Aldermen, Board of

A special meeting of the Board of Aldermen was held Wednesday, March 23, 2011 at 7:00 p.m. in the Nashua High School North Board Room. President Brian S. McCarthy presided; Deputy City Clerk Patricia Piecuch recorded. Prayer was offered by Deputy City Clerk Patricia Piecuch; Alderman Sheehan led in the Pledge to the Flag. The roll call was taken with 13 members of the Board of Aldermen present; Aldermen Tabacsko and Chasse were not in attendance. President McCarthy Alderman Tabacsko and Alderman Chasse contacted me to indicate that they had work commitments this evening and would be unable to attend. Her Honor Mayor Donnalee Lozeau was also in attendance. President McCarthy Procedurally this is a special meeting of the Board. What is going to happen is I will ask for a motion that we invite the Board of Education members to be recognized to ask questions during the presentation. I will ask Mr. Hallowell to introduce the members of the Board of Education who are here, for the record. Both boards did in fact notice this as a meeting of the respective boards, and while it is not formally a meeting of the Board of Education, they did notice it so that the fact that there is a quorum of the Board of Education present should be correctly noticed. MOTION BY ALDERMAN LAROSE TO ALLOW THE MEMBERS OF THE BOARD OF EDUCATION TO PARTICIPATE IN THE DISCUSSION AND ASK QUESTIONS MOTION CARRIED Robert Hallowell, President, Board of Education, introduced the following members of the Board of Education also in attendance: Richard Dowd, Thomas Vaughan, Steven Haas, Sandra Ziehm, William Mosher, Dennis Ryder, Dr. David Murotake, and Student Representative Subbarao Yalamanchili. COMMUNICATIONS MOTION BY ALDERMAN CLEMONS THAT ALL COMMUNICATIONS BE READ BY TITLE ONLY MOTION CARRIED From: Mayor Donnalee Lozeau Re: Special Board of Aldermen Meeting MOTION BY ALDERMAN CLEMONS TO ACCEPT AND PLACE ON FILE MOTION CARRIED Alderman Deane Unlike our microphones at City Hall, with these if you don’t push the little button down and see the green light people can’t hear you and it would not be picked up on the tape. President McCarthy Thank you for pointing that out. I’m going to ask the Mayor to give the presentation, and I think those of us who are sitting underneath the cone of silence will move to the front row of the seats for the time being. Mayor Lozeau First of all I really appreciate everybody participating tonight. I was trying to find the best way to be able to put this, as I say to set the table for what we are faced with this year. Now everybody consistently hears all Spec. Bd. of Aldermen – 03/23/11 Page 2 over the place everything is horrible, it’s horrible on the federal level, it is horrible on the state level, towns, cities, everybody is having some trouble. I thought it would be helpful to define for you the current problem. In very simple terms, a little bit of meat on the bones, but not a lot. I’m going to cover tonight; how did we get here, where is here, now what, and where do we need to end up. How did we get here? Over the last three fiscal years our city’s assessed property value decreased from $9.4 billion to $8.4 billion. That is a significant dollar I don’t have to tell any of you that. We have had decreases in our local revenues and we have had decreases in our state revenues. The decrease in revenues; the cumulative local decreases have been primarily in motor vehicles, almost $3 million and interest income of at least $6 million. I don’t think people realize that we really generate a significant amount of revenue from our interest income. On the state it has been primarily in the suspension of revenue sharing, which is $6 million and the state retirement contribution changes, which have cost us $1.8 million. That is over $16 million. If you kind of let that sink in and we remember that this is over the last three years and every $1.7 million equates to about 1% on the property tax rate, it really, I think, puts it in perspective because certainly people haven’t seen increases to that degree. This doesn’t even include the lower than expected increases in school adequacy dollars, the lower than expected Rooms and Meals sharing from the state, and suspension of the funding for new Water Pollution Control Grants. It also doesn’t take into consideration that we anticipate a continued decline in our local revenues; motor vehicles are still down and interest income is also down. I just thought a graph might help you see just how big those dollars add up to, so you can see over the last three years. What are the newest challenges that we face? Right now we anticipate an increase in healthcare and retirement costs. We’re anticipating an 11% increase in healthcare costs. That is about $3 million. Now that includes the cost of healthcare going up just as the general rule and it includes what we anticipate to be the costs associated with the federal changes to the healthcare law. The employer rate increase to retirement is $1.7 million. In addition, the FY11 decrease of 10% in the state retirement contribution, in that rate is another $1.4 million. Let me be really clear about that; the state had been funding, their contribution level was at 35%, last year legislation passed to drop it to 25% so this past year we have increased what we have been paying. The legislation had a clause in it to have it sunset and go back to the 35%. The Governor’s budget proposed it to go to zero, but we’re anticipating, and from the conversations I have had with some of the key legislators I’m anticipating that the state will probably at least keep it at that 25% so I’m going to account for that. Then of course you need new dollars for different things. New dollars that we are going to be needing are for Enterprise Resource Planning also known as ERP, sometimes referred to, components of it, as ENGINE. We’re looking at about $100,000 for that. Water supply (public hydrants); when Pennichuck’s rate increase went in that affects us as well. Our Capital Equipment Replacement Fund (CERF); the way that we have laid out that new strategic approach to CERF this year, will require $385,000 if we keep it the way that we have been planning so far, and I intend to do that at a minimum. Then capital for buildings for $150,000. Now as many of you know, we don’t normally keep a fund for our facilities so we capital plan for our equipment and our vehicles, but we haven’t done that for our buildings. With the work that we have been putting into our buildings, I think it would be irresponsible not to target some money aside even in difficult times towards establishing that. It is always beneficial for people to take a look at kind of a pie chart of where our budget dollars go. Now when you see these numbers, all of you have heard me say many times I like to try to speak the same language and that holds true to saying the same numbers. When you look at some of these numbers, especially the Board of Education is going to look at that and say our budget isn’t $147 million, almost $148 million, and that is because the revenues that you generate and grants that you get have not been taken out of that so that is not a full amount funded by taxpayer dollars, but that is the amount in our annual CAFR, the Comprehensive Annual Financial Report, which is where we pull the numbers. Spec. Bd. of Aldermen – 03/23/11 Page 3 When you look at the breakdown I don’t think there are any surprises, but I think frequently those budgets come before us and they talk about their operating budget, but not their full budget, and their full budget, fully loaded, includes the costs of benefits, retirement, total compensation that kind of thing. So that is what you see there in the breakdown of those that have hit $10 million. Now, what do we do? What I have been doing is trying to make sure that this information gets out, that we all have a clear understanding of what we are looking at and what we are working on right now that will be coming your way relatively soon. I have provided this information to the employer boards, to the unions, to the legislative bodies, which includes our Aldermen as well as our state legislative body, and to our citizens. This is a great opportunity tonight for our citizens to get a sense of really defining the problem. At a minimum we need to find real fundamental solutions to the problem, and that means that we really have to look at how we are doing business. Now we have been doing that and many of you have certainly been part of that. We also have to be certain that we all gain a better understanding of what