Muni Matters: Financial Outlook Unclear for Cities, Towns
Unknown Length of Crisis Influencing Decisions
9/14/20 7:00 AM
SEPT. 14, 2020.....As cities and towns continue to grapple with an uncertain financial future, they're faced with the decision of whether to furlough or lay off workers in an effort to close their budget shortfalls. It's a decision officials are making without a roadmap, sometimes resulting in starkly different approaches from community to community.
And with the potential for another COVID-19 surge as the weather turns colder and people spend more time indoors, those financial concerns aren't likely to disappear anytime soon, said Geoff Beckwith, executive director of the Massachusetts Municipal Association.
"Even though the state has pledged - which is an outstanding partnership with communities - to at least level fund unrestricted municipal aid and Chapter 70 school aid for communities, communities do have rising costs and lots of budget uncertainty," Beckwith said. "And municipal revenues themselves are actually declining below expectations."
Because many communities have passed temporary budgets, the full impact of furloughs and layoffs so far has been difficult for the association to track, according to Beckwith, though he said a substantial portion of the furloughs that were instituted in March, April and May were for positions that were unable to continue operating during lockdown conditions.
A review of local news coverage reveals that the cuts have impacted nearly every region of the state. Brookline furloughed 196 workers, including library staff, crossing guards, parking enforcement personnel and senior center employees. Framingham laid off a dozen workers and furloughed seven. And in Methuen, where the police chief refused to take a requested furlough and pay freeze, the fiscal year 2021 budget originally laid off 23 people before the City Council voted to bring some employees back using one-time reserves.
In Rockland, furloughs were part of an effort to close a $1 million deficit for fiscal year 2020, according to Town Administrator Douglas Lapp. The town furloughed 35 employees, he said, affecting every town department, including some areas that shut down due to the pandemic, such as the library, senior center and recreation department.
The furloughs were one of several measures aimed at closing the gap, and the town also drew from its stabilization and other post-employment benefits fund. Thanks to state aid, the town is in a better position for fiscal year 2021, Lapp said, but further cuts down the road can't be ruled out.
"In my tenure as a town manager, I've never had to take money out of stabilization before, but these are unprecedented times, including the use of free cash in ways that we don't normally do," Lapp said.
Rockland is not alone in that, according to Beckwith, who said most communities will look to bolster their revenues with free cash - unrestricted funds left over at the end of a fiscal year - and other one-time sources, as well as make cuts in other areas, before furloughing or laying off employees.
"Budgets that communities are passing now for the fiscal '21 year that we're in now, almost all of them are drawing on one-time reserves," Beckwith said. "They're cutting back on capital expenditures, which essentially is a one-time fund, because you can't stop your capital maintenance and improvement because it just gets even more costly over time the more you defer maintenance.â€
The city of Newton has delayed or put most capital improvement projects on hold, according to Ellen Ishkanian, director of community communications. The city furloughed nearly 100 part-time workers in positions that could not continue during the pandemic, such as camp counselors, lifeguards and part-time library employees, she said. And unlike other communities, Newton chose not to dip into its stabilization reserve fund.
"Although the City of Newton is currently experiencing unprecedented and tremendously uncertain times, and we know 'it is raining, and raining very hard,' we do not yet know what is ahead of us," Ishkanian said in an email. " â€¦ We are saving the Rainy Day Stabilization Fund for the 'unknown unknowns' that may confront the City in the coming months and years."
According to officials interviewed by the News Service, the decision of whether to lay off municipal workers typically falls to the city or town manager or mayor. But not all communities are taking the same approach. New Bedford officials have avoided furloughing or laying off workers for now, but the city eliminated 19 vacant positions and closed a fire and police station, according to Chief Financial Officer Ari Sky.
Sky said there were deep cuts in the city during the last recession, which had long-lasting effects and caused a dispute with local unions that ended up costing New Bedford a significant amount of money.
"I think there's sometimes a tendency in these situations to react to the moment and make the big cut. But the problem is the impact that has later on," Sky said. " â€¦ That's the kind of thing we're trying to avoid. We're trying to make changes that are sustainable that actually (don't) just get to the short-term gain but actually looking long term."
Temporary furloughs saved Great Barrington about $50,000 in fiscal year 2020, according to Town Manager Mark Pruhenski. The town furloughed two public works employees and 12 full- and part-time library employees, and also opted not to fill two vacancies in the public works department. Part-time library employees are still furloughed, according to Pruhenski, but the town has not yet calculated the cost savings of those furloughs for the current fiscal year.
To Pruhenski's knowledge, this was the first time in the town's history that municipal employees have been furloughed.
"Looking back, I'm not certain it was necessary, but it did save the community some money during a very difficult and uncertain time," Pruhenski said in an email. "The move was made out of an abundance of caution, but these decisions are never easy ones to make."
Cuts on the school side have also been significant in some communities; more than 2,000 educators received layoff and nonrenewal notices this summer, according to the Massachusetts Teachers Association.
Beckwith said the Massachusetts Municipal Association expects to see the full impact of the recession on municipalities in fiscal year 2022, as cities and towns are largely reliant on property taxes that will likely decline in the absence of new development. With that uncertainty looming, he said further furloughs or layoffs are not off the table for many communities.
"During the last recession, there were deep, deep cuts in the municipal workforce, and it took a decade to recover," Beckwith said. "And so we would expect if this recession continues to last, and there's not significant federal stimulus to get us out of the recession, then we would expect that cities and towns and the state will continue to face a significant financial crisis."
[Muni Matters reports on key issues and breaking news affecting cities and towns in Massachusetts. Send news, materials and tips to firstname.lastname@example.org]
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