The start of the new year also ushers in the beginning of the town’s budget season. The Bulletin asked Warren Serenbetz, chair of the Board of Finance, to cast a parting glance on fiscal year 2012 and weigh in on the challenges that lie ahead.
Mr. Serenbetz has been chair of the Board of Finance since December 2008. He serves as the president and chief executive officer of Radcliff Group Inc., an investment management company, and as an elder at Hope Church. Mr. Serenbetz has a master’s degree in business administration from the University of Pennsylvania’s Wharton School.
1. Could you please reflect back on this year’s fiscal year? What were the successes, problems, challenges?
I think the successes of fiscal year 2012 were the significant savings provided by the town and the increase in delinquent property tax payments. These things, along with Board of Education contributions (from savings in the health claims benefit budget) amounted to $2.2 million. So, rather than having to use funds from the general fund, we were able to add to it.
With respect to fiscal year 2013 (which ends June 2013), this positive result from fiscal year 2012 will help offset what we know to be problems in special education spending due to an increase in outplacements. Special education is currently $690,000 over budget and is expected to be almost $1 million over budget by fiscal year-end. The excess cost claim is not expected to cover this entire deficit, and hence the schools have implemented a partial spending freeze.
2. What do you see in store for next year’s budget season? Anything new on the horizon? Challenges?
The challenge for next budget season, fiscal year 2014, and probably for the foreseeable future, is the area of special education funding. These services must be provided by law and they seem to be accelerating. If we hold the Board of Education to a 1.75% spending cap, it is possible this would force cuts in the regular education budget. Obviously, that is an untenable situation if those cuts were to impact the classroom.
3. How can the Board of Finance hold the line on spending and keep a low mill rate increase? How can the town do this?
Given that the bulk of our spending in both the town and education budgets is people costs (e.g., salaries and benefits), the key to holding the line on spending is to hold the line on increasing those costs. In addition to managing annual salary increases, this includes moving pension benefits from defined benefit plans to defined contribution plans, and managing medical benefits by having employees share more of the cost or by moving to flexible spending plans, as the Board of Education was able to do with the teachers last year.
4. Do you see any improvement in the economy on the horizon?
I see slow improvement in the economy, including excruciatingly slow reduction in the unemployment rate and improvement in the housing market. That said, it is not an “across-the-board” event. I think many of those currently unemployed, particularly if in their 50s, will not be able to return to the types of employment they enjoyed before the financial crisis hit.
Likewise, for many people, their wealth is in their home. Those homes that lost 30% or 40% of their value will take a long time to get back to break-even — much less show appreciation. For people affected by one or both of these things it will not feel like the economy is recovering.
5. How will the revaluation affect the budget or taxpayers?
We expect the reval to show a decline in property values. That said, the reval doesn’t affect the budget directly as we set the mill rate to collect the funds needed to cover the budgeted spending. All else equal, that is, assuming no increase in budgeted spending, the mill rate would rise by enough to offset the decline in the grand list.
The impact on taxpayers is more problematic. Again, assuming no increase in budgeted spending, a taxpayer whose home’s value declines at the same rate as the grand list would see no change in property taxes.
However, I believe there will be differing rates of decline depending on the size of the home and the amount of land it sits on. It is quite possible in the case outlined above that a taxpayer will see an increase in property taxes if their home’s value declines at a rate lower than the decline in the grand list.
The Board of Finance will be holding a public information session in January and we will include our thoughts on this issue in that session.