Release date: June 4, 2024 12:00 AM
In a study of planned premium increases for 2025, new Finance Director Glenys Salas identified several budget shortfalls that could lead to a $2.6 million deficit in self-insured items for the town and schools.
“This is a worst-case scenario,” Finance Minister Salas said of the figure at a Finance Committee meeting on May 23, adding that it could be even lower.
The first portion of the deficit comes from $1 million budgeted as revenue from the town's fund balance, which is not accounted for as an expense anywhere else in the budget.
“We will have a deficit of $1 million as of June 30, 2024,” Salas said.
Salas said he believes the deficit is due to the budget being “somewhat optimistic” about unallocated fund balance revenues, which he said will be closer to $200,000 rather than $1 million.
On the revenue side, Salas said a shortfall of $500,000 was found.
The school's budget also includes about $100,000 in grant funding that has already expired, leaving a $100,000 shortfall.
Finally, looking at the town’s self-insured claims for 2024, she estimates expenses will exceed self-insured items by $1 million.
BOF member Bernie Molloy noted that future budgets could see seven-figure increases in insurance items “no matter how you break it down.”
But the shortfall shouldn't have a significant negative impact on the town's overall budget, which she noted is “very financially strong.”
“There's no danger of not being able to pay the bills,” Salas said.
She also noted that efforts to bring the budget back to fair levels could be a “multi-year” effort.
Salas said the town could remedy the situation by applying $1 million to another part of the budget, but she said deducting it from the fund balance would put it below the 12% of total budget target the town has set for its fund balance, which is part of the town's AAA credit rating with S&P Global.
She recommended that town and school employee premium contributions be “matched” with the town's contribution and increased to 9 percent.
The BOF, City Council and Legislative Council will continue to discuss solutions to the shortfall at upcoming meetings.
Editor Jim Taylor can be reached at jim@thebee.com.