total compensation is. You have heard me talking about that as well and I did that in my State-of-the-City. We have to provide options that relate directly to the cost drivers in compensation and those two big cost drivers are healthcare and retirement. For instance, I believe, actually I know that part of the solution includes healthcare changes. These are the ones that I need to have planning our budget and moving forward. We have to add a lower cost/high deductible plan, we need to remove the named healthcare providers from the collective bargaining agreements, we have to increase the cost sharing of premiums. I’m proposing that we go from the HMO, which is currently at 10% by the employee and 90% by the employer, to 20% by the employee and 80% by the employer, and with the Point of Service (POS) that same 10% increase so it would go from 20% to 30% for the employee. We have to make changes to the plan design. We know if we look at the increased cost of premium sharing, I can tell you that for every 5% increase that is $1.5 million, so if that change takes place to go from 10% to 20% that is a $3 million savings. Then we look at the changes to plan design. I’m proposing that we increase co-pays. Right now our office visits are $10. I am proposing that they go to $20, emergency room visits from $50 to $100, and to add deductibles. I don’t know how many of you realize, but our healthcare plan has no current deductibles in the health plan. I’m proposing that we go to $250 for a single and $500 for a family. Then we need to have a managed three-tier pharmacy program along with introducing some consumer driven healthcare strategies. I think many of us have talked about that in different settings. What does that mean; getting the employee a little bit more in the driver’s seat. I can recall a few years back when Alderman Deane said they should be looking at their bills and they certainly should. Some do, some don’t. Some have easier access to them than others, but that is one part of it. Also looking at programs such as COMPASS, which is a program where if an employee has to go in for let’s say an MRI and they ask their doctor what is the cost of an MRI and they call COMPASS and they say I need to have an MRI, this company would say to them well here are your options and here are the costs, and if you choose the lower cost you will get $100. They become consumers, they start to see what the costs associated with it are and they make different choices. We have to have ongoing citywide division review of staff levels and approach to staffing. Most of the things on this slide we already do, but I think it is worth articulating what they are. We have to reorganize as appropriate. We have to continue to eliminate duplication where possible. When I talk about that one sometimes people say to me really, you know you hear people say that all the time get rid of duplication and it sounds like it is going to save tons of money, is that really the case? I’m not certain that I would be comfortable saying to you that we have a significant amount of duplication, I’m not, but I am comfortable saying to you that we do have some duplication and some of them are more obvious than others. For instance, we have a purchasing department, the schools have a purchasing department, is there a reason to take a look at that and see if we can bring them together but still follow the process of after it gets to a Spec. Bd. of Aldermen – 03/23/11 Page 4 certain point in purchasing it then for the City side would come to the Finance Committee, but then for the school side would come to the School Board, and I think that is one of those things worth exploring. In the final analysis, I don’t know if it will be less expensive or more efficient, but we should certainly look at that and make that determination, and that is just an example. We have to continue our progress with efficiencies and effective delivery of services. We have had a significant impact on the cost of overtime and things like that. They have been declining over the last few years, and we have to stay in that mode. We have to continue to spend our limited dollars smarter while investing wisely. One of the things I worry about as we talk a lot about cutting and how much we are spending, it is equally important to talk about how we are investing, and you don’t not invest in bad times because sometimes you get your best investment in the most difficult of times. The work that we are doing on some of our city buildings has, in some instances, come in at a lower cost than we anticipated because people are out there looking for work, and that has benefited us very well. When I talk about spending our limited dollars smarter, you may recall during my State-of-the-City I was talking about a third party provider for our natural gas services, and we saved almost $170,000. We are doing the same thing with electricity this year and other things like that, which we can be doing different. We have to plan ahead, while doing this, towards FY13. Now I know that people go well of course planning for the long term. We have to think about today, we have to think about tomorrow, and we have to think about a few years down the road. Specifically as we’re looking at some of the things that I have already mentioned there are things that we may say well this is a good idea, like let’s say for instance we do the examination of purchasing and we decide that is a good thing to do, there is not a chance that it is going to get in for this fiscal year so that is something that goes on the sheet of what we are looking at and look at implementation for FY13. Where do we have to end up? Now this is going to be very obvious to all of you in this room; with a budget that maintains the best customer service that we can provide. In spite of all of these challenges that we have had over the last three years I think we would all agree that services have not been impacted significantly here in the city. With the exception of the schools, we really have not had any layoffs and the ones the school had some were by attrition, some were hired back, but we really have not seen what other communities have seen; wholesale layoffs, big numbers, impact in whether they are open for business 5 days a week or not or frankly 7 days a week in some instances, and we have not had to do that. We have to be within the Spending Cap, the FY12 budget has to have the necessary spending cuts to mitigate the identified cost increases that we have been talking about, and we have to have the lowest possible tax increase. Here is why right now is still not easy to define; the Governor’s budget proposed almost $6 million in hits to the city and these are not the only ones, but these are the bigger numbers, that is why I say almost $6 million, the state retirement rate contribution moves to 0%, that is what we talked about at the beginning when I talked about that rate, so I did the math and took out the 10% I already counted on the first slide and then just did the math for the 25%. That could be an additional almost $4 million. School building aid reduction could be $1.6 million, the catastrophic aid reduction could be $400,000, and it is really too soon to calculate other state legislative changes. It changes all the time. The House version is different than the Governor’s version the Senate version is going to be different than that. For those of you in this room that have served as a legislator, you know that the game is not over, I shouldn’t call it a game because I don’t really see it that way, but the process is not over until the Committee of Conference has met and done their work, and that is when the real change will hit and that is when you will really have a sense about what is going to happen. The first part of what I’ve presented tonight is something that I would like to think that we can do with reasonable cuts. We cannot cut our way out of this problem and we can’t tax our way out of this problem, we have to have a balance. That is what I’m trying to achieve here. If we end up with this facing us then I Spec. Bd. of Aldermen – 03/23/11 Page 5 can’t promise that we won’t have layoffs. I can’t even promise in the first instance that we won’t, but my goal is to get to a place where the cuts don’t impact services, and I don’t know where that will be. By having these discussions with groups like this and other groups that I identified, I want us all to be working from the same information, from knowing what we are faced with. There has been some discussion about when my budget comes in. I don’t want