Budgetary Challenges – 3/5/2011

Posted by Bob on March 5, 2011 under Daily Blogs | Read the First Comment

It did not take long for the 2011-2012 budget season to yield typical patterns.  Monday’s (2/28/2011) budget requests by the Police Department and, to a much lesser extent the Fire Department, puts the Borough in the all too familiar position of addressing proposals we can not afford while working with projected revenues that do not allow us to meet demand.  The coming weeks will undoubtedly yield more presentations by various departments asking for amounts that have little to no chance of final adoption.

Naugatuck’s situation does include some similar themes to the situation on the federal and state level as well as other municipalities in Connecticut.  There are no doubt many residents who have been watching cable news and making the logical assumption that every situation is identical throughout Connecticut and across the nation.  It is important, however, that we analyze our local budgetary challenges with a knowledge of the facts and process and in proper contact.

Monday’s (2/28/2011) presentation by the Police Department was the very first (1st) step in the process.  Each department head presents their respective “wish” list to the Board of Finance, some more extravagantly than others.  If the presentation is the most newsworthy happening in the Borough on a particular evening, local media will descend on the meeting and appropriately cover the discussion.  If a particular department requests a significant increase over current year levels, the next morning’s coverage will usually include a headline (which is almost never written by the author of the story in print media) that will justifiably elicit emotions ranging from concern to outrage by beleaguered taxpayers.  While we certainly do not want to “sugarcoat” the financial situation, residents should be assured that the initial presentation by larger departments almost never looks anything like the amount ultimately approved at the end of the budget process.  Difficult decisions will need to be made, but should be done so intelligently without jeopardizing the Borough’s long-term fiscal health.

The Police Department’s presentation can be used to illustrate some of these challenges.  The original request included an approximate eight and 3/10ths (8.3%) percent increase above the 2010-2011 allocation.  The initial review by the Board of Finance already reduced ONE HUNDRED THIRTY ONE THOUSAND EIGHT HUNDRED TWENTY TWO and 00/100THS ($131,822.00)DOLLARS from that request (which currently stands at at 6% increase over 2010-2011), with additional cuts undoubtedly to come.  While the Police Department’s current request can be seen as excessive, I try to remove the emotion from the process and view it for what it is.  The Police Department’s job to tell us what the department needs to operate at maximum levels.  It is our job to live within our means and separate wants from actual needs.

The 2010-2011 Police Department budget actually decreased by THIRTY FIVE THOUSAND FOUR HUNDRED FIVE and 00/100THS ($35,405.00) DOLLARS from the 2009-2010 budget.  The Police bargaining unit agreed to wage freezes for 2009-2010 and 2010-2011, in exchange for two (2) three (3%) percent raises commencing July 1, 2011, and January 1, 2012, respectively.  It is extremely unlikely that the bargaining unit would agree to another, and we could not impose the same unilaterally.  Laying-off police officers would violate the minimum staffing ratios in the current collective bargaining agreement.  In addition, Naugatuck’s Police Department has been operating under recommended staffing levels when compared to similar municipalities for many years.

Many will argue that layoffs are occurring or are being threatened in other towns and states, and Naugatuck should be no different.  While laying-off a public employee may soothe the anger of certain taxpayers, the concept is not as simple as it may seem.  Naugatuck, like most communities, has a self-funded unemployment system.  While a layoff would decrease costs to taxpayers with regard to salary, the Borough would have to pay a good portion of that salary toward unemployment compensation.  Essentially, we would be paying money to have an employee stay home.  Eventually, when unemployment compensation is expended, savings would be achieved.  The federal government, however, recently extended the time someone can remain on unemployment.  Because the Police and Fire collective bargaining agreements require minimum staffing ratios (and have been operating under recommended staffing ratios), layoffs on the municipal side of Borough government really are applicable only to administrative, clerical and public works employees.  Essentially, the Borough would be expending taxpayer dollars for unemployment compensation to the lowest paid employees who would not be performing some of the basic functions of government for which services are most requested.

