Tuesday, April 29, 2008

Is it the Budget or the Weather?

I feel grumpy.

Maybe because I've been thinking about the Town budget, or maybe it's the rainy weather. Probably both, combined with the seven allergy shots I got this morning.

I spent a couple of hours today trying to figure out whether or not the Amherst's budget crunch is a hangover caused by the Town spending like a drunken sailor during the '97-'01 Boom Times, or if it's suffering from Chronic Proposition 2½ Disease.

You can argue either position, depending on which year you start measuring from and whether you think town spending should rise with increasing wages or increasing inflation. Town revenue has been growing at about 4% per year since 1994-- about the same rate as median wages. Inflation over that time has been about 2.7% per year.

If it's raining again Thursday I might go to the library and dig out the detailed town budget from 1994, inflation-adjust (and population-adjust, if I can find those numbers) everything, and try to figure out if there's stuff we're paying for now that we weren't paying for then.

But I hope it's sunny; I'd rather go for a nice, long bike ride...


Larry Kelley said...

I'm so glad you're so anal. I can't tell you how many Prop 2.5 supporter/drones came up and bitched me out exactly one year ago when I was standing in town center holding one of the angry yellow bumblebee "No more overrides" signs. Their #1 complaint was about Prop 2.5 not keeping up with inflation.

Of course what they forgot to factor in was "new growth" that for a fair amount of years added an addition 2.5%, thus bringing revenues to almost twice inflation.

Now "new growth" is down considerably because of the rise of NIMBY types getting on committees and in Town Meeting and doing their level best to kill all development--commercial or residential.

I was also amazed at the number of Override supporters who did not know the town had $4.2 MILLION stashed in savings (not to mention the Regional Schools having an addition $1 million)

abbie said...

Perhaps I am missing the point but as I understand it rates of inflation includes all sorts of things, such as rising costs of consumables and fuel, etc. While the town budget does buy consumables the VAST majority of its costs are salaries and benefits such as health care. It is not especially informative to use the gross rate of inflation to judge whether our revenues are able to keep up with our expected expenditures.

Larry, new growth is not down for the reasons you suggest. Haven't you noticed what is going on in the country? The boom times can not last forever- it was a fantasy developed by banks and other financial forces. The US economy can not rest on real estate, it actually has to produce something- whether that is stuff or intellectual innovation.

As for our savings stashed away. I assume you refer to our reserves. Since we are either in a recession or close to it, it is likely that we will need those reserves. It would be absolute folly not to have them. In fact, this year we will be using some of them and it is likely we will use more next year. So get real, most people understand the wisdom of saving money in good times so that in bad times you have something. Without such thinking its likely evolution will do its thing. Those with foresight and planning, who stored their nuts for winter will survive and those that ate their nuts before winter will die.

Gavin Andresen said...

Combining my back-of-the-envelope calculations with numbers from the Finance Committee, the "inflation versus proposition 2 1/2" arguments look something like this (all these are compound yearly percentage increases):

2.5% -- Prop 2.5 levy limit
2.7% -- Inflation (2994-2008)
4.3% -- Median wage (1994-2006)
4.4% -- Actual Town revenue (1994-2008)
5.5% -- "Level-services" requirement

The 5.5% increase per year is the "salaries and benefits and gas and electricity and EVERYTHING" number.

The problem is that our wages have only been increasing at 4.3% a year, and we can't pay our property taxes with our health insurance benefits. It's probably no accident that town revenues have been rising at about the same rate as our wages.

This all makes me grumpy because the very system itself is broken. If the Town was a private business, it would be competing to provide the best services at the lowest costs. It would have a strong incentive to be more efficient.

That's how businesses have managed to pay 5.5% more per year in salaries and benefits but have charged us only 2.7% more per year-- they've figured out ways of being more productive. That's a wonderful thing.

But beyond privatizing as many town services as we can (an idea that seems like it has little likelihood of happening in Amherst, where we seem to think that the Town should be expert in running a golf course), I don't know how to create the right incentives to ensure that the money is spent efficiently...

Larry Kelley said...

Gee Abby, didn't you notice we just forced Barry Roberts to sell us a portion of Haskins View to downsize his development (using CPAC money of course); or how about the items on this Town Meeting starting us down the road to taking Scott Nielson’s property on South East Street to kill his proposed 24 high-end condos (but hey, it’s CPAC money so who cares) or buying the two lots on Main Street to prevent houses from springing up and obscuring the view of Henry Hill House up on the hill, or some of the Zoning Articles killed to prevent Wal Mart from opening a Superstore on the town common.