to bring my budget in unless I feel confident that it is as close to a finished product as I can have with some of the tough decisions that have to be made. Now ordinarily in my budget process a memo goes out end of December/early January that lays out the parameters of my expectations, budgets start coming in, and I meet with departments into January and February and make the changes I’m going to make as the school board knows. I’ve been back here a few times over the years, right. After you finish your budget and present it to me I come back and say how about this and I appreciate that. Last year the school board made a decision and included me in it talking about let’s lay out what those cuts might be and where they will be so there won’t be any surprises, so people won’t have the uncertainty of what could happen. This year, I’ve taken a different approach, and we are working at the budget in our cabinet setting instead of me with a single department, and we’re presenting those budgets with the whole group present, and it is giving us an opportunity for each division to learn other people’s budgets and what their struggles are so that when we are making decisions some people are willing to acquiesce on certain things in their budget because, for instance the Superintendent makes a compelling case for something else. I believe that is the way that you start down a collaborative process to making sure that we have an end product that still achieves the goals that I outlined. That is what I wanted to lay out tonight. I know that it doesn’t go through some of the lines. I will certainly do more of that when I bring you the budget message. I know I will be back to see the School Board on what is going to go in the budget that I’m going to present. As I said, I anticipate bringing the budget in in May, I’m shooting for the first meeting in May, but I will know better as we complete our work here. As some of the other action at the state level changes I want to be able to be in a place where I have a plan for things. Some of the communities that have passed budgets have just said don’t know what is going to happen when it comes back and that money is gone, we’re just going to keep talking to our legislators. I don’t want to do that. In Manchester the Mayor chairs the School Board and the Board of Aldermen; all different circumstances, all different approach to how things get done. But for those of you that have worked with me for quite some time I think understand I’m more interested in what we can do together, not what I can tell you to do. In a nutshell, there you have it. I’m happy to answer questions that I can answer tonight. I’m looking for Mr. President to ask if I can recognize people or if you would rather do that. Alderman Wilshire Thank you Mr. President. Thank you Mayor. As you know, I am the Business Manager at a local non-profit, and we are struggling with the very same issues that the Mayor presented tonight. We are increasing co- pays, we are increasing deductibles, we are increasing cost sharing, and all of that in a vital effort to save jobs. I think the bottom line is everybody in this city knows that things have to change to some degree in order to save the person’s job that is sitting next to you. I want to thank you for that, and I’m going to say again like I said during the last budget, things that I think the City can realize real cost savings on are prescription drugs, and I’m going to continue to advocate for that and mail order and other tiers of formulary drugs and things. It is time. Everybody knows they are going to have to pay more, everybody is paying more. There is probably not a person in this room that hasn’t had increase in deductibles, co-pays, office visits, and all of those things. Spec. Bd. of Aldermen – 03/23/11 Page 6 Mayor Lozeau I think what is also very important to remember here is it is true that we are asking employees to take on a bigger share of the costs, but they still have an amazing health plan. It is really a good health plan. Alderman Wilshire I agree. Alderman Deane Thank you. Thank you Mayor for your presentation. I think another area where we could look at consolidation, there are a few in my mind anyway, is Human Resources. The school district has a human resource department, it seems like every department has some sort of human resources situation, and they could probably be consolidated. A number of years back myself and President McCarthy, I co-sponsored a piece of legislation with him to consolidate the maintenance operations of the outside facilities so that the boundary lines associated with school district property and city property weren’t territory or was only maintained by those groups. In other words, you could go to the Amherst Street School and see the Park & Recreational lawnmower wheels rubbing up against the school district lawnmower wheels with each department having three guys and $100,000 worth of trucks, trailers, and equipment and everything else where if one group had gone there they could have done the whole section of that facility in one shot and gone on to something else. I think that is really something to look at. I’m glad Alderman Wilshire brought up the insurance. I’ve looked at my health insurance and during the discussion with my employer and my employees, when you have an employed contributing you can’t just always think of yourself you have to think of the employer as well. In my case, the employer does not have to contribute. That is a benefit that can be taken away at any time. I always look at the employer and look what is best, do I want to pay an increase in premiums for a plan that I might not use or do I want to keep my premiums at the same rate and increase my deductibles. The way it is set up I have a $3,000 deductible per person on my plan, which is a total of $15,000 and then I am reimbursed a percentage of what my employer pays as their contribution towards my premium when I bring the bills in, which works out, but what I have seen is a lot of people don’t just run down to the emergency room because a portion of that real cost is not coming out of their pocket. It is a stark reality of what is happening with health insurance and what the costs are. If you look around this country and what is going on, people are finding that out. With this new federal healthcare law with already over a million people being exempted from it for some reason, the grandiose bill already has exemptions and what it is doing to small businesses with people of 50 0and under, I don’t think it is made out to what people thought it was going to be or might have thought it was going to be if they had a chance to read that bill. Pensions is another issue as well. When you look at the state level I don’t understand how nobody saw what was happening in the economy while they continued to approve biennium budgets at 17-18% increases. Our revenue now in our motor vehicle is way down. It is not rocket science. People are struggling. One of the things that really hit home was the decrease of a billion dollars of assessed value on property and what that does. That is going to be made up in the tax rate somehow. But you also have to take into consideration the people that bought those houses that have now decreased in value that are still paying mortgages on those pieces of property. You have to think of those people that are struggling along too, and there are a lot of them. People that bought houses a number of years back especially they are in houses and they are upside down in their houses. A lot of them are riding it out and some of them are not. Spec. Bd. of Aldermen – 03/23/11 Page 7 Another fear I have, and I think I read it in the paper, dipping into our undesignated fund balance. I don’t know what they do in other communities, and I’m glad this board passed a policy associated with that. That was, I believe, a responsible thing for us to do. It is similar to the federal funds that were sent out all over the place as economic stimulation that were one time funds that are now gone that everybody is looking at what do we do now. Draining fund balance to maintain a problem that we have that, as the Mayor stated earlier, we can look onto the horizon and see that, especially with inflation, and when you look at the CIP it doesn’t include food and clothes and gasoline, it doesn’t include any of that. And when you go to the grocery store look what is happening. You go to buy clothes and gasoline, everything is rising. The government keeps that CIP number in there, but it doesn’t include all of those things that