It has become fashionable to some in our Country to blame all of the problems associated with government on public employees.  While there is much truth to the fact that public sector employees earn greater compensation in many instances to those in the private sector performing similar jobs, those benefits have either been bargained or awarded through the process currently in place.  In many instances, elected officials have lavished unsustainable benefits on employees in exchange for short term concessions (i.e. – wages freezes) and/or political convenience.  Now that we are finally doing the math, some are comfortable placing all the blame on people who work for a living and perform various functions of government.  I am not.  A strong argument can be made that at the root of this historic recession is the irresponsible actions of corporate executives involved in financial industry.  Workers from both the public and private sector, from union and non-union employers, have suffered in many ways while those at the top of corporate America have sacrificed little.  While we may not always agree, I have found that the overwhelming majority of Borough employees are cognizant of the difficult times in which we live and willing to negotiate in good faith for reasonable change.

Many point to binding arbitration as the problem.  There is certainly room for improvement in any government system, but complaints alone do nothing for taxpayers.  The current climate of arbitration in Connecticut actually favors management.  Most municipalities and boards of education with good counsel know the decisions and municipal averages for the key provisions of collective bargaining agreements.  Going to arbitration with demands that are not reasonable given past decisions may satisfy citizens who appreciate  a “get-tough” philosophy, but it inevitably costs taxpayers money in terms of greater compensation and a hefty legal bill to match.

There is a “big picture” reality to labor negotiations.  In almost every instance, management never “gets” a wage freeze.  While all of Naugatuck’s municipal bargaining units agreed to a wage freeze in 2009-2010, almost all received a benefit for doing so.  At very least, it took more important items off the bargaining table.  I will argue vehemently that wages are the third (3rd) most important issue relating to collective bargaining agreements.  Health care and pension costs dwarf wage increases, particularly over the long term.  You do not see the health care and pension obligations in the current, proposed Police Department budget (which is attached here for reference).  Simply speaking, Naugatuck can not sustain our health care and defined benefit pension obligations over the long term.  That is not a statement made in a liberal or conservative context; but one of math.  Opening an existing agreement to obtain a wage freeze will actually cost the Borough in the long term by removing the options and focus from achieving concessions in the items that matter the most.

Our administration has been able to successfully negotiate provisions that place all new hires in five (5) of our seven (7) municipal bargaining units into defined contribution pension plans similar to the private sector.  In addition, we have hired very competent health care consultants to address the long term challenges to providing quality but sustainable health insurance plans to our employees.  Such changes take time, tact and a commitment to long-term fiscal health.

The most politically beneficial tactic any chief elected office could employ is to bang his or her fist on the table and demand a wage freeze across the board.  Such a mayor or first selectman will not get it, but it will make that individual very popular with citizens who are very frustrated and see such false bravado as leadership.  I inherited such a decision upon taking office.  It would be fiscally irresponsible to do so again.  While we might make some popular layoffs in a few of the smaller departments, the financial impact would be minimal in the short term, and very costly over time.  For too many years we have kicked the proverbial can down the road for short-term political gains.  Each year we pay for such decisions.

There is no doubt we have a lot of cutting to do before adopting the 2011-2012 budget.  Very difficult decisions need to be made and all options should be discussed in detail.  What we need to be, however, is smart about how we achieve a real budget that will not impact the stability of our financial structure.  Over the past fifteen (15) years, our Board of Finance and Comptroller have taken positive steps in this pursuit such as fully-funding our pension plan, establishing a strong reserve fund (fund balance), funding our debt obligations and resisting temptation to play games with revenue projections.  This recently resulted in the Borough’s bond rating by upgraded.  We must continue to make structural changes that will eventually bring long-term stability to Borough finances.

Budget presentations are held every Monday on the fourth (4th) floor of Town Hall beginning at 6:30 PM.  While comments from residents are reserved for the public hearing toward the end of the process, all such meetings are open to the public.  We encourage residents to attend and learn more about how and why their tax dollars are spent.