December 18, 2009
Mayer: Rethink cycle of budget
By JANE ROH
Gloucester Township Mayor-elect Dave Mayer says one of his first actions upon taking office on Jan. 2 is to put his cash-strapped town on a calendar year budget.
Major cities and larger municipalities like Gloucester Township are on the state's June 30 to July 1 fiscal year schedule, while more than 500 municipalities are on a January 1 to December 31 schedule. If approved, Gloucester Township would be joining towns like Edison and Old Bridge, both in Middlesex County, that have recently adopted the move in order to alleviate a financial crisis.
"What that means is my first budget will be a six-month budget. It will get us from July until the end of the year," Mayer explained. "And then I will propose another budget that will then get us onto the calendar year budget. What that will do is allow us breathing room for our cash flow."
Revenues have plummeted in the township, which had $2.8 million on the books at the beginning of fiscal 2008 and ended fiscal 2009 on June 30 with a $52,523 deficit.
"In 1991, we were compelled to move to the state fiscal year because our population exceeded 35,000. The concept was that it would expedite the budget process," said business administrator Tom Cardis, who has been with Gloucester Township since 1989. "That didn't happen."
Municipalities that rely on state aid often must wait months until the amounts are disbursed or announced before adopting their budgets. When the state comes up short and freezes funding, as is now the case, towns can be thrown into desperation. The end result is more frequently than not higher taxes for residents.
"Last year we didn't get our state awards until 10 months into the fiscal year," Cardis said. "It doesn't make sense."
"And the labor contracts run on a calendar year," he continued. "It's a pain in the butt to try to figure out benefits when you're splitting the fiscal years."
Gloucester Township residents receive two tax bills in the mail because the town must estimate what the rate will be. Moving to the calendar year schedule will remove the need to guess, and Cardis said the town could save as much as $30,000 if only one bill went out.
The state's major cities, including Camden, and more populous municipalities, such as Cherry Hill, are on the state schedule. Moving to a calendar year could position Gloucester Township for more aid, Cardis added.
"If we're going to apply for extraordinary aid, I would rather compete in the pool of calendar year towns," he said. "It seems like the state takes the pool left there for fiscal year towns and hacks away at it, and less money available to us." The township's application was denied last year, and it is awaiting word on extraordinary aid for the 2010 fiscal year.
The move must be voted on by council and approved by the state's Local Finance Board, which oversees municipal finances. Mayer said that last week he discussed the switch with Division of Local Government Services Director Susan Jacobucci, who indicated her approval. Reached by telephone, Council President Glen Bianchini said the measure was "prudent."
Joe Monzo, a former acting director of the Division of Local Government Services, said the shoddy economy was spurring more fiscal year towns to contemplate the change.
"The advantage is you can build up surplus depending on how expenses fall," Monzo said. "Back when towns switched to a state fiscal year, aid numbers were quicker in coming. It only seems to be the last couple of years where fiscal year towns are having to wait and see what their aid numbers are."
State aid has shrunk with the economy. The extraordinary aid program, which helps towns offset tax hikes, handed out more than $19 million last year, down from nearly $43.1 million in 2005.
Monzo said that if Gloucester Township adopted a 6-month transition budget next year, it would be able to use its 12 months' worth of state aid to plug holes and perhaps even build up a surplus. In addition, major expenses like pension payments might not fall due in that 6-month window.
"Then the aid you get in the new budget is from the state's fiscal year 2011 budget. You're getting the proper amount of aid, and building up surplus can help a town down the road," he said.
But the boost could just prove to be a temporary salve.
"It depends on the town's situation," Monzo said.
"Generally speaking there is no difference except that your year begins at a different time," said Gwendolyn Harris, associate director of the Walter Rand Institute for Public Affairs at Rutgers University. "There are some who would say there are advantages to having your fiscal year start at the same time the state fiscal year starts because you have a clear understanding of your budgetary needs and priorities at the same time the state is developing their budget."
It's difficult for revenue-starved towns to win in the current environment, Harris continued, because dwindling state aid could lead some towns to take on excessive debt to avoid raising taxes.
"I could see the advantage of either and the drawbacks of both," Harris said. "It's kind of like you choose your poison."
Mayer said he was also studying long-term solutions based in part on an independent audit of the township's finances that noted clerical and accounting errors. Dottie Jones, the township's chief financial officer, said she was leaving as part of the transition, and Mayer said more personnel changes would come. Mayer added that he would continue the push to sell the vacant Nike missile base and would order an internal audit of the township's departments.
Reach Jane Roh at (856) 486-2919 or firstname.lastname@example.org