are normal day-to- day purchases that we all have to deal with. The budget will be interesting. I do like the consolidation and looking at some ways to consolidate in some of these areas. I will be really interested to what other ideas that you may be presenting to us when you bring your budget in. Thank you. Alderman Clemons Thank you. I would like to start by just thanking the Mayor for her presentation this evening. I thought it was very informative. I also want to compliment you on the proposals that you have in regards to healthcare. I think those, in my opinion, given the times we are in and the challenges we are facing coming from Concord, those are pretty reasonable requests to ask of our employees. I know myself actually my own healthcare at my work is increasing by a lot and one of our options is a deductible plan, and I’m not going that route because I have a choice, but I think when you look at what was proposed this evening; $500 for a family or $250 for an individual, I think that is a reasonable amount, that is a very achievable amount that one of our employees can attain. I think that is something I would definitely support and encourage folks to consider when the time comes. The other thing that I would like to just briefly mention is the fact that we’re all in this together and so when it comes time for the employer boards to negotiate these contracts and when it comes time to have these contracts come before our board, it is important to remember that we are all in this together and that we need to work for the benefit of the entire city. These are tough times that we are in. I think the difference between the last time a lot of these contracts came up and now is that when I came onto this board and we had 15 unsettled contracts, they had been lingering around for a long time. We got those accomplished and we got those contracts replaced, and they were good contracts. They got people’s salaries up to where they should be. Now that they are there I think it is time to recognize the fact that we are in tough times and that we need to be prudent going forward. I, again, just want to throw that out there that we are all in this together and we need to do the right thing for everyone in the city. Thank you. President McCarthy I wanted to make another point about healthcare and some of the options that are available to us having to do with out self insurance plan. At one point we were insured and now we work through the self insurance fund, and I think with 2,000 employees who are active and primarily in working age, we are going to wind up paying about the same or less by being self insured than we would if we bought an insured plan so I think we are in a good position there. But as I understand the way this works now, because of the way our collective bargaining agreements read, we have an administrator of the plan, but basically the only difference if an employee from unit X and an employee from unit Y go to the doctor and get the same service is if they are insured under different plans there is a different rate at which we, out of our self insurance fund, pay the same doctor for the same service. In one of those cases we’re getting a bargain and in the other case we are paying more than we need to. Spec. Bd. of Aldermen – 03/23/11 Page 8 There are a couple of things there. I think that speaks greatly to the need to eliminate the named carriers because we really, we aren’t hiring the carrier anyway, that is simply defining which guy’s plan we go through to reimburse the same doctor for the same service, and it may or may not be to our benefit and therefore to the employees as well for us to go through any particular one of those plans. Also eliminating that with the size of the city and given our local nature and the nature of healthcare in the city, I think we have an opportunity to negotiate some better perhaps provider arrangements from our self insurance fund than we are getting through any of the named carriers. I wanted to ask are we pursuing that last part and also how has the response; I know you have spoken to some of the bargaining units, how has the response been to requests like removing the named carriers from contracts? Mayor Lozeau I will start with the last question first. As you know Alderman McCarthy I can’t request anything because I can’t negotiate. What I have said is this is what I can accept and this is what we have to have. I think people are coming to better understand the value of removing the named carrier. It is a benefit both to the employee and to the employer. If our administrative costs go down because we can have some competition in there everybody benefits because it is reflected in the working rates. Right now we have two named carriers and they have no real incentive to work with us on that cost and each year it has gone up. That is important and it is something that I have said that we need. We have also had discussions with WBS, which is Workplace Benefit solutions, which is our consultant on insurance. They have looked at what do we think the City can realize with some of these changes. All of that is heading certainly in the right direction. There are very few plans that actually have named carriers in it so I am hoping that we can achieve that. President McCarthy Are there questions/ Robert Hallowell Thank you. Thank you Mayor for coming tonight and inviting the Board of Education. Glad we could host everybody. We tried to make everybody feel welcome with their own little nametags there. I just want to speak to Alderman McCarthy had a comment in there about what the employer boards thought. Mayor Lozeau I missed that. Thank you. Robert Hallowell I want to be careful in how I respond to this, but I will say that while there may be specifics in the Mayor’s presentation, I think there isn’t an employer board here in the City that doesn’t recognize that some of these issues are out there that need to be addressed. I think we are all working towards the same goal. I want to go back to Alderman Wilshire had mentioned the prescription drug costs; we get information from Anthem and from Harvard Pilgrim, a summary of what the stats are for the various unit members that we have. Only 10% of our membership takes advantage of the mail order service in order to get the prescriptions. The savings to the City by having those people choose mail order, it is a simple thing, it really doesn’t cost them anything, in fact it saves them money, and yet I think we don’t do a good enough job explaining that to people. Spec. Bd. of Aldermen – 03/23/11 Page 9 When we talk about consumer driven healthcare I think some of the things we should be thinking about is if you don’t currently take mail order service for any of your prescriptions, we will give you $100 to do it because I guarantee you I would do it. I guarantee you once you do it you recognize how simple it is and how much more convenient it is than forgetting that your prescription needs to be filled and having to do it. You get a 90 day supply, far more convenient if you are taking a prescription drug over an entire year. A second example is Lipitor. Lipitor everybody gets because there are lots of ads that say this is the only thing that is going to save you from dying from a heart attach. Well there is a generic version of that, which is 75% less than buying Lipitor, and yet I think what I read was in the Anthem plan we spend over $450,000 a year on Lipitor so again let’s take everybody that is on Lipitor now and for $100 we will put you on the generic, we want you to try the generic. Once they go to the generic, nobody is going back because they work exactly the same, and it is cheaper for them. They don’t do it because they don’t have an incentive to do it. Those are simple things we can do and those two things alone could save you hundreds of thousands of dollars. I like the things that the Mayor has. I think that consumer driven piece is a piece that we really need to flush out in addition to all of these other things. These are things that could benefit the employee and benefit the City and make people’s lives easier quite frankly. Thank you. Alderman Deane Mr. Hallowell thank you for your comments. I don’t know if it is being done now, but are some of these divisions being shown the actual insurance and pension costs of their operations? Mayor Lozeau Yes… Alderman Deane In the past, a lot of them looked at it like well that is on the City side, we don’t have to worry about it, it is not part of our operating budget. But it affects the bottom line. If their operating budgets had to