Support the Town of Rehoboth
Dear Fellow Citizens –
I have witnessed misinformation and misunderstanding of the Town of Rehoboth’s FY2020 budget, specifically regarding the DRRSD appropriation as recommended by the Finance Committee. Therefore, as an informed member of the community striving for our overall success (last year’s op-ed in support of the override: https://tinyurl.com/supportrehoboth2018), I feel compelled to help clarify.
The purpose of this letter is not to take one “side” or the other. Rather, it is to share facts for each topic, paired separately with my perspective. Admittedly, I support the Finance Committee’s FY2020 budget recommendations, but do wish for everyone to draw their own conclusions in order to make well-informed, logical decisions in the best interest of our community.
1. Role of the Finance Committee.
The duty of the Finance Committee is to establish and recommend a balanced budget from known, recurring, and fiscally responsible funding sources -- such as the property tax levy and estimated motor vehicle excise tax and local receipts, among others. The Finance Committee cannot recommend deficit spending or an unbalanced budget, nor does it advocate for or against a Proposition 2 ½ override. Therefore, the sum of all town department budgets and revenue sources as recommended by the Finance Committee must equal $0 prior to annual town meeting.
Although due diligence is performed and many hours of careful work expended by the department heads, town accountant, Board of Selectmen, and Finance Committee to craft and recommend a balanced budget, in the end, only the vote of those in attendance at annual town meeting matters. Unfortunately, most town residents do not attend and participate. If you have not attended regularly in the past, but have an opinion regarding financial matters of the town, I encourage you to start now by learning more and investing just a few hours on one night per year.
2. Fair and Equitable.
The Finance Committee met in accordance with MGL Open Meeting Law on April 4, 2019 regarding upcoming Special Town Meeting and Annual Town Meeting warrant articles as well as Rehoboth’s FY2020 budget in order to make its recommendations for town meetings. When analyzing the budget for the upcoming year, the known recurring revenue sources typically fall short of the total of all departmental budget requests -- and this year was no different. Therefore, the Finance Committee used the following figures to understand what proportion of Rehoboth’s FY2019 total revenue of $28,306,778 the town had appropriated to each of its three primary budget sectors:
o DRRSD: $17,958,791 = 63.44% of total revenue
o Town Government: $9,786,737 = 34.57% of total revenue
o Bristol-Plymouth & Bristol Aggie School Districts: $561,250 = 1.98% of total revenue
In the end, the Finance Committee balanced a FY2020 budget of $29,784,526 using the following recommendations, which are nearly identical to the prior year percentage of total revenue appropriations above:
o DRRSD: $18,970,859 = 63.69% of total revenue
o Town Government: $10,220,050 = 34.31% of total revenue
o Bristol-Plymouth & Bristol Aggie School Districts: $593,617 = 1.99% of total revenue
As you can see, the Finance Committee utilized a fiscally responsible and impartial model, which takes into account FY2019 town appropriations in order to produce a reasonable budgetary recommendation for revenue spending in FY2020. This budget is Rehoboth living within its means while equitably distributing its revenue with proportional equivalence to the prior year. In summary: by recommending the above appropriations, the Finance Committee ensured each of the town’s three primary budget sectors fairly receive the same percentage of revenue sources in FY2020 as in FY2019.
3. FY2019 Override Funds.
Per Massachusetts General Law, a Proposition 2 ½ override resets the tax levy of the town by adding the override amount and, therefore, Rehoboth’s FY2020 tax levy of $24,305,568 includes the $2,115,992 of FY2019 override funds (among other contributing funding sources), an increase from the FY2019 tax levy of $21,311,598. Furthermore, the override funds remain included in the Finance Committee’s recommended DRRSD FY2020 appropriation of $18,970,859 -- an increase of $1,012,068 (5.64%) from the DRRSD FY2019 override-inclusive appropriation of $17,958,791.
Some have questioned the “disappearance” or “theft” of the FY2019 override funds. As conspiracy theories arise and misinformation spewed, please be sure to fact-check with reliable sources, including the resources at the conclusion of this letter. In FY2020, the override funds are included within the town’s local tax levy and, per the Finance Committee’s recommendation, the FY2020 DRRSD appropriation is the total of all its FY2019 funding (yes, including the override revenue) plus an additional increase.
4. “Cuts” and “Reductions”.
