What's In The Town Budget "Memorandum Of Understanding?"

NORTH ANDOVER, MA — At Tuesday's town meeting, North Andover voters approved the town's Fiscal Year 2021 budget, with the Finance Committee's recommendation. But the Committee gave that recommendation only after securing a "memorandum of understanding" between town officials, outlying what would be done in the case of budget shortfalls.

Unlike many towns in the state, North Andover did not take strict measures to respond to a budget hit from the coronavirus. Town officials argued that the town is relatively insulated from the virus: most of the town's revenues — 70 percent — come from property taxes, rather than more vulnerable sources like local hotel and meal taxes or state aid.

Still, the Finance Committee noted that state aid in particular remains a source of uncertainty, and the virus could also result in extra expenses for the town over the next year. The memorandum, agreed to by the Board of Selectmen, School Committee, Town Manager and Superintendent, lays out what the town will do in case of both revenue shortfalls and extra expenses:

Revenue shortfalls

The memorandum lays out five steps for cuts in response to revenue shortfalls. Notes in italics are added by Patch:

1. Reduce 10% from the newly created Finance Reserve Account
   • This account was created with $1.5 million that in past year would have been budget for health insurance, which tended to be overbudgeted.
2. Reduce Operating Capital, if possible
   • Capital projects under $50,000 are funded by the operating budget
3. Reduce Shared Services Budget, if possible
   • Shared services are departments that deliver services to both town and school departments.
4. Reduce Health Insurance Budget
   • Delay in new hires may free up some currently budgeted health benefit funds
5. Reduce the Town and School budgets based on their percentage allocations of the budget
   • The Town and School will independently choose how to account for the decrease in revenue in their own budgets
   • Variances in general fund revenues shall be shared, except any reserved for, or resulting from, specific programs

Extra expenses

The memorandum lays out four sources for additional funds in case of extra expenses due to coronavirus:

• CARES Act
  • Federal Funding for municipalities allocated based on population
  • North Andover eligible for up to $2.7 million in reimbursement
  • Must comply with the following:
    • Necessary expenditure incurred due to COVID-19
    • Expenditure must not have been budgeted as of March 27, 2020, when the CARES Act was enacted
    • An unbudgeted expenditure incurred between March 1, 2020-December 30, 2020
• Federal Emergency Management Agency
• Grants (unspecified)
• Stabilization Funds (town reserves)

View Finance Committee Chair Sasha Weinreich's full presentation at town meeting here, via North Andover CAM.

Christopher Huffaker can be reached at 412-265-8353 or chris.huffaker@patch.com.