Two weeks ago the Finance Committee recommended that Harvard’s schools cut an additional $320,000 from next year’s spending if voters reject the Proposition 2½ tax override needed to balance the town’s fiscal 2021 budget. Without the override’s passage, the town’s fiscal 2021 expenses will exceed its income, and cuts will be necessary to eliminate the difference.
But last week at its April 21 Zoom-facilitated meeting, the Select Board pushed back, with members agreeing that “we’re all in this together” and that if cuts are needed, they should be spread across both town and school departments in a ratio closer to their historical 30% and 70% shares, respectively, of the annual budget.
With members of the School Committee present, FinCom Chair Don Ludwig defended his committee’s recommendation. “We looked at everything and just didn’t see any other way to do it,” he explained, given the cuts already made to the town budget. “We looked toward the largest part of our budget, which was the school budget.”
“I understand how FinCon came up with that argument, but I don’t think that’s the way to do it,” said board member Stu Sklar, voicing an opinion that was echoed by his colleagues. “We should be all in this together. And some of this has to come from the town side, even if it means [cuts to] personnel,” he said. “This is an extraordinary time.”
The fate of the override, in fact, may be the least of the town’s fiscal 2021 worries. Estimates prepared by the state treasurer and independent groups such as the Massachusetts Taxpayers Foundation have forecast that state revenues could drop as much as 20% in fiscal 2021 due to the shutdown of nonessential businesses throughout the state and rising unemployment. If a collapse in state revenues led to a 16% to 20% cut in the aid Massachusetts provides to towns—a worst-case scenario—Harvard could lose as much as $600,000 to $700,000 of the $3.9 million in state aid it expects in the coming year. (For a breakdown of town revenue, see “Where does the money come from?” below.)
To plan for both outcomes—the possible defeat of the override request and likely cuts to state aid and other sources of town revenue—Alice von Loesecke, Select Board chair, without objection, called for a special joint committee to plan the town’s response. The committee will include two members from the Select Board, two each from the School and Finance committees, as well as Town Administrator Tim Bragan, Assistant Town Administrator Marie Sobalvarro, Finance Director Lori Bolasevich, and School Superintendent Linda Dwight. As an official subcommittee, the group will be subject to the open meeting law, and its meetings will be public.
The committee will have two tasks. First, it must come up with a plan to cut town and school expenses, including personnel, should the override fail; and second, it must find a way to cut an additional $600,000 to $700,000 from the omnibus budget if local revenue and state aid drop by that amount.
If the override fails—either at the June 20 Spring Town Meeting or at the June 23 Town Election—the Select Board would have to quickly convene a special town meeting to pass a new fiscal 2021 budget. The new budget would need to balance and the committee’s plan to make up the $320,000 shortfall would be expected to provide the means to do it.
An almost certain cut in state aid poses an even greater threat to the budget. Neither the Legislature nor Gov. Charlie Baker has unveiled a budget that shows how the state will deal with the expected massive decline in its fiscal 2021 revenue, so Harvard officials can only guess at the magnitude of the problem they might face. A drop in town revenue, whatever its cause, would throw Harvard’s fiscal 2021 budget out of balance again and would require yet another special town meeting in the fall to pass a budget to deal with its consequences. Showing how to to achieve that through additional cuts, postponed expenditures, transfers from town funds, or other means would be the task of a second plan.
In their meeting last week, Select Board members agreed their first challenge is to convince voters to pass the override this June. Its passage would increase fiscal 2021 property taxes by an estimated $0.26 per $1,000 of assessed value, or an additional $130 for the owner of a $500,000 home. But its passage, said von Loesecke, would allow the town to continue delivering services without interruption as it enters the new fiscal year.
“We all know that there will be more cuts coming,” she said. “We don’t know what the amount is. If the town sees it in their best interest to step up to this part of it, it will at least preserve some of the functions and some of the services [of the town and schools].” If the town has to make deep cuts later on top of those already made because the override has failed, those cuts will be at a level “we haven’t seen in this town in a decade.”
“There will be ‘bloodletting,’ ” said board member Rich Maiore “We’ll work with the Finance and School committees to figure it out, and no one will be happy.”
As for the inevitable impact of COVID-19 on state and local revenues, von Loesecke and the rest of the Select Board agreed it’s best to plan a response now. “I think the reality is we have to plan on $500,000 cuts from the state no matter what happens to the override,” said Sklar. “It’s baked in. There’s going to be a hole and it’s going to be across-the-board ugly. The override, to my mind, is almost moot because we’re going to be losing a few hundred thousand dollars in the budget no matter what.”
Speaking for the School Committee, member SusanMary Redinger said her board and the school administration were interested in finding the best possible solution for the town. “We don’t consider this a town versus school issue,” she said. “It’s really the town and how we serve our community. So we really appreciate the conversation and look forward to working on how to come out of this in the best possible shape.”
On Monday this week, the School Committee named Redinger and Sharlene Cronin to represent the school on the new joint budget planning committee. The Select Board and Finance Committee have yet to name their representatives. A date and time for the first meeting of the new committee has not been set.
Where does the town get its revenue?
Residential taxpayers bear most of the burden of paying for town services and the schools. State law limits the amount of taxes the town can levy, but voters can voluntarily raise the amount they contribute by approving excluded debt to pay for large capital projects. In fiscal 2021, taxpayers will provide $24.6 million toward the town’s $33.8 million budget. If voters pass the $317,259 override needed to balance the budget, that amount would rise to $25 million.
The remaining dollars in the annual budget come from state aid, local receipts, and transfers from various town funds. Prior to the COVID-19 crisis, the town planned on state aid totaling $3.9 million to defray town and school expenses. Another $1.2 million was expected from local receipts, which include money from auto excise taxes, the local food and lodging sales tax, and other town fees. An additional $4.2 million is expected from school transfers, such as MassDevelopment’s payments to support the education of Devens schoolchildren, and tuition paid for School Choice students educated in Harvard, as well as transfers from other town funds. The revenue from these transfers is offset by $888,000 in charges assessed by the state and town, largely to educate Harvard students at a charter or other public school.
Some revenue streams are threatened by the COVID-19 crisis (see table below). At highest risk is next year’s state aid, which town officials worry could be cut by $600,000 to $800,000. Town Administrator Tim Bragan says new growth, which depends on the construction of new homes and renovations, is a “medium” risk in the expected statewide economic downturn. A drop in purchases of cars and the loss of sales at local businesses could lead to a drop in local receipts.
So far, this year’s fiscal 2020 budget has been relatively unaffected by the crisis. In an email, Finance Director Lori Bolasevich wrote that the FY20 revenues “look very good.” Bragan says he does not expect to see a significant impact to the budget until May and June. But he does not expect a cut in fiscal 2020 state aid.