As I mentioned in my last article, it’s budget time in Westfield. Since that article, the Mayor was interviewed for an article in The Westfield News and he’s made a couple of State of the City presentations. In his article, and in his presentations, he’s projecting a deficit of $2.5 million in the upcoming budget year. This assumes very little new growth in controllable expenses, a slight increase in State Aid, and a maximum increase in taxes as allowed under Proposition 2 ½. This deficit of $2.5 million is a tad lower than my projections, but we’re in the same sad-looking ballpark. Now, $2.5 million doesn’t sound like a big number when compared to the billions and trillions that we hear being discussed with the State and Federal budgets, but it’s a big deal for Westfield.
What bothers me about this deficit is that it was completely predictable and avoidable. The Mayor’s own budget forecast on his campaign website predicted annual shortages 4 years ago when he was running for office. For the last three years that I’ve been involved in the budget process, I and other councilors have been questioning the growth rates in spending, the deferral of obligations, and the spending of one-time grant money or savings to pay for annual operating expenses. Grants go away. Savings balances decline. Operating expenses generally don’t – once we agree to a labor rate increase it stays around forever. We know roughly what our maximum revenue is under Prop 2 ½. We know what our base growth rates are in certain expenses. We know what are annual debt payments are. We can fairly estimate based on the news from the State and Federal government, that we’re not going to be seeing huge increases in local aid (they’re not even keeping up with Prop 2 ½). Some of us added up the contracted growth rates in labor costs and rolled them forward. Some of us complained about giving out unsustainable raises and paying for them with grant money or savings. For years we’ve predicted problems with the math. As you know, I’ve discussed this many times, and am frequently asking “Where’s the money coming from?”
Payroll has gone up by about $7 million since 2010. If we had slowed the growth rate and agreed to $3.5 million in raises – still raises, we’d have a more realistic sustainable operating budget. Hate to say it, but the numbers look worse going forward.
We have yet to address the growing elephant in the room – retiree Health Care (called OPEB). Using the Mayor’s numbers as quoted in the newspaper article, our current obligation is $275 million (net present value). In order to pay for this over 30 years or so, we’re supposed to be paying over $15 million a year, the annual payment amount is supposed to increase by 3.5 percent a year, and we’re supposed to benefit from healthy compounded earnings over many years. We’re paying zero! If we don’t make the payments, we not only get behind by the $15+ million, we lose the projected compounded earnings. It’s impossible to catch up. Everyone in government knows this is a problem, and a problem that has no easy solutions. However, we keep promising these benefits in labor contracts, and we keep passing the buck to the next generation. These numbers are snowballing. FYI, the annual gap (the amount we’re falling behind) is over five times our maximum allowable increase in property taxes. So, what should we do? I believe we have to honor our commitments to current and former employees, and we have to be open and fair when dealing with new employees or employees who many years away from retirement. New contracts
have to have realistic sustainable terms. I also believe all of the terms of the contract should be monetized and projected forward so that everyone knows the real costs involved. I believe that the city and the unions have to agree on how to pay for every item in the contract, and that the payment terms have to be clearly spelled out. If the contracts have unsustainable terms, or there is no realistic way to pay for things, we can’t agree to the contracts.
That brings me to the “Blarney & Westfield Politics” part of the article. Right now, the council has a request from the Mayor to pay $457,000 in retroactive pay increases for several recently negotiated labor contracts. These seem like rather minor increases in the 1 percent per year range. The employee groups that are involved certainly do a fantastic job for the city, and in many cases they are risking their lives and health to protect all of us. How can we say “no” to 1 percent?
I’ve got several questions about this, but the big one, and the one I keep asking is “Where is the money coming from?” As discussed above, we’re not paying for the things we’ve promised in the contracts. We’re $2.5 million short this coming year and we haven’t even gotten into all of the departmental budgets yet. Where’s the money? Are we supposed to agree to the raises, and then have to lay-off other people? Are we supposed to cut schools, fire, police, or DPW? Are we supposed to drain our savings accounts to pay for recurring operating expenses? Should we continue to ignore our long-term obligations? You know, these same great employees are really counting on retirement and health care. They agreed to those benefits when they took the job years ago. The city owes them these benefits. It’s not fair to them to sneakily deny them their future benefits in order to pay unsustainable raises in the short-term.
According to Massachusetts State Law section Chapter 150E section 7 the Mayor is supposed to present the City Council with detailed appropriation requests for all cost items in the contracts. City Council then discusses the items, and votes to approve or deny the funding requests. If the City Council denies the requests, the contract is sent back for further negotiation. This seems like a pretty straightforward thing, and something almost everyone would agree makes sense in our checks-and-balances system. However, it isn’t happening here. The Mayor refuses to give us the information we need to approve or deny the funding. The best we’ve gotten in the last few years is an annual increase buried in the annual departmental appropriations at budget time. That’s not what the law intended.
As mentioned above, the City Council has the Mayor’s request for $457,000 in retroactive pay increases. We have no details on what the annual increases in costs are going forward. The City Council has referred the $457,000 request to the Finance Committee. The Finance Committee has not had a chance to discuss it yet. We want and need accurate information before the City Council takes any vote on the matter. The big issue again is “Where is the money coming from?” We’re still waiting for an answer. The Mayor doesn’t like the question, so he’s told the unions (according to employees who have called us) that “the Finance Committee is holding up your raises”. That’s politics in Westfield. That’s Blarney. Earlier this week, council members started getting phones calls from union members. They aren’t happy. They’re mad at councilors for holding things up. They think we’re screwing them out of overdue pay raises. They’re saying things like “we risk our lives for you and you’re not taking care of us” – or worse. This isn’t right and it doesn’t help address the underlying issue of how to pay for the wages and benefits
that are in the contracts. Yesterday I met with two gentlemen who represented one of the unions. We had a great conversation and exchanged all kinds of information. I think we were able to honestly discuss the real financial problems that the city faces, and I think I was able to show them that I truly am looking out for their best long-term interests by asking these questions. I understand completely where they are coming from, and certainly agree that all members of their team do a fantastic job protecting of all of us. 1 percent is certainly not unreasonable. However, the City has got to figure out how to pay for it. That’s the problem. We all agreed that it is totally unfair for the city to be promising these guys, and gals, something that we know we can’t deliver. They’re counting on these benefits for the rest of their lives.
The ball’s in the Mayor’s court. “Show me the money” as Jerry McGuire would say.
Happy St. Patrick’s Day!
Dave Flaherty
Westfield City Councilor
[email protected]
Disclaimer: The views expressed in this column are those of the author and not the staff, editor, or publisher of the Westfield News.
