Expenditures
The Expenditures category of the Town’s budget is comprised of six sections; Municipal Departments, the School Department, Non-Departmental, Special Appropriations, Enterprises and Non-Appropriated. Overall, expenditures in the FY 2023 Budget are $382,728,844, up by $15.9 million for an increase of 4.3 % over FY 2022. Following is a summary of the FY 2023 recommendations to each category of Expenditures.
Municipal Departments
The total amount of all municipal department budgets is recommended to be $83,912,197 in FY 2023, for an increase of $2,818,170. The FY 2023 budget completes some, but not all restorations of budget reductions experienced during the COVID downturn. We have appreciated the flexibility and understanding of departments who absorbed budget reductions associated with their reduced activity during COVID, including many employees who were temporarily furloughed. In particular, we appreciate the Library’s understanding that savings achieved through temporary closures in FY 2022 did not meet the restrictive municipal appropriation standards of the state Board of Library Commissioners, forcing the Town to seek a waiver. We expect to meet the state requirements for Library funding in FY 2023. While some progress in restoring reductions have been achieved, some reductions from prior funding and staffing levels remain throughout municipal departments. In FY 2023, we have decided to prioritize the funding of fair and competitive wages for our employees. As a result, funding that might normally go to restore or enhance services in municipal departments have been allocated to the Collective Bargaining reserve account.
For the most part, increases in municipal departments are the result of contractual growth in employee wages and benefits, or as a direct result of some contractual or mandated obligation. For example, the number of elections will increase during the FY 2023 cycle. In a few cases, we were able to fund enhancements that reflect policy priorities of the Town.
The following municipal programs received enhanced funding:
To the extent possible, additional municipal needs will be considered when allocating the federal ARP grant, especially if those needs reflect the priorities established through the community engagement process.
The School Department
The School Department’s Budget is recommended to be funded at $124,817,362 in FY 2023, representing an increase over FY 2022 of $3,750,815, or 3.1%. This funding level is the result of an objective revenue allocation formula based on the historical percentage of the budget, then offset by an allocation of shared expenses (e.g. insurance, building maintenance, utility use, IT, etc.). It is acknowledged that the School Department budget request submitted by the School Superintendent represents a 7.9% increase in funding, far below the 3.1% increase produced by the formula. This current shortfall is calculated at $5,802,512.
The Department has submitted a detailed document explaining their budget and supporting their budget needs, which can be found by clicking the link here*.
*Note for print version: The School Department's FY23 Budget Book can be found on the department's website under the Budget Central page (https://www.brookline.k12.ma.us/Page/108).
Non-Departmental
This category of Expenditures is a large component of the Town’s Budget, including the fixed costs of pensions, health insurance, other insurances and debt service. It also covers the Reserve Fund, which is the account administered by the Advisory Committee to cover any emergency or unforeseen expenses that occur throughout the year such as snow and ice removal expenses. Since this expense category is not assigned to any particular department, its costs are reduced from the Town School Partnership revenue allocation formula based on actual usage.
Overall, this category of expenditures is recommended to be funded at $119,769,474 in FY 2023, an increase over FY 2022 of 5.2%. This category includes many of the Town’s “budget busters”, which are those expenses that rise higher than the general rate of inflation. They include:
Health Insurance — The Town contributes 82% of the cost of premiums for a high-quality health insurance program managed by the state Group Insurance Commission (GIC). We are projecting rates for these premiums to rise by at least 5% in FY 2023. We also project a reserve factor for subscriber growth.
Pensions and OPEB — Eligible employees of the Town and School departments are part of the Massachusetts Contributory Retirement System and receive a defined pension benefit upon retirement. State and local government employees in Massachusetts are not eligible for participation in the federal Social Security system. Similar to social security, employees have a percentage of their pay deducted and paid into the Pension fund. The Town of Brookline funds the annual expense of existing pension payments, and has established a special, actuarially approved schedule to meet the unfunded liability of the system. The total amount of Pension funding in FY 2023 is $30,557,924, representing a 7.3% increase over FY 2022. It is possible to modify/extend the pension funding schedule to reduce annual cost increases, but in no event will the state allow a municipality to reduce their prior year’s appropriation. Extending the schedule beyond 2030 or modifying other assumptions to reduce liability are not unlike extending or refinancing a mortgage. While it provides immediate relief, the overall increase in costs are substantial. In addition, the aggressive pension funding schedule is a sign of financial strength seen by credit rating agencies. Within ten years, the Town will eliminate the unfunded portion of the pension liability. At that time, the Town intends to shift this funding capacity to meet the other major unfunded retirement obligation of the Town; Other Post Employment Liabilities, or OPEB. OPEB involves the cost of providing health insurance benefits to municipal and school employees and their survivors upon retirement. In FY 2023, we are restoring the annual increase of $250,000 to the appropriation for OPEBs, making the FY23 appropriation $4,431,980.
