“We have settled on a budget that meets the needs of both the school department and the municipal departments,” Town Manager Jim Malloy said at the Select Board’s meeting this week.
Superintendent Julie Hackett concurred at Tuesday’s School Committee budget hearing, the second of two public hearings focused on the proposed Lexington Public Schools budget. “We’ve arrived where we wanted to be, just in a different way,” she said.
Next Monday’s financial summit, which was originally scheduled for about two weeks ago, was delayed as town and school administrators and leaders continued to negotiate to reach an agreement that would bridge the “pretty significant shortfall” in both proposed budgets presented at the Town’s third summit in November. School and municipal teams reached an agreement late last week.
The new proposed Lexington Public Schools budget amounts to a little over $133 million, while the Town budget comes to slightly more than $47 million. Both budgets rely on approximately 3.9% increases in revenue over last year’s budgets, which is a smaller increase than the approximately 4.2% originally requested by school administration and 7.6% increase requested by the Town.
“We’ve been able to work with the Town to reach a percentage that we can deal with [in] our FY24 budget,” Hackett said on Tuesday.
On the municipal side, a drastic hike in trash and recycling costs of nearly $1 million more than last year, along with increased energy costs and inflation, have contributed to the challenging budgeting process this year. On the school side, increased special education costs have compounded with other costly education challenges stemming from this moment in the pandemic, as previously reported.
At the November summit, the municipal departments faced a budget shortfall of about $1.8 million, while the school district faced approximately a $710,000 shortfall. Thanks in part to increased revenue projections, the school department now faces a $352,000 shortfall compared to its request, which it plans to cover by drawing from special education stabilization funds. The updated projections and careful cost-cutting mean the Town now faces a $395,000 shortfall, which it will cover with free cash, or unrestricted funds available for appropriation.
For the past few years, the Town has implemented a fiscal strategy of phasing out the use of free cash from the operating budget in order to save more money for major anticipated capital expenses like a new or renovated high school, so using free cash to cover the shortfall is a last resort. “We’re not happy about having to do this,” said Assistant Town Manager for Finance Carolyn Kosnoff, “but…given the challenges of this year, we really felt this was the right way to manage this.” That sum will not be added to the Town’s base budget – the budget that is automatically carried over as a foundation for the following fiscal year – because the Town does not intend to incorporate free cash into the FY25 operating budget.
Municipal and school leaders were able to shave down the larger shortfalls anticipated in November in part due to new revenue projections. Every year, the Town develops its budget projections throughout a series of summits from the fall into the early winter – but while small updates to revenue projections often indicate surplus revenue for the Town, this year the Town needed up-to-date projections to address the shortfalls. “This year has been a little bit different,” Kosnoff said at this week’s Select Board meeting. “We’ve needed some of these updates to come in in order to balance the budget.”
On the municipal side, the Finance Department also reduced the shortfall by renegotiating the trash contract. Moving forward, the Town plans to charge for the collection of bulky and white goods (items like mattresses and appliances), a service that it previously provided at no cost. Regular trash collection will remain free.
“We are not trying to make a profit on this,” Kosnoff said. “It is just the Town charging the resident for the cost that it’s costing us…we are essentially just passing that through.”
To cover the school budget shortfall, Town and school leaders have proposed establishing a new Special Education Stabilization Fund, which Kosnoff compared to the Town’s capital Reserve Fund. Under the Town’s latest proposal, the school system will retain its existing Special Education Stabilization Fund, which requires Town Meeting approval for funds to be accessed. However, it will also create an additional special education fund, which will only require Select Board and School Committee approval for funds to be disbursed under a recently passed state law – meaning that its funds can be put to use more easily.
“Having that ready access [to those funds] is important” at a time when Lexington Public Schools anticipate significant special education costs in the next fiscal year, Hackett said on Tuesday.
The Town proposes infusing $500,000 into its preexisting special education account, and appropriating $750,000 into the other account for a total of $1.25 million in “back-up” funds that the district can draw on to address its budget shortfall and other unanticipated special education costs. Town Meeting will consider an article to establish and appropriate into this new Special Education Reserve Fund this spring.
The proposed budget was the product of “a bit of an all-nighter in the Finance Department,” Select Board Chair Jill Hai said on Monday. “I know this was a particularly challenging year to pull this all together, so we really do appreciate all of the effort.”
After Monday’s summit, the recommended budgets will proceed to the Select Board and School Committee for approval. Town Meeting must ultimately approve the entire combined budget.