incur the healthcare, the dental, and the pension costs then you would think that when they were negotiating their collective bargaining agreements and they knew that was coming out of their bottom line directly that perhaps they would take a harder look. But you are presenting that information to them so that they know what the cost is? Mayor Lozeau We are actually presenting that to them. It is again part of what I’m calling the total compensation to change the discussion on how we are talking about that. As you know Alderman Deane, my first budget I went through and we worked really hard trying to attribute costs to different divisions to be able to say here is what it looks like for healthcare. Even though it wasn’t in their budget, bottom line so to speak, as you said, on our side of the ledger, but we still try to at least do a breakdown. The problem is it is educated guesswork doing it that way. At the end of the year, after the audited financial statements, we’re in a much better place to do that. As you know we also changed the cost modeling for the union contracts. As Alderman Clemons said, we came in at the same, all of the contracts had been out there for a long time, and one of the things that was a very early lesson for me was that the modeling sheets that we were using or were working from really were not capturing all of the associated costs. It was much like how I try to do the attribution in the budget was the best we could guess. We really changed that now and we can lay out in those cost modeling documents specific dollars. Under ERP, when that goes in, we will actually be even able to do it much better and can likely put it right in their budget so that it can be seen that way. That is one of the things that Spec. Bd. of Aldermen – 03/23/11 Page 10 we’re looking at. It won’t be for this budget cycle, but I’m not letting anybody get away with saying my budget is $10 million when their budget is actually $18 million. I just made that number up, but you get the idea. Alderman Deane I think in the past I had put an ordinance in and the board adopted it, which encouraged the employer boards and different divisions to take advantage of that cost modeling prior to legislation being filed so that they could see that same cost modeling that we’re looking at so they could have a better understanding of what we are faced with. It is my recollection that in past years that was never done. Someone would sponsor a piece of legislation and more often than not, to the best of my memory, the employer boards had no idea what the cost modeling was other than the labor end of it, you know the cost end of it for their operating budget, but the rest of the attributes and the language in the contract were costs that were driven into other areas of the entire operating budget weren’t really understood by everyone. When we see these contracts come in the labor is one side of it, the 11, 12, and 13 accounts, everybody’s operating budget, but the rest of it was absorbed in other budgets within the City’s entire operating budget that had nothing to do with those departments or divisions’ budget they would be presenting. They could look at something and say oh we can live with these pay increases, but the rest of what was there it didn’t affect them. I think it is good that everyone takes a good hard look at that because that all adds up in the end and that all affects the bottom line. As it increases we struggle with other issues that come about. Mayor Lozeau I think all of us know that there are many things in government that work slower than we would like. Even if we come up with a brilliant idea sometimes getting it implemented takes another long period of time. One of the things that we had success with was changing that model and changing that approach. That is why I think the remaining dozen or so contracts went very smoothly because each employer board had the new cost modeling, they could see the whole picture, and it really changed the discussion to be about total compensation and for them really to have a handle on what that meant. I think they have responded very well and appreciated having that information for their decision making. President McCarthy Just to reinforce Alderman Deane’s point, I think it is very important to get that model out not just to the employer boards but so that the employees can see it as well. When most of the world looks at compensation costs they see salaries. When we look at it we see compensation costs; salaries and benefits. When we look from year to year there is a certain small amount by which that overall compensation cost can rise. If the increase in the benefits cost exceeds what we have to increase the total compensation by then salaries of necessity need to go down or we have to have fewer employees to meet that budget. The net result of that is, and I’m not sure everybody sees this without that model, when the employees help us to cut healthcare costs by enrolling in lower cost programs or doing things that drive the cost of us providing that service down, that increases the amount that we can deal with in other parts of compensation, which is to their benefit for the most part. Mayor Lozeau And they do, Mr. Chairman, that model does get provided to everybody that is at the table when they are at the table. Spec. Bd. of Aldermen – 03/23/11 Page 11 President McCarthy I think it is not just at the table, I think the rank and file needs to be aware of what the dynamics are of compensation. Mayor Lozeau Right. Richard Dowd I too would like to thank you for calling this meeting. I think this is a good first step in coming to collaboration on budget issues that are very serious this year. Certainly we look forward to working collaboratively with the Board of Aldermen and yourself as we go forward with the school budget. There are a lot of aggressive things that you had mentioned relative to cost savings that take part of collective bargaining. I agree some of the things you are looking at are things that should be in the new arrangements. When you sit down and start doing the negotiations, and by the very definition of the term that is a give and take, that costing you were just talking about is extremely important because sometimes the unions look at some of these things as more cost or less cost than we do. If they have an idea what the City is looking at you are in a better position. The other thing is it is a give and take and if we are going to ask for a lot of things from the unions it is very difficult to ask them to take overall reductions in their compensation. I think it is going to be a challenge to get to some of those areas. Not that we won’t aggressively try to make some of these things happen, but it could be a real challenge especially in the short term. Mayor Lozeau I don’t disagree, and 14 of the 15 contracts this year expire; 13 of which expire June 30th/July 1st, and one of which expires in August, one you are familiar with I believe. I understand that the challenge of getting those changes to coincide with the fiscal year so that we can realize those savings to solve this problem that we have would be quite an achievement, a remarkable achievement. Now I’m a realist, but I also think it is worthwhile to state that you can think about in the best of worlds that it would be great if all of our folks came to the table and said we understand the size of the problem, we understand what compensation means, we understand if we do something here we can affect a positive change, and that we won’t have to look at other things that nobody wants to look at. If that is not the case, our options become limited, and when the budget comes in I have to know that I’m in a position to solve that problem. I’m not going to go in with a budget that is in deficit hoping that somebody gets around to adopting some of these changes. There are hard choices that have to be made, but the sooner we make those decisions and the sooner that we have some resolution I think the less pain, the less chaos. There are some communities that have taken the approach to say we are just laying off employees. I don’t want to start there. I want to start with let me explain to you, as you have heard me say, the health of our company and what your role is here in keeping us healthy and keeping your colleagues working and you working and everybody working towards the same goal. That is what I have laid out here; here is a way to make that happen. If that is not a path that people can take then the alternatives are ugly, but those decisions will have to be made. Richard