Representative Town Meeting of Greenwich
Budget Overview Committee
Fiscal 2013 Budget Report
1. Budget Summary. The proposed general fund budget for fiscal 2013 totals $367,712,313, an increase of 2.7%. Set forth below are the components of the budget. The components are sorted in decreasing order of year-to-year spending growth in dollars (column “$ Change”).
The $1.0 million increase in the Fire department budget is largely determined by an increase in overtime of $0.7 million. This increase results from the temporary allocation of eight persons (two at any one time) to the staff at the Glenville engine company, which will allow that engine to respond immediately to incidents in northwest Greenwich. The increase in the Fleet department budget of $0.3 million, while large in percentage, is largely determined by an increase of $0.2 million in the cost of fuel and lubricants, as petroleum prices have risen. Increases in expenses in other departments are 2.7% or less.
Salaries, wages and employment-related costs represent about 74% of the town’s budget. As a result, effective management of the number of employees and initiatives to increase productivity are important.
Town spending is increasing faster than the national economy, the state economy, the incomes of town residents, or the property values in Greenwich. This is not a favorable trend. Municipalities in the U.S. increased spending by only 0.6% over the last year. Greenwich has long had the benefit of municipal government which is not burdensome. Preservation of this benefit depends on careful and modest spending policies. It is important that operating spending increases be limited in future budgets.
Large capital spending in recent years and in the next few years is straining our budget. The capital spending amounts are shown below.
These expenditures substantially exceed the cash set aside from current taxes to pay for them (the capital projects tax levy). As a result, the Town’s debt has grown from $53.3 million at fiscal year-end 2007 to $133.8 million today. It is anticipated that the debt will reach the Town’s debt policy limit of $210.0 million in the two budget years following FY 2013. This will require the RTM and all Town officials to make important choices on the elimination or deferral of projects.
2. Education. The Board of Education continues to be the largest component of the Town ofGreenwich FY Budgetwith a fiscal 2013 request of $139,357,220in operating expenses. This number represents a 2.2% increase over the previous budget.Enrollment projections are a 1 student reduction, budget to actual, and a81 student reduction, budget to budget.This budget was reduced $450,000 by the BET during its deliberations.The budgetreflects therequired resources to address the strategic issues to achieve improved academic performance. Expense levels representa continuation of the current services and classroom staffing models. The BOE has shifted some administrator responsibilities to teaching staff, resulting in lower GOSA staffing levels.
Demographics of the public schools continue to show a changing trend. Greenwich Public Schools currently have 13.9% of students on the free and reduced lunch program. This figure is much higher than DRG A schools (like New Canaan orDarien) and even our comparable group ofDRG Bschools.This percentage has nearly doubled since 2001.Current minority enrollment is at 30.1%,which is up nearly 10% since 2001. Students receiving special education services are at 10%, down 2% from 2001.
The largest driver of the budget is in the 100 line of Personnel Services totaling $116,269,789, whichis an increase of $1,999,887 or 1.8%.This budget includes the impact of the new GEA contract, whichhas a 0% general wage increase and 2.5% step increase in this fiscal year. The new GEA contract also includessavings inhealth careexpensesofan estimated$1.5 million,which are reflected in Fixed Charges.
Other large major object code (MOC) increases include:
a. $711,563in the 200 Other Services MOC for increase in out-of-district tuition for students with disabilities. It is important to note that the State ofCTmandates that theSchool Districtpay for students to attend out of district schools if they are not able to meet specific needs of individual students.The increase in special education costs are offset by increased revenue in the Town’s budget.
b. $339,086 in the 300 Supplies MOC. This is specific to the acceleration of the revised Science curriculum being implemented and provides for material support.This initiative is tied to the goal of improved academic achievement in science and writing.
The cost of student transportation in the education budget is $5,105,419, a reduction of 0.6% from the last budget, in part due to a favorable new bus contract. Additional student transportation costs of $2,478,850 are mandated to transport private school students. These costs are among the Fixed Charges in department 926 Non Public School Costs.
Capital: School capital spending in the budget is $7,367,000 (excluding the $14,585,000 for MISA/GHS projects). The projects include many items which require periodic upgrades such as doors, windows, flooring, painting, Wi-Fi and phone upgrades, restroom renovation and electrical upgrades.
3. Major cost: Healthcare. The FY 2013 budget primarily reflects the implementation of two key initiatives designed to address what has been a continued escalation in the Town’s healthcare costs.
Following a review of the health plan and subsequent request for new proposals initiated last year, the decision was made to change the provider of medical insurance from Anthem to CIGNA. A key factor in the decision to change carriers was not only the competitive pricing, but also the fact that the pricing was guaranteed for a 24-month period.
