Published January 20, 2021
By DAN TOMASELLO
LYNNFIELD — Fiscal year 2022 is going to be an incredibly challenging year, Town Administrator Rob Dolan said during the annual budget summit on Jan. 11.
Select Board Chairman Chris Barrett recalled that the budget summit is usually held in either late November or early December, but said the ongoing COVID-19 pandemic delayed the annual meeting.
“This scheduling change was made in order to help us better understand the impact of the COVID-19 pandemic on projected local receipts and other revenue resources, including state aid,” said Barrett. “This uncertainty makes the budget process more difficult than any in recent memory. In addition, the town is facing more modest new growth revenues with the build-out of MarketStreet and other development slowing.”
Dolan noted that every municipality in the commonwealth has revenue constraints due to Proposition 2 ½, which he said forces cities and towns to rely on state aid. He also noted unfunded mandates on local government and schools “never decrease.” He said new growth generated from proposed developments often “pits neighborhood desires with the need to pay basic services.”
“All of these create constant budgetary challenges,” said Dolan.
Dolan recalled that he has been discussing declining new growth over the last three years.
“That reality impacts town spending,” said Dolan. “While some have various opinions regarding the impact of the project, there is no debate that MarketStreet development growth and the management of that revenue by town leaders led to an incredible series of investments over the past decade, from the best athletic fields in the commonwealth to unprecedented investment in public education, infrastructure and capital. We have used reserve funds as part of our budgetary policy to protect this community in good and bad times. Without MarketStreet, none or few of these accomplishments would have been possible.”
Dolan said, “Limited new growth, stagnant state aid and minimal growth in local receipts” have forced departments to “spend less, plan better, collaborate more and make difficult decisions while meeting citizens’ expectations.”
“We have been successful by any standard whether it’s by our strong bond rating, spotless independent auditing reports, soaring home values, public support for elders and all citizens, and some of the best schools in Massachusetts under any matrix,” said Dolan.
Dolan said the challenges the town is facing in FY22 differs than previous fiscal years.
“All of the challenges we were facing with declining new growth and stagnant state aid continue to be very real,” said Dolan. “But these concerns pale in comparison to the ramifications of COVID and its budgetary impacts on our town directly and in-directly as we enter a period of considerable and very real budgetary hardship regardless of any stimulus that may come, vaccines or individual department needs.”
Dolan recalled that the FY21 budget was approved by Town Meeting last spring despite “many unknowns.” He noted that the Select Board and Finance Committee supported his recommendation that the FY21 budget be cut by $1.2 million from the TA’s original recommended spending plan.
“That is an incredible amount of money as we looked at the spread of COVID and its detrimental impact on this year’s budget,” said Dolan. “We decreased revenue assumptions, protected our reserves and one-time revenue sources for future use, and made hard decisions. To date, tax collections are over 98 percent. State aid is as anticipated. Departments are running lean and well, and new department heads are performing at outstanding levels. Local receipts, however, are down across the board with the exception of building permits. Our particular concern is meals’ tax and fees for services and programs that have simply not happened. Those are significant but are understandable shortfalls. We will get through FY21.”
While Dolan is projecting tax collections will remain “exceptional” in FY22, he is anticipating the loss of revenue from local receipts will be “several hundred thousand dollars.”
“That monumental loss of revenue is significant for a town of our size,” said Dolan. “I believe we cannot anticipate in FY22 an economic bounce back in local receipts and new growth.”
Dolan is also projecting a “significant reduction in local aid.”
“The state is looking at revenue shortfalls in the billions,” said Dolan. “The state recently used one-time money in the rainy day accounts and one-time tax collections in order to close the FY21 deficit. They cannot play that card again.”
Dolan said local officials might have to consider using some funds in the Stabilization Fund, which is the town’s equivalent to the state’s rainy day fund, in order to try and balance the FY22 budget.
“However, we must protect our bond rating while doing so,” said Dolan. “We might have to consider taking a year off contributing to our other reserve accounts. I believe we are not going to be able to be as conservative in our revenue assumptions in order to balance our budget. This will mean less Free Cash in the future and a smaller capital budget. I believe new growth will be stagnant in FY22 and we must adjust appropriately.”
Dolan is also projecting school enrollment will continue increasing in FY22. He also said capital expenditures will have to be “significantly limited” in the next fiscal year.
“I believe we need to keep a very close eye on employee benefits, insurance and how COVID and the economy will affect insurance rates and pension liability in a positive or negative way because these are budget busters,” Dolan added. “There is currently no stimulus bill that provides direct assistance to states or localities. That may change under a new administration, but we must remember that any stimulus money is one-time money and we must think long-term.”
Dolan said all of the town’s collective bargaining contracts expire on June 30, 2022. He noted that all town contracts will award employees 1.5 percent raises in the next fiscal year. The School Department’s contracts will be giving educators and other staff a 2.5 percent raise after those agreements were ratified two years ago.
Unlike the federal government, Dolan noted that state law requires municipalities to approve a balanced budget that has to be reviewed by the Department of Revenue and an independent auditor.
“We can’t print money and we can’t spend money we don’t have regardless of what we want to do,” said Dolan. “The financial health of our community is every department’s responsibility.”
Dolan said he has asked department heads to submit budgets with “no new staff.”
“The increases can only reflect contracted salary increases and mandated increases to begin the process,” said Dolan. “I have asked for capital requests that are limited to high-need or emergency items and state or federal mandated directives. I have asked all departments to look at revenue enhancements and any efficiencies, reorganizations and collaborations that decrease costs and streamline services.”
Dolan said every community is “dealing with the same problems” in FY22.
“I am confident we will navigate these times in partnership and I am looking forward to working with all of you,” said Dolan. “We are certainly up to the challenge.”
While Barrett said the town will be forced to make “very difficult decisions” in FY22, he said, “Lynnfield is in a better condition to meet these challenges than any other community.”
“This is the result of the foresight and wise decisions made by past and present town officials as well as voters at Town Meeting,” said Barrett. “We look forward to working with you in this very difficult endeavor. Together, we will recommend to voters a budget plan that is fiscally responsible, done in a manner that we can be proud of and continue to provide the people of Lynnfield the services that have made Lynnfield the place in which we are proud to live, serve and call our home.”