Dowd Relative to the healthcare costs, as was mentioned, a lot of the outside companies it is not an option, it is not a negotiated thing, there are no unions… Spec. Bd. of Aldermen – 03/23/11 Page 12 Mayor Lozeau Exactly. Richard Dowd …so it is much easier for those companies large or small, and certainly here in Nashua they have all taken large challenges to the backs of the employees for the healthcare costs without it being up to a vote. We have a bit of a challenge going forward, and it may even take a phasing of bringing it in. Hopefully some of the major things can be done in one shot, but we can only try. Mayor Lozeau I appreciate the effort. Robert Hallowell Just a couple of things on the cost model; I think the difference in the cost model now is, if you look at the attachments to all of the union contracts, the cost model is not that dissimilar to what Carol Anderson used to put together in front of all of the union contracts. I think the difference was, and having been part of a previous negotiation, the challenge was in trying to extract those numbers, when you got to healthcare and pension costs it was very difficult to get a consistent number out of the City that said okay here is our cost. I think a lot of that is because we have this ancient system that makes it very difficult to get those numbers out. I think people have learned some ways to congole those numbers out that are a little easier now and so I think we are pretty good. I think the ERP will help immensely once that is in place, and that is why I think the school district has been in the forefront of helping the City transfer to that. I think the way I look at that cost mode is two ways. There is still the operating costs. There is still the Board of Education has to worry about its operating costs and pluses and minuses there, but I think the cost model allows us to look at sort of two tiers so here is the impact on the operating budget and now here is the overall impact on the City, and you can have in your head some limits there on both of those numbers. I think in that way it is very helpful. I think a lot of the components were there. I think the Mayor has done a great job of making sure that all of those components get to the right people at the right time so that we can understand the big picture. Richard Dowd The other thing that we could get some help from the City on, and I know you are already trying to influence the state legislature, but in the past and I have heard rumors of something they are considering now that impact retirements, if the state passes something that is going to cause a decrease in people’s retirements if they don’t retire this year, in the school department we could have 100 people retire before the next school year that are eligible. The state needs to be cognizant of the fact that if they pass an impact to people’s ongoing retirements and make it effective towards the beginning of the school year next year that could have a serious cost impact on the City. I think any influence we have on the legislature, especially our local representatives…I’m not sure how much that exists, but that would be one thing they would really hurt the City if they passed that kind of legislation. Mayor Lozeau Senate Bill 3, which is Senator Jeb Bradley’s bill that looks at retirement reforms, is something that I have endorsed and have participated in the process on. That does not make the changes that you describe that would have people feel compelled to early retirement. It is a step in the right direction. I happen to think that it is not sustainable for the retirement system to go beyond somebody’s base pay. Long term that hurts the employees as well as the employer. I think more changes will come by the way, but I think the people Spec. Bd. of Aldermen – 03/23/11 Page 13 that are at the table working on what those final solutions will be for this term recognize the challenges that we could face if they make changes too quickly. I will just leave it at that. Alderman Clemons Thank you. I just want to again compliment the Mayor on bringing this forward and having this discussion tonight. I think the options that were presented tonight are exactly the options, and the way in which it was presented, is exactly what we need to do. We need to get our hands dirty and figure this thing out before June 30th rolls around. As Herculean as it sounds, it is a task that we need to get done. I’m hoping that the unions and the employer boards can come together and get something to the Board of Aldermen. I would also like to say in that same vein that I completely agree with the Mayor as far as pushing back the date of when the budget should come out. I think that we have until the end of June to pass a solid budget for this City and to give ourselves time to figure out what is going on with these contracts, to give ourselves time to figure out what is going to happen up in Concord is the smart thing to do. To do anything else we would just be putting the cart before the horse. Alderman Deane On the fear of retirement over pension changes at the state level, didn’t we put $1.8 million in the school operating budget for severance last year? Mayor Lozeau Yes. Alderman Deane And how much did you spend? Do you remember offhand how much was paid out? Robert Hallowell About $450,000. Alderman Deane Okay so that leaves $1.3 million, and didn’t we just spend $600,000 on something else? Wasn’t there a piece of… Robert Hallowell We put $600,000 into a reserve fund for severance costs that is correct. Alderman Deane And the other $800,000 something was… Robert Hallowell We used some of that money to restore services that were going to be cut where there was a cry about the credits that were going to be cut and the services that would be cut to students. That was probably about $600,000 of that so there is $200,000 that I can’t account for off the top of my head, but I’m sure we… Spec. Bd. of Aldermen – 03/23/11 Page 14 President McCarthy And that transfer is basically the plan we had talked about at last year’s budget season where we weren’t sure what the retirement picture would look like. Robert Hallowell And I think what you will see in the school district budget is that the line item for severance is reduced to about $800,000 because we knew we had the reserve of $600,000 and we’re hoping that the State Legislature doesn’t make big changes. I will point out that the year prior to the year that 11 people retired, 58 people retired. That is the problem with that number is it goes up and down, and the reason 58 retired is because they made a big change to the retirement system. Alderman Deane If I remember correctly, during our budget deliberations I predicted that there would be no more than 15 retirements out of the school district. We over-budgeted. We put in $1.8 million alright as an assurance that we would have some money to fall back on and then the majority decided to spend it on something else, and now we are sitting here listening to the fact that if there are changes in the pension plan then 100 people might run out the door. The year prior to that when the 58 people retired the changes in the plan then or the reductions in the pension plan then would have been similar to what I compared to having a $40,000 annuity taken away. Those that were eligible left. That was pretty much predicted what was going to happen that year as well. That is all recorded in the minutes of our Budget Committee discussions. I remember this like it was yesterday. The thing that bothers me or that concerns me, it doesn’t bother me it just concerns me, is that we had this $1.8 million, a portion of it was utilized for the fiscal year to pay for those folks that left into retirement, another portion of it was set aside in a trust fund for its original budgeted purpose, and the rest of it was spent on restoring things that you had already taken out of your budget. It is sort of disheartening. You made the tough decisions and you decided that you were going to use the money to do other things with, which you have the authority to do, but it is sort of disingenuous to sit here and say well if 100 people leave what are we going to do, we are not going to have the money. Well there was a start to building that fund so that you maintained a balance to help cover some of those costs, and I am well aware of the fact that I know it is difficult to understand who is going to leave and who is not. When you see that in the contract where they have to put a letter of intent in and the letters can be withdrawn. That would be a nice thing