On October 2, Acton held a special Town Meeting to consider a motion advanced by the Acton Voters Group to keep taxes level this year, using some of the NESWC reserve monies. Over 1,500 voters attended the meeting. The meeting was held at the Field House of the high school, because the attendance was anticipated to be high. It was, and then some. It took quite a while to check voters in. The lobby was so full of people at 7 pm that you could hardly move. The overflow crowd was sent to the auditorium.

The meeting started with a motion to have a secret ballot. The proponents felt that this contentious issue warranted this move, having heard from several town employees and parents with children in the school that they would feel more comfortable voting that way. The moderator explained the process and the time it would take, and I'd say about ¾ of the people simply didn't want to take the extra time, so the motion was defeated.

Then came the presentations. Mr. Clint Seward did a great job of outlining the Acton Voters Group position. He talked about a simple choice to transfer reserves to reduce the tax increase, leaving higher reserve levels than the DOR recommended. He then addressed some of the issues that had been raised by opponents, including the idea that the town and schools would have to cut staff if the motion passed.

Logically, people had to know that the issue of layoffs was a red herring. Since the reserves were supposed to be for capital projects, using them to offset a tax increase shouldn't have any effect on services.

In order to keep his comments brief, there were issues that Mr. Seward did not address. For example, the history of Acton using reserves to finance deficit spending was not made clear except in passing. He showed the ALG Plan, which would once again spend down reserves to imprudent levels. He said the only way to really protect the reserves would be to return them to taxpayers. This would not be "spending" them. Should projects come up that were compelling, town officials could always ask for additional revenue through a capital override. This would give voters a clear choice about these projects.

The opponents then made their presentations. Mr. Peter Ashton, a former Selectman, did a good job of arguing that cuts in budgets were inevitable if this motion passed. This was not news to the majority of the parents in the audience, because the same arguments were clearly made in flyers and on his group's website. But this conclusion is one with which the Acton Voters Group clearly disagreed, for two primary reasons.

First, the motion itself was to use reserve funds to pay for a tax reduction. It was a one-time use of funds. It would not impact current-year budgets. So how could this use ever result in layoffs? The only way is if the town planned on spending the reserves to cover operational expenses (which they said they would not do with the NESWC monies.)

Second, Mr. Ashton's conjecture seemed to be based on the Acton Voters Group's three-year plan that was on page 15 of the Warrant. This plan was developed at Mr. Ashton's suggestion when he asked how using reserves as the Acton Voters Group suggested would impact future budgets. We showed that the reserves could be maintained at levels above DOR recommendations if different spending assumptions were made.

Since these were issues that would be discussed and debated over the six-month budget cycle, and the motion had no effect on operating budgets, the argument that using the reserves to fund tax reduction could lead to layoffs was simply incorrect. Yet Mr. Ashton and his allies continued to state that this was true, and many in the audience evidently believed them.

Mr. Ashton then talked about higher reserve levels in 11 "comparable" towns, picked by the Board of Selectmen. Many of the towns cited have Stabilization Funds in which money is being saved for future capital projects. Acton's Stabilization Fund has no money in it. This is probably because Acton town officials have repeatedly decided not to establish a "reserve" policy and, lacking such a policy, it would seem senseless to save money in a Stabilization Fund without some specific purpose or strategy in mind.

Acton also has a history of spending reserves to finance an operating deficit. Whether these other towns do the same is unknown, but unlikely (given their high reserve levels.) It is curious that Mr. Ashton did not make any criticisms of, or suggestions to, Acton's town officials about things they should be doing, like having a reserve policy or not using reserves to fund recurring operations. It will be interesting to see if Mr. Ashton uses his considerable influence to make some positive changes in some of the town's policies and procedures in this area.

He then talked about how bond agencies looked at the amount of reserves, and that if Acton returned reserves to taxpayers, our bond rating could suffer and we might end up paying higher interest rates as a result. But he did not explain how the ALG Plan to spend reserves from about $8 million to $1.4 million would affect Acton's future bond rating.

Using reserves to finance deficit spending is a bad idea because reserves don't last forever. Eventually they run dry and that sudden loss of income is hard to replace. Furthermore, if there is a structural budget deficit, that deficit will grow each year until it is solved. So a $1 million deficit will be $2 million after a year and $3 million after two years. The budget becomes harder and harder to balance the longer the deficit is allowed to remain.

Steve Noone, the Finance Committee Chair, gave an overview of the Finance Committee's view, showing several charts on the screen that were filled with numbers. He basically argued that showing a deficit in three years is not unusual, because many of Acton's past 3-year plans have also shown deficits and we haven't always needed overrides to solve them.

It is interesting to note how one can frame almost any issue in a particular context and miss the big picture. When forecasting into the future, it makes sense to have a plan that balances the budget. If unforeseen circumstances change that plan, you make adjustments as needed. But a good plan would not plan on an override. It is surprising that a committee charged with looking out for Acton's medium- and long-term financial well-being would be satisfied with such poor projection models and not insist on either higher revenues or lower expense growth to solve anticipated problems.

