Sunday, January 1, 2012

Franklin, MA: Long Range Financial Planning Committee

The Long Range Financial Planning Committee is one that has changed considerably in the last 14 months. It started as a committee with representatives from the Town Council (3), School Committee (2), and Finance Committee (2). In December 2010, it was reformed as a committee completely made up of 'citizens' - that is residents with no other direct board membership. 

The Long Range Finance Committee is a citizen advisory group tasked with helping citizens and Town officials better understand Franklin’s long-term financial outlook and the various courses of action available to secure Franklin’s financial future.

The Committee will achieve this vision by (i) evaluating and reporting on the Town’s five-year financial projection, (ii) assessing the nature and potential magnitude of the Town’s significant financial risks, particularly those that give rise to a structural deficit, and (iii) recommending steps to close the gap between future expected revenues and expenditures in an effort ultimately to achieve fiscal sustainability.

Additional information and links to the reports issued by the committee can be found on the Franklin website

One of the papers made available to candidates for office in the Franklin November 2011 election was as follows:

Financial Challenges in Franklin:
Informing Public Debate in Advance of the 2011 Town Elections
Prepared by the Long Range Finance Committee

As we approach the 2011 Town election cycle, candidates and voters alike have an opportunity to discuss the issues that matter most to residents of Franklin. Understandably, the pre-election dialogue gravitates toward timely matters that are likely to be voted upon in the near term or simple topics that can be answered in a few sentences. The downside of this dynamic, however,is that we often overlook the more complex challenges the Town of Franklin is facing. The purpose of this document is to help candidates and voters appreciate the nature and magnitude of Franklin’s growing financial challenges. We summarize the key issues and highlight resources that will help inform public debate.
Summary of Key Issues
In October 2009, the Long Range Finance Committee issued a report on Franklin’s financial outlook for the period from FY 2010 to 2014, finding that Town and School services are declining steadily because costs are rising faster than revenues (a “structural deficit”) and warning that this trend would continue indefinitely if not addressed. The Committee recommended that town leaders: (i) agree on the problem; (ii) develop a comprehensive, multi-
year plan for achieving a services neutral budget, and (iii) improve transparency and accessibility of financial information. 
Over the past two years, the economic recession has compounded the problem, and the financial outlook for Franklin, along with cities and towns across the Commonwealth, has deteriorated. Preliminary estimates show that expenses for existing Town and School services are on track to outpace revenue by 8-10% of the Town’s total operating budget over the next 5 years. This projection does not include additional expenses that will be required to address the Town’s aging infrastructure and begin funding its significant OPEB (other post-employment benefit) obligation. The residents of Franklin, together with Town officials, determine when and how these complex financial issues are to be confronted. The 2011 election cycle is the ideal time to move this discussion to center stage. 
How to Prepare for Discussions about Franklin’s Long Term Financial Outlook?
1. Read the “Five Year Financial Outlook” prepared by the Long Range Finance Committee in October 2009. An Executive Summary and mid year update are also available. These materials can be found on the Town of Franklin website.  Reports
2. Learn about OPEB. The Town currently follows a “pay as you go” approach for its OPEB obligation, which means it pays the minimum costs incurred in that year even though this minimum is insufficient to meet the future obligation. Across the Commonwealth, municipalities are assessing whether to continue “pay as you go” or to move towards fully funding the future obligations. In Franklin, the FY 2010 funding shortfall was approximately $5M or 5% of the operating budget, based on an $80M unfunded obligation. White papers and other general information can be found on the web. We have not recommended any specific resources in order to avoid linking ourselves with any particular political point of view that may be associated with the authors or sponsoring organizations. 
3. Compare Franklin with other towns. The Committee’s “Five Year Financial Outlook” compares Franklin to neighboring and peer towns across a wide range of relevant categories, including sources of revenue, municipal spending and school spending. If you prefer to do your own comparisons, considerable data is available on the web as follows: 
a. Massachusetts Department of Revenue Mass DOR
b. Massachusetts Department of Elementary and Secondary Education Department of Education
4. Follow the activities of the Long Range Finance Committee. The Committee is currently focused on four topics: (i) long-term infrastructure requirements, (ii) post-employment benefit obligations, (iii) legislative impediments to addressing the structural deficit, and (iv) benchmarking the residential tax burden. The Committee’s meeting schedule is also available on the Town’s web page and posted in Town Hall.

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