Annual Town Meeting, June 5, 2021 Message from the Finance Committee Westport’s Chronic Structural Deficit Expenses outpacing revenues is a structural deficit, and Westport has been in this chronic situation for many years. Each year it becomes more difficult to find ways to patch up the holes. For many years, we have adopted short-term solutions which simply "kick the can down the road." Revenue Westport’s revenue growth is limited by the: o Proposition 2 ½ o Historical State aid reductions that have not been restored o Slower growth of local tax and fee receipts o Few new sustainable and diverse revenue sources The biggest factor constraining revenue growth is Prop 2 ½. Westport relies on Property Tax as 73% of its overall revenue, and that growth is limited by the tax levy. Expenses Westport faces growing demands to increase expenditures in all its municipal services, as well as to comply with additional required state mandates. Each year, making the budget “balance” means these needed funds are excluded from the budget and not appropriated. Virtually every department in all of Westport’s sectors of its General Government, Public Safety, Schools, Public Works and Facilities, Human Services, Culture and Recreation are lacking the resources to adequately provide needed services to our Town residents. There are not sufficient revenues to support these needed expenditures. Many departments have needed positions that are unfilled. Many departments are understaffed. Many departments wait each budget year for help, and each year, the requests remain unfunded. Chronic Deficit As we look ahead, the fiscal outlook does not improve. In fact, the structural deficit grows each year. Revenue growth continues to be limited and expense increases are dictated by growth and other mandates that outpace available funds. The Budget presented to you today has many difficult choices. Current recurring revenue sources are not sufficient to sustain and support all legitimate department needs. Again, many budget requests have been eliminated from the Finance Committee recommended budget in order to maintain a balanced budget. FY22 Budget The FY22 budget process started back in October when departments prepared their budgets for the following fiscal year. Department heads participated in budget hearings with both the Select Board and the Finance Committee from December through April. The nine member Finance Committee holds multiple public meetings and encourages anyone to attend our meetings. The full FY22 budget is included in the Warrant Article 5. Recommendations for Free Cash Free cash is an unappropriated fund balance, and is certified by the Department of Revenue once the financial books are closed for the fiscal year. The free cash calculation incorporates surplus revenues (revenue collections in excess of estimated revenues), budget turn backs (unexpended appropriations), the prior year’s free cash balance, and outstanding property taxes. Free cash is the amount of funds that are unrestricted and available for appropriation. Free Cash is a nonrecurring revenue source, and should be limited to paying one-time expenditures, funding capital projects, or replenishing other reserves. There is no guarantee the amount of free cash that will be available each year, and is unpredictable. Recurring expenses should only be funded by recurring/reliable revenue sources. The Department of Revenue (DOR) recommends avoiding supplementing current year departmental operations with free cash. The Finance Committee has worked hard to avoid using free cash to temporarily patch holes. That is true of the budget we present to you today, which is supported as well by the Select Board. In doing that, we want to note the extraordinary cooperation and restraint that has characterized the Town departments' behavior in helping to pull together this budget. Ongoing expenses are best supported by ongoing and recurring revenue sources only. Difficult Decisions ahead The Finance Committee is in support of a Prop 2 ½ override which will provide Westport its needed recurring revenue stream, and the ability to fund the many departments’ needs. We are committed to working with the Select Board, School Committee, and all other department heads to address the collective needs of the entire Town of Westport. An override budget would require appropriation at a future town meeting, and would be expressly contingent upon approval by the voters of a Proposition 2 ½ overrid