The Finance Committee did not recommend funding the DRRSD FY2020 requested assessment of $19,529,656 in its entirety. However, to be perfectly clear:
o DRRSD FY2019 appropriation was $17,958,791 (inclusive of the $2,115,992 override)
o DRRSD FY2020 requested assessment is currently $19,529,656 -- a proposed increase of $1,570,865 (8.75%)
o Finance Committee’s DRRSD FY2020 recommended appropriation is $18,970,859 -- a proposed increase of $1,012,068 (5.64%)
DRRSD officials and affiliates have described DRRSD’s FY2020 funding as cut or reduced. However, per the Finance Committee’s recommendation, the year-over-year DRRSD appropriation would increase. While the recommended funding of $18,970,859 does fall short of the requested $19,529,656 by $558,797, it is unreasonable in my opinion to describe DRRSD funding as cut or reduced. Consider for a moment: if another town department had a FY2019 budget of $800K, requested FY2020 funding of $10MM and the Finance Committee recommended an appropriation of $1MM, could that department accurately describe its budget as cut or reduced by $9MM when it was actually increased by $200K?
5. DRRSD Operating Budget vs. Total Assessment.
The DRRSD operating budget is only one component of the total DRRSD assessment to the Town of Rehoboth; others include transportation and capital costs. As a result, the only figure pertinent to the Finance Committee when balancing the town’s budget and to town residents when voting at town meeting is the total DRRSD Rehoboth assessment, which includes ALL expenses requested for the DRRSD to deliver educational services to Rehoboth.
Some have touted the DRRSD requested FY2020 operating budget increase as very small. My disagreement aside, isolating and highlighting one “slice of the pie” while disregarding the remainder has caused confusion. Discussions surrounding DRRSD funding must be qualified to ensure the total assessment is in scope -- not just the operating budget component. Much like pricing a new vehicle without an engine, body, axles, and wheels, talking about only the DRRSD operating budget component in the context of these municipal finance matters is ambiguous at best.
6. Stabilization Accounts as a Funding Source.
The Town of Rehoboth’s Stabilization and Capital Stabilization funds are special accounts designated for cash reserves per Massachusetts General Law and managed per Department of Revenue guidelines. The town has incrementally funded each account over time whenever possible and earmarked their balance as a source of funding for extreme emergency or one-time capital expenditures (examples might include new fire department apparatus or a town building renovation). Furthermore, when establishing interest rates for capital loans, bonding agencies assess risk and review Stabilization balances to help determine the overall financial health of a town. Finally, Stabilization accounts require a majority vote at town meeting to add funds and a two-thirds vote at town meeting to spend any portion thereof.
Discussions have surfaced to propose funding the difference of the DRRSD FY2020 requested assessment and the Finance Committee’s recommended appropriation from a town Stabilization account. However, it is careless to consider Stabilization accounts as a funding source for any portion of the town’s operating budget. As we know, an operating budget recurs and continues to require funding each year. Therefore, if the town depletes a portion of a Stabilization account for recurring expenses, it is willingly decreasing its cash reserves and bond rating but, most importantly, is knowingly creating demand for continued use of Stabilization funds in future years. In other words, if revenue from known, recurring revenue sources (local tax levy, motor vehicle excise tax, local receipts, etc.) was insufficient to fully fund all budgetary requests for FY2020, it is highly improbable that amount (and any year-over-year increase) will miraculously be available for FY2021 -- therefore requiring the use of Stabilization funds once again. This viscous cycle is not unlike (but much worse than) Rehoboth’s excessive use of free cash to fund the operating budget in years past, until such time there was an inadequate free cash balance and a Proposition 2 ½ override was necessary. Any party entertaining or recommending the use of the Town of Rehoboth’s Stabilization accounts to fund a portion of the town’s operating budget, including the DRRSD assessment, is, at the least, completely misinformed about the proper use of Stabilization funds. Using a Stabilization account to fund the town’s operating budget would be an egregious maneuver of fiscal irresponsibility and is strongly discouraged.
In summary: based on the Town of Rehoboth’s limited FY2020 revenue sources, I feel comfortable with the Finance Committee’s recommendations regarding the town’s overall FY2020 budget. Therefore, I encourage you to attend town meeting on Monday, May 13th and vote in favor of the Finance Committee’s recommendations.
Before concluding, it is important to point out that, although I am the Vice Chairman of the Town of Rehoboth’s Finance Committee and do summarize the rationalizations of the committee’s recommendations herein, my opinions do not represent or necessarily reflect that of the Finance Committee as a whole or of its individual members.
Thank you for taking the time to read and further educate yourself regarding the FY2020 budget. I encourage all to learn more using the following sources:
- Rehoboth FY2020 Financial Summit (https://tinyurl.com/rehobothfinancialsummit2020)
- Municipal Finance 101 (https://tinyurl.com/rehobothtownfinances101)
- Massachusetts Department of Revenue (https://tinyurl.com/madortownfinancialmgmt)
Be well, Rehoboth.
Douglas C. Furtado
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