Preliminary 2012 Municipal Budget Discussion

At the 12/22/11 Township Committee (TC) Meeting, the Finance Committee discussed how the 2012 budget was shaping up. Recall that the Township budget discussed here relates only to about 25% of your total property tax burden. The other 75% goes to fund the school (about half) and support the county (about a quarter).

The proverbial bottom line of the presentation is that without a tax increase or further expense reductions, the township is facing a $277K budget gap. By law, the budget has to be balanced (ie. it cannot deficit spend like the Federal government). So to close the gap the TC will need to raise property taxes about 5%, cut expenses by $277K (about 3% of an $8.77 million budget) or do a combination of raising taxes and cutting expenses. Future TC meetings in January and February will wrestle with this tradeoff while drilling deeper into various department budgets (Police, Admin, Construction, Health, etc). There will be a special additional TC meeting in late January (exact date TBD) that will focus on the budget. Citizens who wish to weigh in on this should attend that meeting and the one in February to let their voice be heard.

For citizens who would like to see the slides from the presentation, they are available on both the Civic Association (www.hardingOnline.org) and the Harding Township websites.

This report will build up the budget as it was presented – starting with non-property tax revenues, moving on the expenses and finally the trade off between property tax increase and cost cutting.

Regarding revenues, the preliminary forecast is that revenues (ex-property taxes) will decline by about $289K from $3.35 MM to 3.06MM. This is due to expected decreases in (a) surplus ($160K), (b) municipal court revenues ($95K) from reduced traffic fines, (c) interest income ($30K), and permit fees ($4K). In 2012 as in recent past years, fees from construction activities are expected to continue at a low level. And the forecast is for a loss of grants from Fish & Wildlife Commission.

On the expense side, total expenses are preliminarily pegged to decline by a hair (about $12K or 1/10th of 1%) to about $8.774. The biggest expense line items are compensation relates (salaries, benefits, pension and insurance - $4.88 mm, 55.6%), Other Expenses ($1.36mm, or 15.5%), Reserve for Uncollected Taxes ($0.91mm, or 10.4%), and Debt Service (0.79mm or 9%).

However, underneath that nearly unchanged total of expenses, there is more action -- $147K reduction in Pension expense resulting from Governor Christie's reform initiatives; $72K in savings from combining our municipal court with Madison's; and $12K reduction in engineering expense.

However, these savings are almost totally consumed by increases in health insurance ($70K or 9-10.5% increase); Police Salaries ($63K as per the PBA contract now in its fourth and final year); Non-police salaries ($38K – a 2% increase), reserve for uncollected taxes ($28K) and miscellaneous operating expenses ($20K). The budget for legal services is pegged at $115K, flat with the 2011 level, but almost double what it was a couple years ago due to an entanglement with a litigious resident over land use ordinances.

Netting the $289K of lower revenues with the $12K of lower expenses get $277K – this is the amount that must be raised through higher taxes or eliminated via cost cutting to create a balanced budget. A table at the end of the presentation showed tax increases between 2% and 5%. Interestingly a 0% or 1% tax increase was not included in the range of possible tax increases. The table showed that a 5% tax increase would close the gap and raise the entire $277K and not require any budget cuts. At the other end a 2% tax increase would raise $109K and require the TC and administration to find $168K more of expense reductions.

As the final figures come in for 2011, especially uncollected taxes, it is expected that the budget gap may close to $100K or perhaps a bit less.