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Staff Writer

TOWNSEND — The size of the town’s deficit depends largely upon school cost increases, according to discussions between the Finance Committee and the town administrator.

However, the 7 percent to 9 percent increase predicted earlier this year for North Middlesex Regional School District can’t pass without the approval of two out of the three towns it serves, said committee member John Whittemore.

The town can’t afford a large increase in school costs, town administrator Gregory Barnes told the committee at its Jan. 11 meeting, and he doubts that the other district towns — Pepperell and Ashby — will approve such a hike, either.

“I know a lot of towns right now that are going through the same thing we are,” he said.

Barnes predicts a worst-case deficit of nearly $600,000, if the 9 percent school increase comes to pass. There are also educational costs for students attending Nashoba Regional Tech, he pointed out.

Former North Middlesex superintendent James McCormick in the past used the district’s E&D (or “Excess and Deficiency”) funds to offset the financial hit to the towns’ budgets, said member Paul Concemi. But how the new superintendent handles the budget can’t be predicted, he said.

When Superintendent Dr. Maureen Marshall met with selectmen last September, Barnes had in hand a letter from district business manager Gerald Martin showing four years of declining E&D balances, leading up to fiscal year 2005. Martin predicted that towns would be asked to absorb a hike to support the school budget, but the hike will be much higher than they are accustomed to, without the E&D funds cushioning the blow.

“This year (FY07), they did not plug into any E&D to support the towns,” said Barnes.

The school administration is arguing that the E&D account balance is now a small percentage of the overall budget, he said, and it can’t be viewed as more than an emergency fund.

At a prior School Committee meeting, the certified public accountant from Melanson Heath & Company, who is in charge of the FY06 audit for the district, said that the E&D balance, as well as local demographics and fiscal management, affects not just the budget but also the bond rating for the district. A higher bond rating, derived from a higher E&D balance, means lower interest rates on borrowed money, he said.

At the last School Committee meeting, the bond rating came up for discussion when member Frederick Gibbons III reminded the board of the connection between the E&D balance and interest rates.

Even if the town makes it through the next few years, school renovations planned for 2010 will cost “millions and millions,” said Finance Committee Chairman Andrea Wood.

“The state only makes us responsible for the net minimum (contribution),” she informed members. She suggested that the town only accept an FY08 budget from the school district that reflects the minimum requirement. State aid to the towns and school districts is used in calculating that minimum payment amount.

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