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PEPPERELL — The Finance Committee (FinCom) has sent fiscal year 2007 budget-setting guidelines to all town boards, commissions and department heads. The guidelines allow a 3 percent bottom line increase in the purchase of services and supplies over last year as well as a 3 percent cost of living wage increase.

The figure represents a half percent more than the guidelines of the past two years.

In a letter sent after the committee’s first December meeting, the FinCom asked that all budgets and worksheets be completed and returned to town accountant Theresa Walsh by Jan. 9. The FinCom begins it’s annual budget review in January.

The 3 percent salary cap is subject to final approval by the Personnel Board and the FinCom, excluding union salary increases that have been negotiated.

All capital item requests — equipment, repairs, etc. — will be looked at and departments have been asked to be prepared to justify their requests. Items in excess of $5,000 will be sent to the Capital Program Committee to be prioritized.

Town administrator Robert Hanson, who chairs the committee, said existing departmental wish lists that look forward five years are often changed each year and may be altered again.

“It seems that we no sooner finish budget work for one fiscal year and it is time to begin work on the next fiscal year,” a letter from FinCom said.

“We, as a town, faired surprisingly well for fiscal 2005, and hopefully, we can make the same statement at the end of fiscal 2006 (June 30, 2006). The lion’s share of credit for our current fiscal situation belongs to you, department heads,” the letter read.

“This is not to indicate that we will not have to approach fiscal 2007 with budgetary constraints or that we are in a position to sanction greater spending. However, we are in a better financial position than we expected to be at this time,” it said.

Warning that the town must continue diligence in efforts to conserve funds in light of soaring energy costs, medical insurance premiums, and uncertainty from Beacon Hill, the FinCom promised to remain tough on overspending.

“Thus, while we are willing to increase your budget slightly from last fiscal year, we caution you that overages from our target increases will not be allowed, and a very thorough review will be made of all requests for additions to staff,” the committee wrote.