City Manager Jay Ash has filed a $115 million budget proposal with the city council to cover Chelsea’s operations and obligations for the upcoming year. Ash views this Fiscal Year 2012 budget as historic, featuring a 4.5% reduction in overall spending while simultaneously increasing police staffing to unprecedented levels and boosting the city’s pension contributions beyond state requirements. “And we’re still providing for much more,” said Ash. “We’re going to take advantage of federal funding to add another four firefighters. We’re going to get even more serious about recycling by hiring someone to help push the effort in our community, and we’re continuing to be mindful of future budgeting issues by not overspending today or borrowing ourselves into bankruptcy tomorrow.” The careful stewardship of municipal resources under Ash’s leadership has transformed Chelsea significantly.
The budget reveals a troubling trend: non-school local aid has declined by another 7%, a pattern affecting municipalities statewide and particularly those near Chelsea. While neighboring Everett gained $1 million in Chapter 70 funding, Chelsea faces a $500,000 reduction in school aid, bringing that figure to $6.4 million compared to $10.6 million in FY’11. “We’ve lost about 40% over the last decade in aid to support everything but education. We’re managing through that, though, and have had some good economic development and entrepreneurial efforts to thank for helping to keep our budget funded,” Ash said. The challenge stems from fixed costs rising faster than level-funded school aid. Chelsea’s schools require an additional $2 million to meet contractual obligations and maintain balance. “It may seem counterintuitive that we would add positions on the municipal side but cut them on the school side. However, school funding is so much more dependent on state aid, so when state aid slows, levels or, heaven forbid, drops, the impact on school spending is much greater,” explained Ash, who noted that state aid comprises 83% of school spending versus just 13% of municipal spending. Beyond education, most city departments face level funding.
Despite budget constraints, Ash’s plan adds positions in key areas. Public safety gains staffing while public works receives two new positions—a full-time laborer plus half-time roles for solid waste enforcement and recycling coordination. The clerk’s office will add staff to implement a new parking program, and an additional financial position will monitor water, sewer, and other accounts. Staffing in some city hall offices has dropped 50%, though selective hiring continues in critical areas. “Those accounts continue to wreak havoc on our budget. On health insurance, for example, we’ve gone from spending 5.5% of the municipal budget to nearly 14% during my tenure. I remain hopeful that the State will take action to give us the tools we don’t have today to bring health insurance spending and retirement costs better under control. Until that happens, though, more and more tax dollars are going to employee benefits instead of direct services. That’s probably our biggest trouble spot,” suggested Ash.
The largest spending increases stem from employee benefits, with health insurance rising 7% and retirement contributions up 4.5%. Last week, the House of Representatives passed legislation to grant cities and towns authority over health insurance program design, addressing unsustainable coverage costs. Ash’s Five-Year Financial Forecast shows the city’s structural deficit—recurring expenses minus recurring revenues—continuing to decline through FY’12 and beyond. The FY’12 imbalance of $1.9 million will be covered using city reserves. “Frankly, we’ve done a great job holding down spending. If you were to look at debt service, for example, you’d see we are actually experiencing declining debt levels while still doing more projects. However, we have little control over employee benefits and even less control over local aid,” emphasized Ash, citing non-school local aid cuts and soaring employee benefits as primary culprits.
The annual budget proposal represents Ash’s most consequential action, signaling the city’s priorities on public safety, infrastructure, and service quality. At least one councillor views the outlook positively. “Frankly, in these continuing troubled times for municipal finance, to be able to be talking about providing adequate and then some service levels with a heightened focus on particularly important areas, like policing, is remarkable. And, to be able to do so while having the lowest tax burden around is astonishing,” said Councillor Brian Hatleberg, referencing a recent report showing Chelsea costs at least 23% less to live in and own homes than surrounding communities. Hatleberg and fellow councillors will begin budget hearings on May 16, with a public hearing scheduled before the council votes on final approval.