Financial storm on horizon for Amherst

By Scott Merzbach
Staff Writer

Published on October 10, 2008

Preparing next year's municipal budget is becoming increasingly difficult for town officials as state revenues dip, access to credit tightens, the stock market declines and Massachusetts voters consider eliminating the state income tax.

While Amherst might typically look to the state for some assistance in dealing with these financial issues, how and whether the state will be able to help struggling communities is unclear, says state Sen. Stan Rosenberg, D-Amherst.

At a joint meeting of the Select Board, Finance Committee, School Committee and Jones Library Trustees Monday, Rosenberg said the state is facing at least a $1 billion deficit of its own, with some analysts estimating the deficit to be double that.

"There's really nothing funny about the situation at the moment," Rosenberg said.

Rosenberg pointed out that millions of dollars are expected to be cut from the state budget in the next few weeks by Gov. Deval Patrick, with more trims looming before Jan. 1.

Though lottery revenues, which are an important source of money for towns, are up over last year, Rosenberg said he expects it will be hard to maintain the current levels of Chapter 70 aid for schools.

Rosenberg said if the ballot initiative to eliminate the state income tax passes Nov. 4, the state Legislature and governor would be obligated to cut about $3 billion by June 30, and a total of $12.7 billion, or 40 percent of state spending, by Jan. 1, 2010.

This is a monumental task, he said, because eliminating state pensions and state police road details, for example, only accomplishes $2 billion of that total.

Assistant Town Manager John Musante, giving his own presentation to the board, said the loss of the state income tax could mean between $5 million and $14 million in reduced revenue to Amherst. But the loss of this revenue source is not even being contemplated in future budget scenarios under examination by the Facilitation of Community Choices Committee, which is asking for residents to provide input on future budget scenarios.

Rosenberg said he suspects if the income tax is eliminate, the Legislature will put just about anything on the table, with discussion on developing casinos becoming prominent, and possibly talks about increasing the sales tax and adjusting the Proposition 21/2 tax-cap law to allow communities to more quickly raise property taxes. Raising property taxes, though, would remain contingent on local voter approval.

Even implementing a local options meals tax, though, which Amherst officials have supported, still might not happen, even though it could bring in an estimated $1.2 million to the town coffers annually. "I will be raising the issue again," Rosenberg said.

In difficult times, the state has had a rainy day fund, currently pegged at $1.9 billion. During the last two recessions, this was used to cushion the negative impacts, Rosenberg said. How it will be used this year and going forward is not yet known.

Town Meeting member Larry Kelley asked Rosenberg if he could file legislation to require the Campus Center hotel at the University of Massachusetts to pay hotel taxes to the town. Rosenberg said the university has usually resisted such efforts to tax rooms or events at the Mullins Center.

Town budget issues

Musante is already projecting a $2.66 million deficit between expenses and revenues just to maintain existing services in Amherst next year, but this is based on revenue assumptions of no significant drop in state aid or lottery receipts.

The bright spots for the budget, at the outset, is the $1.4 million net excess revenue in the fiscal year 2008 budget, property tax collections remaining strong, the town getting money from the strategic partnership with UMass and the possibility of continuing to receive a financial contribution from Amherst College.

Reserves now sit at $4.4 million, up $400,000 from last year, which Musante said might be used to buffer the town from any potential cuts in state aid.

But Musante told the committee members the challenges remain significant to preserve current services.

School Committee Chairman Andy Churchill wondered whether this marked the proverbial rainy day and whether it was time to use reserves for certain budgets. If reserves are used for operating expenses, though, it creates future deficits that are harder to overcome.

Churchill wondered whether the town could explore having its police and the UMass police work more closely together or even combine to save money.

Town Manager Larry Shaffer, who is already looking into merging emergency dispatching with UMass and Hadley, said he wouldn't be averse to studying it.

"I'm certainly not opposed to talking about that," Shaffer said.

Select Board Chairman Gerry Weiss praised Musante for the presentation, which helped the boards and committees better understand what they are facing. "It's laid out in a clear, logical way," Weiss said.

Weiss said the town will have to be conservative in its budgeting.

With the economic downturn, Library Trustees Chairwoman Molly Turner said more people will likely be coming to the libraries and demanding services.

Trustee Louis Greenbaum said the trustees will have to defend and advocate for the libraries to receive the proper share of the town budget and maintain their current service levels.