Director of Finance Matthew Kerwood gave a preview of the 2020 budget process.
PITTSFIELD, Mass. — The city is expecting to have some $6.4 million more in revenue as it builds the fiscal 2020 budget.
The City Council and the School Committee held its annual meeting to discuss the fiscal state of the city Wednesday night.
Director of Finance Matthew Kerwood noted an upward trend in revenues from various sources that will go into the budget planning for next year.
Of particular note, the city is expecting a $3.7 million increase in state funding for schools.
"This is after several years of talking hundreds of thousands of dollars, not millions," said Superintendent Jason McCandless said.
The increase in school aid comes as the state is about to take on revamping the Chapter 70 formula and Gov. Charlie Baker has put in his proposed budget his idea of how to implement the Foundation Budget Review Commission's recommendations. State lawmakers may choose to go at it in different ways but either way, the city is poised to see a significant increase in Chapter 70.
McCandless said the foundation budget has been particularly off in how it handles costs associated with health care and special education, English language learners, and economically disadvantaged students.
"There is broad consensus that Chapter 70 has not kept up with the times," McCandless said.
McCandless and Kerwood both expect the increase to be a trend in the coming years. It also follows last year's increase to the city of $2.1 million.
From 2015 to 2017, the state aid to the city had increased at a pace of $500,000 or less per year. But last year, the number overall jumped by about $2 million.
Baker released his proposed budget earlier this month and the cherry sheets call for the city to see $3.7 million more in school aid and $241,035 more in unrestricted aid to the city. In total, the city is anticipating $57.4 million in state aid this coming year.
"[The governor's numbers] are the lowest they will get. The House and the Senate never go lower than the governor's budget," Kerwood said.
That revenue will be added to increases in the tax levy, local receipts, free cash, and reimbursements from the Massachusetts School Building Authority to a total revenue estimate of $162,164,202 as officials start the budget process.
Kerwood is also anticipating a 2 percent increase in total valuation. That is less than the actual increases in valuation over the last two years, which was about 3.5 percent in 2018 and 3 percent in 2019. That will raise the levy ceiling to $91,324,815.
That increase in values marks five consecutive years of increases.
"From FY10 through FY15, except for one blip in 2014, you saw a decreasing trend, values were going down," Kerwood said.
The city saw particular growth in personal property taxes and in the industrial sector. Real estate values in both commercial and residential have remained fairly consistent, with commercial values decreasing this current year and residential seeing only a slight increase.
"The one thing that sticks out in my mind is FY19, we saw SABIC make a $9 million investment in equipment for Building 100. That is one example of personal property tax revenue. We are now assessing utility companies differently from how we were so that is factored into it," Kerwood said.
The city, however, still has an issue with the levy ceiling. That ceiling is the calculation of 2.5 percent of the total taxable value in the city. That has been lower than the annually calculated levy limit and thus limiting the amount of potential revenue coming from property taxes. Overall, the city has $3.5 billion worth of taxable value.
"We will remain constrained by the levy ceiling for FY20 and beyond," Kerwood said.
Kerwood is also bumping up his estimation for local receipts. The city currently estimates $11.9 million in those receipts but in 2018, the city brought in $13.6 million. Kerwood is estimating $12.2 million for the 2020 budget process.
Those numbers paint more flexibility in the budget process. But Kerwood is also planning for a 5 percent increase in health insurance.
Kerwood said the numbers given to him from the insurance company so far show that most communities in the group will see a 0.6 percent decrease. But he doesn't anticipate Pittsfield will be one of those. He is using the 5 percent increase number because that was the top of the range given.
"I don't expect us to be at the 5 percent. I do expect us to be less than that because our claims experience has gotten better," Kerwood said.
Kerwood said the city is also looking to move about 80 percent of retirees who were not Medicare eligible to the program. The city will be paying the penalties for doing so but by moving them to them to Medicaid and getting them off the city's plans, he hopes the total claims number will decrease. That would help limit future increases in health insurance.
"The objective here is to minimize the increases in premium," Kerwood said.
Kerwood also said there will increased expenses with the employees, adding that the city is also starting negotiations with the majority of the city's workers unions next month. And he is also looking to bolster figures for making repairs to the city-owned building.
"We have to have a better approach to facilities management and we have to make investments to that regard," Kerwood said.
The budget process kicked off with the joint meeting on Wednesday. On Feb. 15, the city department heads' budgets are due to the administration. In March, the city will hold a summit with all of the department heads to work on the overall spending plan. In April, Kerwood expects to submit a five-year capital plan to the City Council and that would be followed by a proposed budget in May.
"It is our intent to transmit the budget to the council on May 14," Kerwood said.
In May and June, the council will review the budget and make any changes. It is expected to be passed in June.
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Superintendent Jason McCandless told the School Committee last week that there will be recalls of some of the 140 nonrenewal notices sent out prior to the passage of the $64 million budget.
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