to change too. If you are going to leave there should be some language in there that says you have to submit your retirement letter on this date and that is it, and that way the school district has an opportunity to say hey we have these people leaving, this is our severance payout cost. I don’t envy you for having that problem. That is a nightmare of a problem to have. But when the money was put aside and then a trust fund was set up to put the balance in I was kind of hoping that fund would be built up a little bit because you can kind of go out and you can do a matrix on your employees and see who is eligible and have a pretty good idea of what their severance is in the out years and understand that these folks could leave at any time and collect that. Not a lot of the younger teachers or people that have been in the system as long as those who haven’t. I was just a little discouraged to see that the money was moved around like that. I was kind of hoping that it would have been…we heard a lot of angst about not having money in there and then the budget was budgeted in there and it was utilized for some of the payouts, a trust fund was set up to put a portion of the balance in, and then other monies were spent on other things. I hope we have a good chance to try to understand where we are in the out years on that for a liability. Spec. Bd. of Aldermen – 03/23/11 Page 15 Richard Dowd When I was referencing the 100 people I was sort of referring to the pension funds that we are now going to have to pay more for in the city. A couple of years ago the risk shifted to the Board of Education on the retirement payouts. The problem is that if we have a number of people that are eligible to retire that doesn’t mean they are going to retire, and some of the things that you suggested are things that are being looked at as we go forth in negotiations for that very reason because if you look at the risk of who can retire and how much that would cost our budget, we have to be sure that we have that covered to some degree. Now that number that you were talking about, $1.8 million, when the new Superintendent came in and looked at what had happened the year before, looked at the total risk, and the year before we had so many people retire it was because of a change in the retirement system that it was going to cost these people a lot if they waited another year to retire because the state changed the rules. We understand that and we are trying to implement things, without getting into any details, that will minimize our risk on a year to year basis and we can better plan for a more concrete number for the people that are going to retire. Over-running that would just kill our budget and with our budgets as tighter as they are today, we don’t have that kind of surplus if you will. Putting that money aside to cover a contingency for a lot of people retiring is a good thing because then it doesn’t cost us as much in the next year budget to cover that risk, but as long as that risk is on our side of the ledger, we have to account for it. We’re trying to minimize that risk by putting some things in place to do that. I can’t get into the details, but we understand that, we understand that $1.8 million was too much for that year, but there was that total risk out there. It could in fact have cost us $1.8 million. It didn’t but that was due to other reasons. Then we had to allocate those funds as we thought best and then in this new year’s budget that number is significantly less for two reasons; 1) we are trying to implement things that will protect us against the risk and 2) we have that other money set aside in a contingency fund where if we do have that number of retirees that we can cover it. It is not an easy target to hit. We don’t know what people are going to do. We are going to try and put things in place so we will know what they are going to do, but right now they can all retire if they want to. If you saw the number of people that are eligible to retire it is a big dollar number. Alderman Clemons I just wanted to say, and now I will add this, but I agree with what Mr. Dowd was just saying that that risk was there at the end of last year with the $1.8 million that was set aside. I understood why the Superintendent did that. The problem with it was that by doing that you had a budget that threatened to have 250 person study halls in the high schools and that is completely unacceptable. That is what we were faced with. When it was gotten together and found out we don’t need all of that money, yeah the appropriate thing to do was to move that money so that you don’t have 250 students in a study hall with 4 monitors. Absolutely the right thing to do. As far as spending it on other things, if you want to call that other things that is fine, I call it education. I think it is important. It was absolutely the right thing to do, and the remainder of that money went into the appropriate thing, which is a contingency fund for the exact purpose that it was set up for. As far as the way that was handled, I think it was entirely appropriate. Alderman Deane I rest my case. Thank you. Robert Hallowell I’m sure this will be a fascinating discussion at the Budget Committee meetings. Thank you. Spec. Bd. of Aldermen – 03/23/11 Page 16 Alderman Flynn Thank you. Going back to one of your slides Mayor that you really didn’t get much discussion on, a little bit talking about two lawnmowers almost bumping into each other, that is a lot of hard work to drive those kinds of things; consolidating departments, eliminating some of the department heads and consolidating responsibilities. With some of the information that you now have with that staff that we have with CitiStat and hopefully with some of the changes that are coming forth with this new computer system, I don’t know how the Board of Aldermen feel, if you presented a budget to me I could either say I am not going to approve a salary for this department because I don’t think you need that person, I don’t think that is going to drive change. That wouldn’t pass anyway that would just be a matter of me trying to express my own little insight into what is just a much more massive picture that needs to be analyzed, but I think that is an area, the sheet that you show is certainly a sheet I am glad you did show, it is not a sheet that was being overlooked. There might be some opportunities quite frankly for outsourcing. With the new computer system coming in I was, we talked a little bit about this I thought at Finance, but I was disappointed that we didn’t pursue more for example outsourcing payroll. But as the new computers do come in and there are other decisions that need to be made, there may be some good considerations that could be given to taking things that the City does now and putting them back into the private sector. To me payroll is a perfect example. There are very few people that do their own payroll any longer. I know usually the answer is that payroll is too complicated, but quite frankly with the challenges that many companies have for payroll, it is certainly something that is done and done successfully once you commit to doing it. There may be other areas. That page that you presented is an interesting page. It certainly should not have been eliminated and as I say as the computer or this new ERP system is developed and gets more into the fabric of the City there may be some opportunities there to help that sheet 6 or whatever it is that you showed in your presentation. I think that was an important page. It is not something we as Alderman, I think, can have much impact on short-term. I think we could support changes if you were to bring them forward, but it is hard work to bring that about and most of that unfortunately is going to fall into your lap I think. Like I say I will support anything, I will vote yes on anything if it makes some financial sense for us. But I don’t see us being able to drive that kind of change. Mayor Lozeau I will give you an example Alderman Flynn; I think it was the year before last I came in with a budget and when I came in with it I explained that I had planned a reorganization in Public Works as it related to administrative staff and how that operated. It was passed as part of my budget. It took a little while to get the change implemented and that sort of thing, but we certainly ended up delivering much better services and saved over $200,000 doing that. That is the way that, I’m hopeful when I come in and present some of those ideas that are embedded in the budget with that plan going forward, that the support