A funny thing happened on the way to town meeting. We discovered that decisions about millions of dollars are made without the knowledge of taxpayers and the Finance Committee.
At the March 28 meeting of the FinCom, concerned residents identified a significant difference in the FinCom’s understanding of the “Unclassified” payments for line item 32B Insurance (page 53 in the 2012 Annual Town Meeting Warrant) compared with how this money was used. More importantly, this was a significant difference between what taxpayers approved in the budget.
There are two elements included in our health insurance obligation: 1) The cost to provide health insurance to our existing employees and 2) The cost to fund future insurance benefits for employees, OPEB (other post employment benefits).
While we have an estimated $50 million liability, the state is NOT mandating any payments to OPEB and actuarial calculations detail “recommended” payments over 25 years.
As published by the FinCom in the 2011 Warrant (page 11) “The State has not mandated that communities begin payments toward OPEB; however, as part of our financial management plan, the Town has been making payments of approximately $1 million per year since FY2009.”
Every year we have approved insurance expense of approximately $6 million to $7 million, representing the current expense plus approximately $1 million to fund the OPEB liability.
At the same time, we heard comments about the insurance savings that were negotiated in recent collective bargaining agreements. However, the insurance budget line item continued to grow. Where were these savings?
Our town employees and officials negotiated these savings in good faith, expecting the benefit to be passed on to the taxpayers with a positive impact on our tax obligation.
Unbeknownst to the FinCom these savings were never factored into the budget. These savings were instead used to pre-pay our OPEB obligation without their approval or the approval of town meeting! The FinCom is now struggling with how to reconcile huge OPEB payments against what they assumed to be $1 million annual payments.
Accelerating the funding of this obligation put a significant undue burden on our current taxpayers while our tax rates grew. This cost should have been shared over time. Additionally, these payments happened without our informed consent!
As a result, $6 million of tax savings that should have been shared with taxpayers was used to fund this obligation without approval.
Why did this happen?
1. We do not have a sufficient budgeting process to ensure the proper PUBLIC vetting of major expenditures.
2. The CURRENT structure of town government does not provide for accounting oversight, nor written policy and procedures to ensure appropriate controls.
3. There is a lack of coordination with our annual audit and other financial reporting.
How do we fix this?
1. Improve the Financial Oversight of town government with an elected FinCom and an Independent Audit/Review Committee.
2. Only approve budgeted line items that have been properly scrutinized and publically vetted.
Attend Town Meeting on Monday, April 9 and vote for these changes that will lower your taxes without impacting services!
- Tony Boschetto