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Budget working group prepares for stormy fiscal 2021

Casting a glance at the fiscal storm clouds gathering in the summer sky, a new working group has begun a search for ways to minimize damage to the town’s budget and its ability to deliver vital citizen services.

The Budget Working Group, assembled at the request of the Select Board, is preparing for two potential threats to Harvard’s $33.8 million fiscal 2021 omnibus budget. The first is the possibility that at Spring Town Meeting on June 20 voters will reject the $320,000 Proposition 2½ override required to balance it. If the override fails, town officials will be forced to cut that amount to bring the budget into balance.

But defeat of the override will seem like a spring shower compared to the hurricane-sized threat posed by a potential COVID-caused loss of $800,000 to $1 million in state aid. A report released Monday, May 18, by the Massachusetts Taxpayers Foundation estimates that fiscal 2021 state tax revenues could fall by $6 billion, or 19.3%, from a January 2020 forecast, due to loss of revenue caused by the shutdown of state businesses and rising unemployment. Should that translate into a 20% cut to the $3.9 million in state aid Harvard expects to receive in fiscal 2021, Town Administrator Tim Bragan has said the town would need to cut its budget by an additional $700,000.

A defeat of the override followed by deep cuts in state aid would require the town to cut a total of $1.1 million from 2021 spending or draw on additional sources of revenue to counter a near-perfect fiscal storm.

The first task of the committee, which met this week for a second time, is to define precisely how the fiscal 2021 budget would be balanced if Spring Town Meeting rejects the override. Last week committee members agreed that 70% of the necessary cuts ($224,000) should come from the school budget, with the remaining 30% ($96,000) coming from town departments, a split that reflects the historical allocation of spending between schools and the town.

On Wednesday Bragan told the committee the town could meet its obligation by not filling a budgeted but unfilled position in the Police Department ($60,000), not awarding planned merit pay bonuses to municipal employees ($26,000), and reducing the tree warden’s budget ($10,000). Superintendent Linda Dwight said the schools could save $220,000 by not filling three teacher positions that will become vacant this fall, and by reducing the professional development budget by $4,000. By leaving budgeted positions unfilled, both the town and schools hope to avoid furloughing or laying off employees. Cuts to the town budget would have to be approved by the Select Board. The School Committee has not acted on Dwight’s recommendations.

The looming loss of state aid is a much bigger problem. This week and last, working group members have discussed a number of possible solutions. Increasing the amount that municipal employees, teachers, and retirees contribute to their benefit plans from 25% to 30% would bring the town its “biggest bang for the buck,” Bragan told the group last week, but would not be enough to cover the entire amount. The recently signed one-year teacher contract, however, would bar any change to teacher benefits before fiscal 2022.

Other measures could include a $200,000 withdrawal from the $1.3 million Stabilization Fund, and a reduction in the annual contribution to the town’s OPEB (Other Post-Employment Benefits) trust fund. One funding source was taken off the table last week by the Finance Committee, which voted unanimously against reducing  next year’s $350,000 appropriation to the town’s Reserve Fund, a source of money for snow and ice removal as well as unexpected payments in support of special education. Deeper cuts would lead to furloughs and layoffs, both Bragan and Dwight agreed.

This planning is occurring in the midst of great uncertainty. Gov. Charlie Baker has not submitted a revised fiscal 2021 state budget to the Legislature, which is needed to account for the expected drop in state revenue. A revised state budget would provide clues to the amount by which state aid is likely to be reduced. A $2 trillion federal relief bill that passed in the House of Representatives and would provide federal relief money to towns and cities is languishing in the Senate. Whether or not Harvard’s override passes next month, it is virtually certain the Select Board will need to offer a revised fiscal 2021 budget at Fall Town Meeting, one that slashes spending in an amount between $700,000 and $1.1 million, depending on the fate of the override. Deciding how that can be done will be the task of the working group in coming weeks, and will ultimately require the approval of the Select Board.

The Budget Working Group meets every Wednesday morning at 9 a.m. Meetings are open to the public, and agendas are posted on the town website. Members include Select Board Chair Alice von Loesecke and Select Board member Rich Maiore; School Committee members SusanMary Redinger and Sharlene Cronin; Finance Committee members Jennifer Finch and Dick Fellows; School Superintendent Linda Dwight; and representing the town administration, Bragan and Marie Sobalvarro.

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