A secondary initiative involved the migration of staff from high cost PPO plans to lower cost high deductible plans and Health Savings Accounts (HSA’s). Approximately 1,100 employees and 500 teachers are currently enrolled in the high deductible plan, while an additional 400 employees are projected to enroll in 2013.
The healthcare budget for fiscal 2013 is $45.7 million, a decrease of $0.7 million (or 1.5%) as compared with the fiscal 2012 budget. In addition, the budget reflects a $3.9 million (or 8%) decrease compared to the initial budget guidelines established by the BET. During the formulation of both the 2012 budget and 2013 budget guidelines, the structure of the new health plan was unknown, hence the decrease in the final budget relative to those levels.
In contrast to previous years, employee contributions toward healthcare expenses have decreased on a budgeted year-over-year basis. As shown below, employee contributions are now projected to represent 8.6% of total healthcare costs as compared to 13.1% in 2012 and 11.3% over the prior 5-year average. As part of the migration to the high deductible plans, employee premiums were lowered and the Town increased the amount of HSA contributions for employees as an incentive for participation. The increase in HSA contributions by the Town is more than offset by the reduction in healthcare premium. The trend in the Town’s healthcare expenses is shown below (Fixed Charges tab, page 137):
Overall, the Town lowered healthcare costs by simplifying the plan design as well as by increasing deductibles and employee premium share. The Town now offers 3 medical options with CIGNA as opposed to 6 with Anthem. The healthcare plan design and benefits are negotiated with nine different union groups representing 2,335 full time equivalent personnel. With family coverage, CIGNA covers 5,384 individuals for the Town.
4. Pension Contribution. Defined benefit pension contributions are increasing, as shown below (Fixed Charges tab, page 137). The fund assets experienced a drop in value with the financial market declines since fiscal 2009. The assets at June 30, 2011 totaled $305,915,000. According to the preliminary flash report which is unaudited, actual assets at March 31, 2012 were $314,655,000.
($000) / Actual / Actual / Actual / Actual / Actual / Budget / BudgetAccount / 2007 / 2008 / 2009 / 2010 / 2011 / 2012 / 2013
57010 / Pension Contribution / 3,992 / 6,500 / 6,620 / 7,162 / 10,740 / 14,488 / 16,400
Fund Assets at Market Value / 347,799 / 321,150 / 254,888 / 268,250 / 305,915
Pension contributions by the Town are expected to grow as estimated below by EFI Actuaries:
($ millions) / Projected / Projected / Projected / Projected2014 / 2015 / 2016 / 2017
Pension Contribution / 19.4 / 21.8 / 22.7 / 22.1
According to the draft valuation of July 1, 2011, the Actuarial Value of Assets is approximately $323 million and the Actuarial Accrued Liability is $421 million resulting in a funding ratio of approximately 77%, and an unfunded liability of $98 million, which is a real debt obligation of the Town.
5. Capital Budget. The largest items in the 2013 capital budget are related to MISA and the Greenwich High School site, on which the BOC has made a separate report. The FY 2013 capital budget is summarized below.
As a result of the very large capital appropriations during for MISA construction ($17.0 million in FY 2012 and $12.2 million in FY 2013) and The Nathaniel Witherell ($20.2 million during FY 2012), other capital spending is necessarily limited in the next years. Capital appropriations for fiscal 2014 and for subsequent years will be reduced to conform to the Town’s debt policy limit of $210 million. Capital items totaling $66.0 million will need to be deferred or eliminated from the capital plan over the three subsequent years, as shown below:
Projects such as the Byram pool, the King Street firehouse, a new ferry, dredging, Horseneck drainage, and GEMS space are among those under consideration for deferral. Also, although the FY 2013 budget includes $1.5 million for continued investigation and planning for remediation at the GHS fields, the funds for carrying out the remediation are not in the multi-year plans. These remediation costs cannot be estimated at present, but when they are identified and added to the multi-year capital plans, additional items will need to be eliminated. Careful capital planning will be a major responsibility of the RTM and town officials in the coming months.
6. Approval of the 2013 Budget. The Budget Overview Committee commends the thorough and productive work of the Town departments and the Board of Education who created the budget under consideration. Our analysis benefitted from the continuing cooperation of members of the Board of Estimate and Taxation. In this report, our objective has been to identify and analyze the major causes and trends which are behind the appropriations figures. Decisions on capital spending are of primary importance in this budget, particularly with respect to the MISA and GHS site project. Capital spending will also be of primary importance during FY 2013 and in the FY 2014 budget. Our committee voted 10 in favor, one abstaining and one absent to endorse this report, and to approve the Budget as presented. We recommend its approval by the Representative Town Meeting.