Windsor Finances FY23-27
Windsor Finance Committee Statement on the FY23 Budget and the
FY23-27 Medium-Term Expenditure Framework
For comparison, here is the Finance Committee's Statement on the FY22 Budget and FY22-26 Framework
The proposed budget for next fiscal year (FY23) represents a departure from the medium-term framework we issued this time last year. We hope to be back on track in FY24. The main challenge we are facing is how to respond to inflation, especially as it affects employees’ wages and salaries, but also as it affects other expenses, notably energy. At the same time, the proposed budget for FY23 contains important new positions that will help ensure the continued provision of basic services. We are in a good financial position going into the new year, with about $812,000 in reserves (free cash plus stabilization balances) and we will draw on these assets during FY23 at least. Even if the money we are expecting from the Federal Connect America Fund and the broadband MLP operating surplus do not materialize for some unforeseen reasons, we would still be in a good financial position over the next five years with assets falling to just under $700,000 before beginning to rise again. Such an outcome would however require a fairly bare-bones capital program. Should these funds arrive in FY23, which we fully expect them to do (though too late to include in this budget), then our financial position will be much stronger, offering us a favorable set of opportunities.
Taxes and State Aid and Total Expenditure and How to Pay For it All
As in the past, the Finance Committee has targeted the total tax levy to increase no more than 3 percent (see attached charts and tables). If the number of households increases, as it has in the past, this would mean that the average single-family tax bill would rise by less. Local receipts in FY23 are projected to be notably higher than what we budgeted in FY22 while state aid (net of charges and other expenses such as overlay) is expected to fall. All told, we are projecting total revenue to increase by 2.8 percent to roughly $2.283 million.
Total expenditure (including transfers to funds) is projected to increase 12.1 percent to $2.500 million, with much of the increase arising from the across-the-board salary increase, new positions, and capital spending. The gap between revenue and expenditure would be closed through $140,000 in new borrowing (for the fire department truck and the new school bus) and a $81,437 drawdown in financial reserves, which which are projected to remain above above $700,000 for the year.
Inflation: wages and salaries
We are recommending a 7.1 percent across-the-board wage/salary increase. When we compiled the FY22 budget, inflation had been averaging about 1.5 percent a year. The 2 percent across-the-board salary increase approved last year was meant to provide town employees with a positive, if modest, increase in the purchasing power of their paychecks. Actual inflation turned out to be much higher (how much higher depends on which price index you look at and over what period of time – more on this below) and the inflation-adjusted value of salaries in FY22 actually declined.
The Finance Committee voted to recommend compensating employees for the loss of purchasing power of their FY22 salaries and add 2 percent on top of that for FY23. Our methodology was similar to that used by the Social Security Administration to adjust SS payments each year except we used the CPI for New England published by the Bureau of Labor Statistics and used a more recent 3-month period to calculate actual inflation. On this basis, we calculated actual inflation at 6.6 percent compared to the expected 1.5 percent. To this difference (5.1 percent) we added the usual 2 percent to arrive at the recommended 7.1 percent across-the-board increase. This adjustment (excluding the new positions discussed below) costs about $13,000 a year (compared to a 2 percent increase).
The Select Board and Finance Committee are recommending the addition of four new paid positions in FY23: a town administrator, a new full-time highway department worker, a fifth part-time police officer, and a library director. The first two positions come with full benefits. These four positions would cost $105,000 in the first year (including benefits).
Other wage compensation adjustments
Some town employees are paid by the hour (highway workers, police officers, bus driver, and others). In the past, the hourly rates and the annual appropriation were not directly linked. The annual appropriation acted as a “maximum” total compensation for each employee paid hourly. This is still the case, but in line with recommendations from the Department of Local Services, we are now constructing the annual appropriations from the bottom up; multiplying the hourly rate times the number of hours per year. Consequently, some budgeted amounts for hourly employees rise by more or less than 7.1 percent because we adjusted the number of hours up or down relative to FY22.
Fuel price are up sharply this year, as many are painfully aware. The average retail price of gasoline in Massachusetts was up 54 percent last March compared with a year earlier, the price of diesel was up 67 percent and the wholesale price of propane was up 46 percent. [Massachusetts fuel prices from Energy Information Agency]. The price of heating oil has also increased sharply, but the only building that will be consuming this fuel in FY23 will be the fire station as the town offices and town hall will be using electric air-source heat pumps. This means that our electricity consumption will rise and while we don’t yet know what will happen to electricity rates, we expect that the increase cost will not exceed the savings we realize from lower consumption of heating oil.
The energy component of the FY23 budget is based on recent prices and we hope they come down soon but we have no way of knowing. Most of our fuel prices will get locked in by July through the Berkshire Regional Planning Commission bulk supply contracts, but we won’t know at what price until after the FY23 budget is approved.
Capital spending in FY23 incudes the historical building, a command vehicle and turnout equipment for the fire department, a new school bus, and a leaf blower for the highway department.
The Medium-Term Expenditure Framework
The medium-term forecast is premised on an annual 3 percent increase in the overall tax levy and a substantial increase in revenue arising from Windsor’s share of the Connect America Fund (CAF) and the annual operating surplus of the broadband MLP. We expect a total of about $850,000 from the CAF over the next five years, with a first disbursement of about $390,000 coming in FY23, though not in time for next year’s budget. We are also expecting about $85,000 a year from broadband operations. This would allow us to pursue a strategy of enhanced public services, a more ambitious capital improvement program, and/or lower taxes. The Master Plan process that is currently underway will help inform this decision-making. In addition to the capital expenditures in FY23 the medium-term framework includes spending for a new fire truck and a new police cruiser. The updated medium-term expenditure framework is reflected in the charts and table below.