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If the worst-case budget scenario Cheshire Town officials presented Monday night holds true, taxpayers will be looking at a significant tax increase as the budget soars over $100 million for the first time in Town history.
Town Manager Michael Milone presented the budget scenario on Monday night to the Town Council and Board of Education as a way to get a head start on the process that usually begins in a few months. Milone was brutally honest, explaining that the projections call for an Operating Budget of $102.5 million, a 7.35 percent increase from this year's $95.5 million budget. Assumptions, such as increases in salaries and benefits, and the addition of a 27th payroll period, are all causes of the projected increase.
"The pressure is not on the expenditures side. There are no major uncertainties there," Milone said. “It's the revenue the past two years that's been a challenge."
Stimulus money and state aid could all be gone or significantly decreased next fiscal year, which, when coupled with contractual and other obligations, could lead to a significant increase for taxpayers. Milone was quick to remind the Council and BOE that he painted a similar “gloom and doom” scenario last year. Before the budget process even began during a similar meeting in 2009, Milone projected the Operating Budget to increase by more than $4 million, or a 4.35 percent increase. Instead, the Cheshire Town Council was able to reduce the budget to a $1 million increase, or a 1.12 percent increase.
"This is where we see ourselves at this moment in time. We are looking at the worst-case scenario," Milone explained. "We did the same thing last year and we were pretty far off the mark."
Under the scenario, the Board of Education budget would increase by $3.5 million, or 5.8 percent. There is a 4.3 percent increase in certified salaries, and an 11 percent increase in employee benefits, all of which are driving the increase. Superintendent of Schools Dr. Greg Florio explained there were "assumed increases" across the board, including four percent for support services and maintenance. Like Milone, Florio said these are just predictions and they "may be too high."
"The state used a lot of stimulus money to keep funding at the current level," Florio explained. "If they maintain level funding, it needs to be found somewhere at the state level."
The fear is that affluent communities like Cheshire could be stripped of some funding to help out other districts, such as Waterbury or Hartford.
"The state can come to the Cheshires of the world to find the money," Florio said. "They said they would keep it, but how they do that I don't know."
Milone commented that the general government side of the budget would be increasing by approximately $3 million, a majority of which is found in salaries, benefits, pensions, and an anomaly of a 27th payroll. Milone said the budget has already been scaled back significantly, highlighting the equipment budget, which in 2007 was funded at $350,000 and is projected for $45,000 next fiscal year.
"A lot of the low hanging fruit has been picked off the tree and some of the middle hanging fruit also has been picked off," Milone said. "I know there is some sticker shock, but this is the worst case scenario at the start of this process. Don't panic yet. We have some options."
Those options will be discussed at great length by the Town Council as the budget process moves forward early next year. Milone's predictions do not include any mitigation options, which could amount to millions of dollars. The Town Council can choose to use up money from the rainy day fund, or Fund Balance, which currently sits at over $8 million. There is also a possibility of phasing in the pension increases over three years, which could save more than $500,000 next year. Additionally, a bond sale scheduled for today could lower the interest rates on money the Town is borrowing, and could result in long-term savings in the millions. Finally, there is $5.6 million the Town received from its 20 year commitment with the Connecticut Resources Recovery Authority. The Town Council allocated that money last year to be held in reserve accounts, sensing that the coming fiscal year would be a difficult one to manage.