Finance Board Asking BOE To Share Burden Of Town’s Revenue Shortfall

By John Voket

What happens in a household when both spouses work, contributing roughly one-third and two-thirds of the income respectively to a tightly managed budget — and suddenly the lower earning spouse is hit with a substantial salary cut?

Finance Board Chairman John Kortze believes in most cases, if there is no other source from which to make up the revenue loss, each spouse will have to work together to maintain their collective financial obligations, even if it means the higher earner has to make a short-term sacrifice.

“It may sound ridiculous, but maybe one buys fewer ties and the other buys fewer dresses,” Mr Kortze said. The finance board chair used the marriage metaphor as  the simplest way to explain a unique and highly complicated maneuver he was planning to propose at a meeting Thursday night (after the The Bee  went to press).

“The bottom line is, the town is getting less money than was promised from the state this year, and we expect that trend to continue,” he said. “Mark my words, it ain’t gonna get any better, at least next year.”

The town has already taken steps to address its validated revenue shortfall through the Board of Selectmen, which passed a budget amendment in January reducing its spending $805,979 to reflect that anticipated reduction. According to a document produced by First Selectman Pat Llodra, at the time of the town-side budget amendment, it was unknown whether the school side of the equation would also suffer a revenue shortfall.

But it was announced at a finance board meeting February 22 that any expected shortfall in school-side revenues would be minimal at best. That did not stop the district from putting mechanisms in place in the event the news from Hartford was more dire.

According to Mr Kortze, one of those mechanisms was a freeze on about a half-million dollars in transfers to offset the anticipated shortfall. The finance chair, with the support of the first selectman, said he will request the school district keeps those funds frozen until June 30, when the money will revert to the general fund as a district budget surplus by local Charter mandate.

Mrs Llodra and Mr Kortze both believe this is the best and most practical way for the town as a whole to handle the lopsided affects of the state’s inability to keep its promises to fund municipal-side programs, while maintaining school district revenue commitments.

“This is nobody’s fault at the local level,” Mr Kortze explained. “We were told what to expect in the way of state revenues, and because of issues in Hartford, and the general state of the global economy, we’ve ended up with around an $800,000 shortfall.”

This is why the finance chair said the analogy about the household scenario is “very close.”

“The money is all going into one pot, and they are paying all their budgeted bills out of that pot,” Mr Kortze said. “No matter where the revenue comes from, they both share it indirectly.”

In the case of the town-side and school-side budgets, Mr Kortze illustrated several instances where town-side departments cross over by providing professional expertise, trades work, heavy equipment sharing, even things like plowing school parking lots and maintaining school district playing fields.

For that reason, he and Mrs Llodra believe there should be a sharing of the overall revenue loss between the two entities.

“Revenue gains are not side specific,” Mrs Llodra spelled out in her report. “An increase in revenues contributes to the general fund — the general fund supports the entire budget. The same should be true for deficits.”

The first selectman cited drops in state education cost sharing (ECS) grants to the school district.

“Such decreases are not specifically applied to the BOE side of the budget. The loss is accommodated through a shared increase in the tax burden and reduction in expenditures throughout all the budget accounts,” Mrs Llodra’s report specified.

“There should be one definition of the bottom line,” she said.

The first selectman and finance chair believe the most fair way to proceed is to apportion the overall revenue loss across both the town and school sides of the budget, which would equate to a $268,659 loss on the town side — one-third of the actual loss of $805,979.

“In such case, the 2009-2010 amended [town-side] budget would stand at $37,133,107,” according to Mrs Llodra. In a follow-up interview, the first selectman said the town initially calculated its increase in anticipated revenues against the approved budget.

“There’s nothing wrong with that, but it ended up incorrectly reflecting the whole story,” Mrs Llodra said. “To support that budget, we needed to have that revenue, and that revenue projection was not met.”

Mr Kortze said the finance board will negotiate a resolution requesting the school board maintain its contingent self-imposed freeze on transfers “to even out the shortfall on the town side.”

Mr Kortze said the move, if accepted, will also better level the financial playing field as the town moves forward into the next fiscal cycle.

“Remember, Governor Rell’s last budget already built a $2.7 billion deficit into the 2010-2011 state budget,” he said, adding that the move signals a likely cut in promised revenues as the town begins to consider its own 2011-2012 budget.