Framingham Tax Rate Hike Will Prevent Schools Trouble: Opinion

The following is a submitted opinion article and does not reflect the views of Framingham Patch

The City Council meeting on Tuesday will show if the recent election and the light shed by the election cycle debate on issues have shifted City Council thinking. Will City Council, in setting the fiscal year 2022 tax levy, provide hope that much-needed change is underway in Framingham, or will solutions to destabilizing school district financial problems be deferred to the middle of 2022?

Will the Council start digging the school district out of a $4.4 million current fiscal year budget hole, or leave a new Council and mayor to dig the school system out of an impossible $7 to $8 million budget hole in June 2022?

As has been made crystal clear in election discussions, the school district’s operating budget for the current fiscal year, FY22, is built on quicksand. $4.4 million in onetime money has rescued the school district from a round of disastrous layoffs: $3 million drawn from reserves accrued from FY21 pandemic-related savings in transportation, teacher substitutes etc., and $1.4 million in federal aid. Even with that help, the FY22 budget is built on the assumption of a 1 percent cost of living adjustment (COLA) for teachers and other staff to combat inflation, when we know inflation is running much higher than that, and even in normal times has been typically around 2 percent annually.

The situation for the next fiscal year, FY23, looks frightening. The city will have to come up with the $4.4 million in recurring funds missing in the school district FY22 budget and add an increase to cover projected FY23 increases in student numbers and inflation. The city-funded portion of the school district budget is about $90 million, so if you add 2 percent for inflation and 1 percent for student growth — both at the lowest end of projections — you get about $2.7 million in additional recurring funds to be found for FY23.

That means if expectations pan out, the city will have to come up with an additional $7.1 million in recurring funding for the school district for the next fiscal year. This is obviously a giant problem, when for the last four years, the city has come up with an average annual increase of $1.2 million for the school district, compared to an average annual increase of $3.6 million, in the last four years as a town.

The key to Framingham’s future lies in the tax policy being pursued by the City Council. Four years ago, at least one Council race was run with a campaign promise to set the property tax levy annual increase to zero. Since Proposition 2-½ was passed in the early 1980s, Framingham increased the property tax levy each year to the limit allowed by law: 2.5 percent. Then in 2013, the town pulled back on the increases and gave property owners a break on taxes, setting the annual tax levy increase in the neighborhood of 1.5 percent. In the last 6 years as a town, this reduced taxing approach for Framingham gave back a total of $43.2 million to property owners in tax breaks. In the last three years as a city, the zero annual tax levy increase approach sent an additional $71.4 million in tax breaks back to property owners. (See state tax data here.)

The original intent of the zero tax levy was reasonable. It took the position that the city was not using taxpayer money in an efficient manner. So, the idea was to see how the various operations in the city would respond to throttling back the money supply. There were two completely different reactions to this: the school district approach under the superintendent and the School Committee, and the city side approach under the mayor and her administration. The mayor did nothing.

In contrast, the school district embraced the whole notion of reworking its entire operation. The new city School Committee hired a new executive director of finance and operations, Lincoln Lynch. He and Superintendent Bob Tremblay set about building the school district budget from scratch in a zero-based budgeting approach, aligned with the school district strategic plan. The annual budget book grew from 80 pages of largely useless descriptions to a comprehensive, transparent, analytic, 250-page document, jam-packed with a range of information, from a strategic overview, including priorities and drivers, to the details of spending in each school and each department, with extensive historical trends laid out in appendices. Under zero annual tax levy increase pressure, amplified by a mayor dedicated to reducing school district funding, the school district team collaborated to produce the best, most efficient result it could.

With the annual school district budget, taxpayer funded increase averaging $1.2 million as a city, compared to $3.6 million as a town, the experiment to see how much financial duress the school district could endure played out. In FY20, the school district almost made the budget work, but had to deploy half-a-million in reserves. In FY21, the dependence on reserves grew to $1.5 million, then in FY22 to $3 million in reserves, plus $1.4 million in federal aid. It does not take a math degree to see that the financial pressure experiment produced a growing structural problem in the school district budget.

It is unusual for a city or town to conduct a stress test like this on its school district, but now we have the advantage of complete clarity on how much funding the school district truly needs. If the town funding level had continued, in the last four years, the school district taxpayer funded budget contribution would have risen by $3.6 million multiplied by 4 equals $14.4 million. In the 4 years as a city, the school district taxpayer-funded budget contribution rose by just $4.8 million. That is almost $10 million less than the budget increase would have been if the town funding level had continued. If we fix the $4.4 million funding gap problem, the increase would be $9.2 million, still $5.2 million less than if the town funding level had continued.

The zero annual tax levy increase experiment worked in that it improved efficiency in the school district, but it went too far by producing a structural deficit in recurring funding. So now we must fix that. The challenge for the City Council is the difficulty of switching from its zero tax levy increase levy mentality for FY22, versus the difficulty of a deferral, and inevitably facing a much more wrenching switch for FY23.

The annual revenue from property taxes has stalled due to the zero annual tax levy increase City Council policy, so FY23 promises to be a total nightmare. The property tax revenue base was $196.1 million in FY20 and dropped to $195.6 million in FY21. (See the state data here.)

Given that the tax revenue base is about $200 million, it would take a 3-1/2 percent tax increase in FY23 to fix the broken school district funding. It seems much more reasonable to start addressing the problem now and smooth out the tax increases by doing a levy increase for FY22 to about 1.75 percent, yielding about $3.5 million, to plug most of the FY22 school district budget hole and then doing a similar increase in FY23.

The silver lining for the FY22 1.75 percent levy increase, would be that, given that roughly $3.5 million addition to its recurring bottom line, the school district could return to the city roughly $3.5 million in onetime reserves, which the city could deploy to replace the failing Farley roof, amongst other things. Win-win.

If the City Council sticks with its zero annual tax levy increase approach for FY22, it will be impossible to avoid huge school district budget problems for FY23, with large cuts to a school district, which has saved millions of dollars through efficiency innovations, labored mightily through a pandemic crisis, and endured constant financial attacks by the current Mayor.

Our school district deserves better. Our school district leadership deserves better. Our teachers and staff deserve better. Our children deserve better.

The City Council has arrived at the crossroads. Which path will it choose?

—Geoffrey Epstein is the District 6 Framingham School Committee member