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Declining state aid problematic for school budget planners

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SHIRLEY — Town and school officials at a special Finance Committee meeting attended by representatives from Shirley and Ayer discussed a looming shortfall in the first Ayer-Shirley Regional School District budget. The district becomes operational July 1, 2011.

Previously estimated at $3 million, the gap was down to about $1million when presented at the two-town budget meeting.

One key issues that’s causing problems for the budget planners is declining state aid.

Participants included Shirley Superintendent of Schools Malcolm Reid, interim Ayer Superintendent George Frost, Shirley School Business Manager Evan Katz and Ayer counterpart, Bill Plunkett; Regional School Committee Chairman Robert Prescott, Shirley interim Town Manager Ron Marchetti and Ayer Town Administrator Robert Pontbriand; Ayer and Shirley Finance Committee members and both town accountants.

Shirley Selectmen Chairman Kendra Dumont and Selectman Andy Deveau were present, but they came “just to listen” and did not participate in the Dec. 15 discussion.

The group had a lot to talk about, including questions. But Katz said details would come later. He and Plunkett had prepared “more general presentation,” he said, with spreadsheets highlighting a negative million-dollar gap between revenue and expenses and a $900,000 problem to be solved.

“We will provide more information on request,” he said.

For now, the aim was to view the big picture with an eye to closing the budget gap before assessments are presented to annual Town Meeting voters in Ayer and Shirley next year.

Reid said he and Frost had been meeting with their individual school committees to discuss the deficit, which they consider a townwide issue for Ayer and Shirley to tackle together, rather than a budget problem the new regional school system must solve alone.

“That’s the point now, to start the conversation,” he said.

Tracing the problem, Katz cited a $2 million spike in the expense line from last year to this year, with $1 million less in revenue, mostly due to state aid cuts. That’s the $3 million issue the RSC has been discussing,” he said, with itemized lists. “When we ran the numbers, base assessments for fiscal 2011 were about $12 million,” he said.

Reid said the “narrowed” shortfall basically came from three sources. First, administrators had compiled lists of “what’s needed” to run the new school district, adding items that totaled $1.6 million. “We made cuts then, for a net increase of $1 million,” he said, subsequently adding in another $1million for “first-year costs.”

For example, the combined “Schedule 19” add-in for the two towns to get is more than $400,000, Reid said. As independent districts, that category of school expenses was paid on the municipal side. As a region, the new district must assume those costs.

Reid paged through the process. “There was no way we could add $3 million to our budget, so we decided to scratch out all the new requests,” he said.

They also sought added revenue sources, such as the $50 per student the new district will get from the state in its first year. There are also plans to go for one-time health insurance and technology savings and to cut central office staff when the two districts become one.

“With all that squeezing, we’re about $1million short,” Frost said. “Basically, Bill and Evan can back up all these numbers,” he continued. “What I will present is a higher-level picture,” which looks grim now but could get better, or worse. “It’s early in the process,” he said. “Lots could happen.”

Frost cited two major culprits for the shortfall, cuts in Chapter 70 school aid — which could go even higher than the 5 percent already factored in — and “Schedule 19” costs.

Revenues were “conservatively” projected based on a “what if” scenario that envisioned the two districts as a merged-budget region this year, he said, using that as a basis to get from fiscal 2011 to fiscal 2012.

Frost also cited another way to reduce the deficit. Ayer projects property tax gains of $770,000 (2 and a half percent assessment hike plus new growth) this year that he’s hoping will be shared with the school district, he said.

Similarly, added revenue in Shirley might be shared with the schools based on the 60/40 deficit-sharing percentage split the former budget committee worked out last year.

Tagging the figure Marchetti quoted for Shirley — $240,000 — Frost said that could bring $150,00 to the region.

“There would be symmetry in the three budgets that way,” he said.

As the group discussed first-year startup costs, raises came up. Shirley town employees haven’t had raises for three years, but teacher contracts have provided Cost of Living Allowance increases. Reid cut that conversation short.

“We’re in negotiations” with teachers unions, he said.

A Shirley Finance Committee member, however, said he wasn’t asking for confidential details, only that negotiators bear in mind the town’s tight fiscal straits, with fewer town employees and limited or cut budgets for essential services such as the police and fire departments.

Marchetti characterized the assessment vision as an unpleasant surprise, “going back to what we were told about the benefits of regionalization.” Dipping into considerable past experience in the corporate world, he said the merger should have saved 20 percent of the cost of operating two independent districts and use that money to improve education.

He questioned why per-pupil costs — which he averaged out by dividing the total budget by the number of students — were higher than other districts, about $15,000 per student.

Katz explained the state Department of Elementary and Secondary Education doesn’t work its calculations that way. By the DESE formula, Ayer spends $12.5 per student, he said.

“If the state didn’t cut us, we wouldn’t be here,” Reid said, adding that Shirley, which relies heavily on state aid, lost more than $1 million over the last two years.

Marchetti countered that communities also lost state aid and are struggling to make ends meet.

Pontbriand agreed.

“Obviously, both towns want this (region) to work, but you can’t get blood from a stone,” he said. “Our deficit stands at $200,000, with collective bargaining set to start. “In Ayer, we feel the original $8.3 school assessment was done in good faith, but we need to drill down your deficit,” he said to Frost.

Seemingly out of the blue, someone asked about lease agreements for regional school buildings that now belong to Ayer and Shirley. A loose end in the regional agreement, those deals have yet to be struck with selectmen in the two towns. Frost has been working on that.

Pointedly asked if the deal will be for a nominal sum of a dollar a year, Frost said yes. Neither Shirley nor Ayer selectmen have talked about the matter in public, however.

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