Acton leaders need to get realistic about the economy and the budgets.

Thu, 2010-01-14

(ACTON) -- Listening to the Acton Leadership Group (ALG) discuss next year’s budget at their 13 January meeting, one wonders if ALG is aware of how serious this economic downturn is. ALG claims to be proposing a 0% budget increase. But Mr. Kadlec pointed out from the audience that any correct use of budget accounting methods would conclude that ALG is proposing closer to a 3% to 4% budget increase, a more than $2M discrepancy. Why is ALG calling a 3% increase a 0% increase? This budget misrepresentation will only lead to long term fiscal problems for Acton.

The ALG discrepancy comes from comparing projected budget increases to budgets authorized at Town Meeting. Good accounting practice would instead require comparing projected budget increases to projected actuals for this year, a more than $2M difference. Last year’s actuals give a good example of this. These show that last year ended with more than $2M unspent amount. These numbers are available for the budget year ended June 30, 2009 on the Acton Town website, but are not used on the ALG budget spreadsheet as they should be. Somewhat similar results should be expected by the end of this year, based on the observed excellent budget management by the Town Manager and the School Superintendent.

It is time for ALG to budget realistically. The sooner this is done the better for Acton in the long run. ALG is saying that times are tough and they are being prudent by holding budgets down to a zero percent increase. But in reality, they are increasing budgets 3% and using one-time revenues. When those revenues run out, the true deficit will be revealed and we won't have any more reserves to fall back on. This course of action will only push off a responsible day of reckoning with economy reality. It also raises many questions.

Why is ALG planning on spending reserves to cover operational deficits, contrary to Mass. Department of Revenues recommendations? Why is ALG apparently planning to spend reserves to risky low levels in the next few years, contrary to bond rating agency’s guidelines? Why is ALG apparently planning to deplete the reserves over the next few years with no long term plan to replenish them, leaving Acton at risk? Is ALG purposely ignoring the likehood that this will force Acton into a contentious override situation, putting many teacher positions at risk? It does not have to be this way.

Why is ALG avoiding implementing identified cost reduction activities that could be used to avoid teacher layoffs? In fairness to the excellent work by the FinCom cost reduction folks, ALG is talking about cost reduction, but talking is vastly different from taking the steps to implement them and to include them in the budgets instead of spending reserves and forcing layoffs.

Two years ago the Acton Voters Group (AVG) advocated that ALG treat the economic downturn seriously as a long-term problem. The ALG plan at that time forecasted that the economy would turn around in just one year, by 2009. It is now clear to everyone that this is a several year downturn even from 2010, so ALG needs to begin budgeting for that reality.

Two years ago AVG briefed every board that would listen and respectfully suggested that Acton needed a serious cost reduction program in order to avoid layoffs. Serious cost reduction is just now getting looked at, two years later. Now Acton is forced into layoffs instead of serious cost reductions. Will the same thing happen next year, or will ALG get serious on the cost reduction issue?

Two years ago AVG advocated for a long term plan as required in the Acton Town by-laws, but ALG has avoided that. At this January 13th meeting, one FinCom member requested that the subject of the long term forecast be placed on next meeting’s agenda. That is an applaudable activity and is the only way forward to plan for and work through long term fiscal difficulties.

Will ALG be two more years avoiding the problems caused by this economic downturn instead of addressing them? Nominal “business as usual” approaches to the budget are not good practice, such as spending reserves on operations, depleting reserves, and calling a 3% budget increase a 0% budget increase.

ALG needs to end its budget misrepresentations and begin planning for the long term economic reality. It is time to get serious.

This is part one of a two-part discussion. Part 2 will discuss the use of reserves.