Employee Health Insurance — The Town is obligated to provide health insurance to permanent employees (and their families) who work at least 18.75 hours per week. The Town also covers retirees and their survivors. The Town procures its insurance coverage through the Massachusetts Group Insurance Commission (GIC), a governmental entity that manages the health care benefit for employees of all state agencies and dozens of cities and towns. The contributions of GIC premiums and other out of pocket costs between the Town and its employees are a mandatory subject of collective bargaining. An official Public Employee Committee (PEC), comprised of representatives of unions and retirees, meets with the Town to bargain over the costs and other terms of this benefit.
The GIC has been very aggressive in keeping its costs/rates as low as possible. Still, the rate increase of 5% assumed for FY 2023 remains much higher than the normal growth in Town revenues.
Special Appropriations — This category of expense is mainly the annual appropriations for projects within the Capital Improvement Plan (CIP). The CIP is funded through a combination of direct appropriations and the issuance of debt. In FY 2023, the direct appropriations to fund capital projects is $2,163,425. This level of appropriation is bolstered by $6,814,801 million in Free Cash. A much more detailed review of projects funded through the annual budget appropriation is discussed in the CIP Section of this document.
A change in the accounting of Marijuana Host Community Agreement (HCA) revenue skews the special appropriations category this year. Beginning in FY 2023, over $1 million in HCA expenditures are allocated to a special appropriation to support mitigation activities. See table below for details:
Debt Service — Another expense within the Non-Departmental category is the Town’s obligation to repay debt, which is the cost of principal and interest charged on the issuance of municipal bonds. Incurring debt is an accepted mechanism to amortize the cost of major capital purchases or projects over time and is a major strategy in the Town’s capital financing program. The Town’s fiscal policy dictates that at least 6% of the Town’s net revenue be allocated to fund capital projects. Within that 6% amount, we strive to have 4.5% funded via debt. As discussed previously, substantial debt has been issued that is temporarily added to the Town’s tax levy in the form of debt exclusions. While this excluded debt is not “counted” towards the Town’s debt policies, its impact to Brookline’s taxpayers has the same financial effect as any other debt and must be considered when determining the overall tax burden and future capital planning.
Enterprises
The FY 2023 Budget includes $34.8 million in expenses related to business type enterprises of the Town. It is the Town’s policy to recover 100% of the costs associated with these activities through fees or other charges to users rather than through the general tax levy. The Town’s formal enterprises include the water/sewer utility and the golf course. A recreation revolving fund is a similar but separate accounting mechanism. The water/sewer and golf course operations are fully funded through fees and charges while the recreation programs are subsidized 17.3% from the Town’s General Fund. It is the Town’s policy that all direct and indirect expenses of the Enterprises, including debt service and employee benefits, be accounted for and paid to the Town’s general fund to ensure that the Town’s taxpayers do not subsidize such activities.
Non-Appropriated
This category of expenses relates to charges that are mandated but not required to be appropriated by Town Meeting. However, since these expenses must be funded within the Town’s Budget, they are fully disclosed and accounted for in this Financial Plan. State and county assessments at $7,345,435 are the largest part of this category, of which the $5.8 million assessment to the MBTA represents the major share. As discussed in the prior section on State Aid revenue, the MBTA assessment has increased by 9% in FY 2023, presumably due to a reallocation of the assessment based on population changes from the 2020 Census. Brookline’s payment to Norfolk County is $1.1 million in FY 2023. The Town believes that the costs of Norfolk county government should be absorbed by state government, similar to the case of neighboring Middlesex County.
Another expense that is covered in the Non-Appropriated category is the Tax Overlay account at $1,930,062. This is an account under control of the Board of Assessors used to fund the annual cost of property tax abatements and exemptions.