Finance chair Andrew Cavanaugh prefaced the first work session discussion by saying this year will be particularly challenging, especially because reserves were called upon to deal with Superstorm Sandy.
"It is having a little bit of a disconcerting effect on the trial balance budget," he said. "There is in fact a double digit increase in the tax ... That is not where we are going to end but it is a trial balance that we are working from. It is just put there to illustrate this is going to be a very challenging, very serious and I'm sure very informative series of meetings to see where we are in the end. But in full transparency that's what we're dealing with - a moderate increase in spend [2.5 percent year on year increase] and an unacceptable at this point tax increase."
Working with village administrator Bob Schoelle, village auditor Jim Olivo and fellow Finance Committee members, trustees Brian Daughney and Nick Episcopia, Cavanaugh said preliminary changes were already made to the trial balance budget.
Olivo said health care costs, up 6.6 percent year over year, as well as a 13.6+ percent rise in the retirement system are two "great drivers" of the budget increase.
Department heads have requested "relatively modest increases," which total approximately $1 million; of which $483,00 is funding, according to Olivo. "Debt service will remain constant," he added.
An issue, Olivo said, trustees will have to deal with is contributions to the insurance reserve. "We have been funding the insurance reserve at a level which does not meet our annual outflow, particularly now that we are buying premium policies," he said.
"We had the advantage over the years of being self insured with workers compensation. While that program has proved to be very cost savings a guaranteed cost program was put into place a couple of years ago, which was significantly less expensive. However, it was up front money and not down the road money."
Olivo explained that during the early 2000s the rate was hovering at 4-5 percent. It then rose to approximately 10 percent during the mid 2000s. "When the fund itself was valued at $150 billion it lost about one-third of its value during 2008," Olivo said. "When it lost value, pension contributions had to go up to make up the value because they actuarially were underfunding. That has led to significant increases in costs to municipalities which are passed along to us by the state. We must pay them. We don't have control over those rates."
Olivo said the village saw a large jump in pension contributions in 2009, which was to be re-paid over a five-year actuarial smoothing that was put in place at the state level. "We have absorbed very hefty increases; this increase this year has been represented as the last of the smoothing years," he said. "This sounds like good news. This increase year over year is less than it was last year so it is stabilized but at a much higher contribution."
This year's increase is 13.6 percent; last year's increase was approximately 19 percent, Olivo said. "We see that increase year over year is starting to soften but we think it'll take another year to shake out," he added.
Trustee Dennis Donnelly noted Gov. Andrew Cuomo's proposal to lengthen payments on pensions at a lower rate (18.5 percent instead of 29 percent) but Cavanaugh said that's not a path the village wants to take.
"We're going to do it over my dead body," he said. "What you're essentially doing is borrowing from yourself. You'd have to continually be leaning forward to pay what you borrowed. This village always had a pay-as-you-go methodology for almost everything and we certainly have a pay-as-you-go methodology for our annual costs in the pension scheme. Following the governor's bill would be a very large mistake and take us down a road we don't want to go."
Remaining 2013-14 budget sessions are as follows:
- Thursday, Feb. 14, 7-10 p.m.: Budget Study Work Session #2
- Thursday, Feb. 28, 7:30-10 p.m.: Budget Work Session #3
- Thursday, March 14, 7:30-10 p.m.: Budget Work Session (Final)
- Monday, April 1, 8 p.m.: Adoption of the 2013/2014 Village Budget