Hamden Council: End Budgeting Savings

After its council revisited and passed a transfer it had previously failed Monday, Hamden is now set to close out the last fiscal year as finance officials would like, and set to stop the longstanding practice in town of including savings in operating budgets.

The Hamden Legislative Council voted Monday to pass a financial transfer that allowed it to close out the 2019 – 2020 fiscal year (FY20). The transfer, which totaled $2.85 million, was intended carry savings from lines throughout the budget and account for them in two savings lines.

The last budget included a $2.5 million savings line in the fringes section to account for savings from union concessions, attrition, and ​“incentive savings.” It also included a $350,000 efficiency savings line in the mayor’s office budget. Those lines were counted as negative expenses, offsetting the actual expenditures.

While those anticipated savings were accounted for in those two lines, the actual savings would appear in other lines throughout the budget like salary and other personnel-related lines. Monday’s transfer took whatever savings were left over in hundreds of accounts throughout the town and poured them into those two savings lines so that when the auditors complete the audit, savings are accounted for in the lines that were supposed to catch them. Otherwise, Finance Director Curtis Eatman told the council, the audit would look odd because it would look like the two departments where those savings lines were had been overspent. The transfer did not affect the bottom line of the audit. It was simply supposed to make the numbers look better.

When the transfer came before the council the first time, it failed. Some council members said later that they did not fully understand it. Others objected to the fact that the town was counting savings from all over the budget in those lines, when they were intended only to catch savings from concessions, attrition, and other personnel cost reductions. In total, the town realized only $220,000 in savings from union concessions in the 2020 fiscal year.

After the transfer failed, the administration resubmitted it, saying it was an important step to smooth over eye-popping lines in the town’s audit. On Monday, the council approved the transfer, with a handful of council members who had originally voted against it switching their votes.

As Eatman pointed out, the budget the council approved in June also includes a concessions savings line, this time of $2 million. By including that line in the current budget and passing the budget, the council was anticipating a similar transfer next year, he said.

While the transfer itself is relatively inconsequential — it does not change the bottom line of the audit, or change how the town is spending its money — the practice it accompanies does have a more significant effect on the town’s financial health.

As a part of the transfer’s passage Monday, Council President Mick McGarry sent a letter to the administration of Mayor Curt Leng requesting that in his next budget, Leng not include any savings lines.

Since savings lines count as negatives among the other expenditure lines, they allow the town to reduce the overall budget expenditures, thereby reducing the amount of revenue the town must collect in taxes. For instance, the inclusion of the $2.5 million in anticipated savings in the last budget meant the bottom-line expenditure number could be $2.5 million lower than the actual total of all of the budgeted expenses. That meant the town would not have to raise taxes quite as much.

But it also meant the town had to come up with $2.5 million in savings throughout the year just to end the year without a deficit. In years past, the town has managed to scrape up enough savings when revenues came in short to avoid a deficit. This year, Hamden will achieve no such feat. As Eatman told the council when he first presented the transfer, the last fiscal year will likely end in a $6 million deficit, mostly because of a revenue shortfall. (That number is just a projection, and will not be official until the fiscal year’s audit is released.)

Council members said they are worried about the concessions savings line in the current budget as well. The budget also includes a $6 million revenue line anticipating federal aid for pandemic relief. That aid has not materialized, and there is no indication yet that it will. If the town cannot come up with those $2 million in savings, and it does not get a $6 million revenue windfall, it is careening toward another deficit at the end of the current fiscal year. The council may soon have to choose between enacting a mid-year tax increase or further sinking the town’s financial situation with another deficit.

Leng said that in the future, he likely will no longer account for concessions as savings lines in the budget. ​“Moving forward I think concessions should be accounted for in a better manner consistent with best government practice,” he wrote to the Independent.

He said the town is currently engaged with unions to try to negotiate concessions packages.

Hamden has included savings lines in its budgets for at least a decade. The 2009-fiscal-year budget, the oldest one available on the town’s website, included a $300,000 retirement savings line. In 2013, the budget included a $1.2 million staff reductions and retirement savings line. From 2014 until 2018, budgets included attrition savings lines ranging from $150,000 to $275,000.

The union concessions savings lines started in the 2019-fiscal-year budget. That budget included an anticipated savings of $1.5 million from concessions. It also included $600,000 in savings from attrition.

That budget did end without a deficit, but only because the town paid $6.7 million less into its pension than it budgeted.

Jim Pascarella, a former council member who served as president and then finance chair who now serves on the town’s fiscal stability committee, said the council first included concessions in the budget because the town was engaged with unions and knew it had concessions on the way. ​“It has since become more of a guess or a hope as opposed to a fact,” he said.

“Based upon our experience with having done that in the past, I would say it’s probably best we curtail the practice for the time being,” he said.