What are the challenges facing us in FY2010?
- State Aid cut of $530,000 in FY2009
- Additional State Aid cut of $1,500,000 expected in FY2010 This is in the Governor's proposed budget
- Additional State Aid cut in local aid proposed in FY2010 byt the Mass. House of Representatives This would be on top of the cut proposed by the Governor.
- Excise tax revenue down by 7% in this economy fewer people are buying cars
Negotiated salary increases slated to go up $1,200,000
employment contracts settled in prior years obligate the city to cost of living and wage increases
- Health Insurance costs to rise by $1,700,000
- Other fixed costs to rise by $925,000
Interest income is down by 60%
the funds which the city has invested are affected by the economic downturn just as private investors' funds are
- Free Cash and Stabilization Funds are down these funds have helped manage budget deficits in previous years and have been very nearly depleted. Because we are using tailings identified for the Free Cash (Undesignated Fund Balance) to absorb the FY2009 state aid cut of $530,000 in order to avoid layoffs in the current year, we do not expect to be able to add to our Undesignated Funds in FY2010
What we know so far about FY2010 revenues
Current analysis of city revenue sources for FY2010 project an increase in property taxes of $1,075,000 and an increase in tuition payments for the Smith Vocational and Agricultural High School. These increases are offset, however, by projected losses in revenue in motor vehicle excise taxes, interest on investments, and medicaid reimbursements. We also will not have the one-time funds from the Stabilization Fund and other one-time monies which were used to build the FY2009 budget. A dramatic reduction in state Lottery and Additional Assistance leads to a net loss in revenues of more than $2 million.
There are some revenue sources which are proposed, but which remain uncertain as of this date. The Local Option Meals Tax is under discussion in the State Legislature. If passed, the city could stand to gain up to $250,000, depending on how the final legislation is written. A state meals tax and hotel tax of an additional 1% was recently proposed by the Governor. Under that plan, Northampton could gain as much as $620,000. Although it is still a bit murky, the Federal Stimulus Package might yield another $500,000 - $600,000 in aid to the city. However, it is important to note that there may be significant restrictions on how that money may be spent. The city may be required to spend it on certain projects or line items which only supplement the city's budget; we could not use the funds to fill in the revenue gap we already face.
Even if all of the proposed revenues happen and bring in revenue up to the proposed amount, Northampton would still be facing a net revenue loss of $604,000 before we even examine the expense increases we know are coming.
What we know so far about FY2010 Expenses
This screen shows what we currently have projected for increases across the city, including negotiated salary increases, and projected increases in utility costs and repairs.
The top three boxes show the projected expense increases in the City government departments, the Northampton Public Schools and the Smith Vocational and Agricultural High School.
The fourth box, labeled Shared Costs, show anticipated increases in spending for all insurances, including health, retirement and other benefits for city, school, and SVAHS employees. All of these costs are paid from the city's general fund and not apportioned to the NPS or SVAHS appropriation from the city.
The final box simply takes all the information from the top boxes and presents a recap and the percent of the total expenses in each category.
What this bottom line means is that to maintain all the city staff, programs and services from this year into next year would cost an additional $4,088,376.
Add this to the Revenue Gap we are anticipating, and we are facing a total budget gap of more than $6 million.