of the Board will be important because some of those changes have to be made as part of the budget and then get implemented outside of the budget, if you understand what I’m explaining. And then with ERP right now we have staff that is just doing just an unbelievable job. I look out here at Mr. Donovan from the School Department, the COO, and he has been participating in ERP countless hours a week, the staff in the payroll department, staff in financial services, and we have a schedule of how the staff’s hours are working out, and they are doing their regular job and doing work on ERP to get it in place. What ERP, besides the reporting and the ability to be able to look at things and make decisions quicker and see trends faster, will also be the ability to put in best practices. When you look at some of the way the system has been developed, when it was put in place in the ‘70s there may be 10 steps to a process that best practices says there should be 3, but our system doesn’t allow for that without a re-write of the program. Things like that. Spec. Bd. of Aldermen – 03/23/11 Page 17 As those best practices comes in place we can spend smarter and we can have the staff work on other things instead of something that used to take them 10 hours that may now take them 3. That is why that line in there was so important, about an eye towards FY13. Some of those things we do now can’t happen right now, but I don’t want to wait until next budget year to go okay so now here is this year’s budget what else can we do? It has to be an ongoing process. That is one of the biggest benefits of having a cabinet of senior level staff that sits at the table and works on solutions. President McCarthy Is there anything else? Subbarao Yalamanchili First I would like to thank Mayor Lozeau for coming out. It is really interesting to see everyone here combined to make my life, as a student, better in the City and also general everyday life better. It is really reassuring to me. I have a question pointed towards Alderman Deane. We talked about consolidation of groups. There is a consolidation of outdoor management or something like that that you talked about a bill that was passed a few years ago. How effective was that bill as far as saving money? Alderman Deane Alderman McCarthy had put a piece of legislation in that would have taken the Park & Recreation Department and the Grounds Department at the School District and consolidated them into one department whereas currently right now we have two different departments, umpteen sports fields, and everything else, along with the common grounds that they do. When you go through the City and you see all of those little green squares and patches at different intersections and things like that, the Park Department is responsible for that. More often than not what I would see would be the School Department and the Park Department in the same area doing the same work where you could consolidate that and get more of a bang for your dollar having one group in one area doing that kind of work. Subbarao Yalamanchili Correct, but how effective was that in actually saving money? President McCarthy We never actually got to make any changes… Alderman Deane We never acted on it. President McCarthy …in terms of doing it. What we set out to do was to actually merge those groups together, but when you look at that because of the number of bargaining units involved and the fact that the Park & Recreation employees are actually in a different retirement system whose solvency is notably different than the state retirement system let’s say, it is very difficult to move the personnel around to fold that together so what we were pursuing was just on paper managing it as if it was one department and tracking expenses. We had talked to Manchester about the way they do that, etc. and due to the loss of some staff in the Mayor’s Office that was driving that, we basically did not make any of the changes in any particular operating year so that program never materialized to understand whether there were savings or not. Spec. Bd. of Aldermen – 03/23/11 Page 18 I was convinced that there were in fact savings to be had by doing things that way, and our intent was to just, on paper, try to sort things out so that we would have the Park & Recreation Department do the exterior facilities maintenance and actually have the School Department Plant Operations group take over some of the interior maintenance because we have trades people in house who can do plumbing and electrical work and those sorts of things. I think that is something we need to pursue again. I think there is savings to be had there, but we never did get it to a point where we could measure what that would save us over the course of a year. Subbarao Yalamanchili Thank you. President McCarthy Is there anything else? Is there a motion? ADJOURNMENT MOTION BY ALDERMAN DEANE THAT THE MARCH 23, 2011 SPECIAL MEETING OF THE BOARD OF ALDERMEN BE ADJOURNED MOTION CARRIED The meeting was declared adjourned at 8:25 p.m. Attest: Patricia Piecuch, Deputy City Clerk Defining the current problem •How did we get here? •Where is here? •Now what ? •Where do we need to end up? March 23, 2011 1 How did we get here? y Over the last three fiscal years: y City’s assessed property value decreased from $9.4 Billion to $8.4 Billion y Decrease in Local Revenues y Decrease in State Revenues 2 Decrease in Revenue y Cumulative Local Decreases ‐ Primarily in: y Motor Vehicles y $2,900,000 y Interest Income y $6,000,000 y Cumulative State Decreases ‐ Primarily in: y Suspension of Revenue Sharing y $6,000,000 y State Retirement Contribution y $1,800,000 3  Where is here ? y Over $16,000,000 in Revenue decreases during the last 3 years y Not including other State dollars such as: y Lower than expected increases in school adequacy dollars y Lower than expected Rooms and Meals sharing from State y Suspension of the funding for new Water Pollution Control Grants y Anticipate a continued decline in local revenue such as: y Motor Vehicle Revenues y Interest Income ‐ due to record low rates 4 Decrease in Revenue from FY2008 Base Year 5  Where is here? Newest Challenges: We Know y Local ‐ $6,975,000 y Increase in Health Care and Retirement Costs: y Anticipating an 11% increase in health care costs ‐ $3,000,000 y Employer Rate increase to retirement ‐ $1,700,000 y FY11 decrease of 10% in State Retirement Contribution Rate ‐ $1,430,000 y New Dollars needed for: y Enterprise Resource Planning (ERP) ‐ $100,000 y Water Supply (Public Hydrants) ‐ $210,000 y Capital Equipment Replacement Fund (CERF) ‐ $385,000 y Capital for Buildings ‐ $150,000 6 Governmental Activities – FY2010 7 Now what ? y Provide this information as background to: y Employer Boards y Unions y Legislative Bodies y Citizens y At a minimum we need to: y Find real fundamental solutions to the problem y Be certain we all gain a better understanding of total compensation y Provide options that relate directly to the cost drivers in compensation such as health care and retirement 8  Now what? y For instance: Part of the solution includes Health Care changes: y Add a lower cost, high deductable plan y Remove named health care carriers from collective bargaining agreements y Increase cost sharing of premiums y HMO – 10% to 20% y POS – 20% to 30% y Changes to Plan Design y Increased co‐pays y Office visits from $10.00 to $20.00 y Emergency room visits from $50.00 to $100.00 y Add deductibles y Annual ‐ $250.00 per person / $500.00 per family for inpatient/outpatient services y Managed three tier pharmacy program y Introduce consumer‐driven healthcare strategies 9 Now what? y On‐going City wide Division review of staff levels and approach to staffing y Reorganizations as appropriate y Continue to eliminate duplication where possible y Continue our progress with efficiencies and effective delivery of services y Continue to spend our limited dollars smarter, while investing wisely y Plan ahead while doing this toward FY13 10 Where do we have to end up? y With a budget that maintains the best customer service we can provide y Within the spending cap y FY12 budget with necessary spending cuts to mitigate the identified cost increases y Lowest possible tax increase as appropriate 11 Potential Problems Governor Proposes: y State ‐ $5,570,000 y State Retirement Contribution Rate moves to zero percent ‐ $3,570,000 (remaining 25%) y Each 5% reduction is approximately ‐ $715,000 y School Building Aid Reduction ‐ $1,600,000 y Catastrophic Aid Reduction ‐ $400,000 y Too soon to calculate other State legislative changes 12