FinCom chair sounds schools’ budget alarm

Mar 26, 2020 by

Published in the March 26, 2020 edition.

By MARK SARDELLA

WAKEFIELD — In spite of dire warnings from the chairman of the Finance Committee regarding the size of the School Department’s FY 2021 budget, the School Committee went ahead and unanimously approved Superintendent Doug Lyons’ recommended $47,976,659 FY 2021 School Department budget. The proposal includes a $2,045,611 (4.88 percent) increase over the current year’s budget.

Dan Sherman’s comments were read by School Committee Chairman Cristopher Callanan at Tuesday night’s School Committee meeting. Due to COVID-19 social distancing requirements, the meeting featured Callanan and Lyons in the WCAT studio with School Committee members participating via telephone conference call.

Stressing that he was speaking only as one member of the Finance Committee,  Sherman cautioned the School Committee that even before the loss of revenue that the town and the state will suffer as a result of the current pandemic, the recommended school budget was not sustainable. With the economic downturn expected from the virus-related shutdown, he added, the School Department should be prepared to cut its budget.

Sherman stressed that the recommended School Department budget increase exceeds the town’s anticipated rate of growth.

“Your proposed increase of 4.88 percent over FY 2020 is significantly more than our expected increase in revenue of 3.5 percent,” Sherman said. “Your budget increase percentage is substantially higher than almost all other departments. I expect that the town’s total tax levy supported budget will exceed our income by about $900,000. We can manage that amount of extra spending for 2021 from Free Cash. But it is not sustainable. At these levels, I expect that the Town will be running a budget deficit of about $1 million annually.”

Sherman warned that with the loss of revenue due to the virus-related business shutdowns, the future outlook was even more bleak.

“We receive close to $1 million (annually) from hotel and meals taxes,” Sherman noted. “Due to the current virus pandemic, these tax receipts are going to drop to near zero for the remainder of this year. And 2021 does not look good.”

Sherman reminded the School Committee of what happened in 2008.

“Some of you may recall what the state did during the last financial crisis,” Sherman said. “They cut local aid in October, or one quarter into the fiscal year. A substantial portion of state revenue is based on capital gains taxes. In that year, and this, capital gains were severely cut. The town and School Department had no choice but to cut services and people. This compounded the town’s fiscal struggles because it impacted our Unemployment Insurance in subsequent years.”

In light of all that, Sherman urged the School Committee to reduce its FY 2021 budget request and prepare for lean times ahead.

“I encourage you to consider reducing your budget where you can for 2021, be prepared for potential cuts in your 2021 spending and think about how you would handle a 0 percent increase for 2022. We are entering very challenging times. Please be cautious on what you purchase.”

Prior to the the vote on the budget at Tuesday’s meeting, Lyons addressed Sherman’s concerns about an economic slide.

“We are keenly aware of that and are working hard to be prudent in all of our decisions around the budget,” Lyons said. “One priority that hasn’t changed for us is to create a sustainable budget year over year and to be responsible for our part as part of the overall town financial picture.”

Only one School Committee member commented on the budget at Tuesday’s meeting, and her comments came after the vote.

Suzy Veilleux called it a “balanced and fair budget” that “best meets the needs of students and teachers.” She acknowledged the uncertain future, but said that she still felt that it was appropriate to support the superintendent’s recommended budget.

After the School Committee meeting, Sherman elaborated on his concerns and explained that the picture is actually more bleak than he originally thought.

“Besides the capital gains tax reductions, the state also heavily relies on income taxes,” Sherman noted. “With a large spike in layoffs and businesses shutting down, individual incomes will also take a hit. I suspect that state revenue will drop more than I initially thought. And with that, state aid can be expected to take a hit as well. I have grown pessimistic about 2021 and 2022. I think we are in for some rough times in the near future.”

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