Board of finance members often hear, “why does the mill rate seem to always go up while in most years rates don’t change for federal and state income taxes? From the revenue perspective, this reflects that the income base to which state and federal tax rates apply generally increases annually as income levels and taxable population steadily rise. The Grand List that municipalities historically tax tends to grow at a much slower rate. When that happens, the mill rate will almost always show an increase, depending upon the level of growth on the expenditure side of the budgetary equation. Growth in other revenues such as state aid categories will affect the growth as well.
This causes us to place significant focus on the expenditure budgets, including capital and operating aspects, of both the boards of selectmen and education. What we propose as a mill rate request—as well as the amount we take from the General Fund and capital reserves—is dependent on the final overall budget request. From the preliminary work in assembling the Plus-One initial projections for the next fiscal year through the winnowing process of the budget workshops leading to operating board acceptance and transmittal to the board of finance, wants and needs get pared and modified to coalesce around a final result the finance board can package as an overall budget that meets the vast majority of community needs at a reasonable cost to taxpayers who foot roughly 80 percent of the total bill.
Both on the boards and within the community, there are a wide variety of perspectives on what should and should not be included in the budget, and on what may or may not be a reasonable mill rate change. Reaching consensus takes months of time and patience as the boards work with the administrations to bring viewpoints and the numbers closer, leading to a recommended budget package being sent by the board of finance to a public hearing for review and comment. At that point it is hoped that a balance has been struck that gets the right job done at a reasoned cost and acceptable mill rate—and it is then up to the voting public to decide.
Individual perspectives vary widely in town—from one person telling the board of education to ignore the board of finance budget-guideline guidance (per charter, finance determines the final numbers sent to public hearing) to another calling for a tax freeze or decrease. The boards are collectively very aware of those varying viewpoints, as we work to navigate the process with the end goal of producing a balanced—reasonable—affordable budget package and tax bill.
As the combined operating budgets are roughly 90 percent of the total annual expenditure budget, and property taxes are about 80 percent of the revenue side, there is inherently a direct link in how they move. As compensation—salaries and benefits—comprise about 75 percent of the operating budget overall, there is a corresponding correlation between them, and essentially as go the contracts so go the budgets and taxes. With the state arbitration laws effectively resulting in wage settlements spiraling upwards within a narrow band above the rate of inflation, seeking out operational efficiencies and reductions to help offset those increases becomes the order of the day. This helps create an acceptable balance between meeting perceived needs and the cost of doing so. In the end, the greater the desire to improve and enhance operations, the greater the need to look within existing operations to make wise choices within the current base. In doing so, there is more need to question the base budget and operations rather than simply serve as cheerleaders for the status quo. In that regard, experience and independence matter in striking the right balance.