate can be calculated that would raise the same amount of taxes as in the current budget. Separated out will be the net additions showing the growth in the Grand List year to year. The state revenue component is not finalized until the legislature and governor both sign off on an approved state budget for next year. The governor’s initial budget request is a good starting point and is usually presented to the legislature on the first Wednesday in February.
Once these final revenue components are known, the Board of Finance will finalize operating budget guidelines for FY24. In the last 12 years Finance has looked to limit the actual change in taxes, ignoring Grand List growth, to generally no more than 2 percent in line with what had been modest inflation. We will be challenged to do so this year in view of the inflationary pressures and net cost increases of special education.
At the time of the January Three Board meeting, the budget projections would drive a tax rate change of about 2.8 percent which is about a percent higher than where we have been in the past dozen years. This shows no other changes on the revenue side other than assumptions of real growth in the Grand List of 1.5 percent and no major change in revenues beyond the anticipated $500K increase in the Excess Cost Grant. Without any additional revenues, it will take reductions in those expenditure projections to get there. So the table is set for discussion.
Once the governor’s budget becomes known, the Board of Finance will meet to finalize its targets for the operating board as it seeks to balance the perceived needs with the ability and willingness to pay. We recognize that this is a time where both are constrained by the effects of inflation.