And, of course, Acton's recent good fortune in avoiding an override is not due to good fiscal management but to good luck. We saved money to cap a landfill that didn't need to be capped, and we benefited from large increases in Chapter 70 state aid because the funding formula was changed.

In the last three years, Acton's Chapter 70 monies have about doubled. No one could have expected-or hoped-for such an outcome. Because of this increase in state aid, the town and schools saw fit to add over 30 staff people this year. That is about a 3% increase in staff town-wide-right in the middle of a severe economic crisis.

Mr. Noone's charts also showed some of his assumptions in how our costs might rise, and under the salary line, he showed increases of 4.5% - 5.5%. Because of things like retirement (hiring less expensive staff to replace those who leave at higher salary levels), this translates into pay raises at a much higher level. Instead of acknowledging this, Mr. Noone instead asserted that salary raises were lower, if you don't count the step increases.

With all of the financial numbers and such, we did not hear any comments on more important matters from Mr. Noone, like why so much of our reserves would be spent under the ALG Plan. Mr. Noone must be aware that using reserves to fund operations is not truly balancing the budget, yet he seems okay with doing it. The Mass. Department of Revenue is very clear that non-recurring revenue sources should not fund recurring expenses. And they aren't the only ones. A brief Internet search found dozens of documents from local cities and towns, other states, and even the federal government which cautions about this use for reserves.

Then Heather Harer spoke for the School Committees. She was the briefest speaker and really showed just one chart, which was a comparison of the Acton Voters Group 3-year plan versus the ALG 3-year plan.

It was said that the budgets going forward as proposed in the ALG plan did not include new staff, but simply maintained what we had, maybe with some new capital items. And those budgets needed to go up about 6% per year just to stay even and not suffer cutbacks in service. This is because all of the "budget drivers" are going up 5-10% per year, so naturally the budgets need to likewise increase.

But at last April's town meeting, voters approved budget increases of 6.6% with about 30 new staff positions. (Since then, I have heard the schools have added another 7 positions "after budget.") If budgets go up 6.6% with 30 new staff, how can the ALG Plan increase budgets by 6.3% with no new staff? Something doesn't add up.

Also, Ms. Harer was careful to use the latest "ALG Plan," which was finalized on September 10; well after the Acton Voters Group had turned in its petitions for a Special Town Meeting. It is interesting to note that previous versions of the ALG Plan showed much larger deficits earlier, but by changing some of the basic assumptions about budget growth, the deficits have suddenly shrunk and what had been projected as a $4.4 million override in FY12 has changed to a $2.4 million override.

Was this simply a good recalculation of the numbers based on new information between the September 2, 2008 ALG Plan and the September 10, 2008 ALG Plan, or not? We may never know, but to save $2 million in a week shows good work by our elected officials, I guess.

Mr. Seward was given some time to rebut some of the issues that were raised. He made it clear that the vote would not affect current budgets or future budgets. But most people seemed to heed the cautionary words of the opponents and that appeared to be the deciding factor for many in attendance. People did not want to vote to reduce reserves if it could have an impact on school spending. Issues of policy were left to another day. And after a careful tally, the "no" votes outnumbered the "yes" by 947 to 640.

I think the economy certainly played a role in all of this. Uncertainty clearly makes people think of holding onto reserves instead of dispersing them. But because of Acton's stable property tax base (which will go up by 2.5% per year, no matter what) and the recent large increases in Chapter 70 state aid (doubling in the last three years), we should be able to survive even a cut in state aid and still be far ahead of where we were just a few years ago. Still, no one can blame people for doing what they think caution demands.

So what does this all mean? It means that Acton has taken another step toward being a town of long-term transients. We are known for our good schools, and many young families move here for that reason. It is far cheaper to pay high taxes for a good public school than to pay low taxes and send the kids to private school. The problem is that there is little incentive to control spending when town officials are sure that the voters will always support an increase, no matter what. And with a (possible) false sense of confidence, our town leadership has a history of spending town reserves to a dangerously low level and then resorting to a "make or break" override while issuing threats that will undoubtedly come to pass if the override fails. In fact, it is the certainty that the threats will be carried out that make the overrides so important for parents to support.

There will always be a few hardy individuals who will stay in Acton no matter what, but for many people who find Acton's taxes too high, staying here is an economic decision as much as an emotional decision. Should they stay in Acton once their children graduate from school? Or is that a good time to make a move to a lower-tax location?

And if good schools are what keep Acton's property values high, then everyone has an incentive to keep the schools excellent. Let's hope that the decision by the Special Town Meeting accomplishes that goal, one in which a clear majority of those present seemed to support.

Allen Nitschelm, an Editor of the Acton Forum, is also on the Steering Committee of the Acton Voters Group.

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Response to Article

Response #1
     By Richard Doherty, October 13, 2008