Fiscal Challenges

This week’s question was contributed by former Selectman Jim Williams:

The Town faces two continuing fiscal challenges. First, there is the imbalance between the allowable prop 2.5 percent real estate tax increases and escalating non-school operating expenses (i.e. primarily salaries). Second, as of June 30, 2018, unfunded employee retirement obligations have increased from zero to $152 million since 2010 with an escalating and projected claim on the cash budget of up to $12 million annually. These liabilities are largely responsible for the Town’s negative net worth position. What specific initiatives do you have in mind to bring to office as a Selectman or Selectwoman to address these issues? Please explain how your new ideas will improve management of the Town’s financial affairs and make that management more transparent to Town Meeting members and the voter/taxpayers they represent. (Please answer in 300 words or less).

Roy Epstein

Belmont has made major progress to meet its financial obligations to retired town employees.

The law requires that retirees’ pensions be paid on time. In 2017, as Warrant Committee chairman, I worked with the Board of Selectmen and Belmont’s independently elected Retirement Board to make sure this happens. The pension liability will be amortized, i.e., fully funded, by 2029. Funds will come from the operating budget. This is prudent policy. It should not be changed when it has just started.

A second obligation is retiree health benefits called OPEB (other post-employment benefits). The Selectmen, the Warrant Committee and the town treasurer agreed on an OPEB funding policy a few years ago. Under this, Belmont pays something towards funding each year. After the unfunded pension is amortized, the town will start to pay down OPEB faster.

Both polices are fair to retirees and important for Belmont’s financial stability. They help preserve Belmont’s AAA bond rating for current and future borrowing.

These policies and decisions were reached in a public process.

The Warrant Committee is committed to transparency. Because of this, I created a special working group to monitor pension and OPEB liabilities for our annual report to Town Meeting.

This week’s question about Proposition 2.5 reveals a misunderstanding about the challenge in managing our budget. The issue is not an imbalance between real estate tax increases and non-school operating expenses. It’s the opposite. Employee compensation on the school side is growing faster than the rest of the budget.

Excellence of the schools and financial stability are both critical goals. This will require tough negotiations as well as moderating the increase in expenses and growing town revenue. These are the biggest questions facing the Selectmen, the School Committee, and the town as a whole.

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