Budget Transfers - North Haven Connecticut Town Information

Why You Should Vote "No" on 2006-2007 Budget Transfers at the September 25, 2007 Town Meeting

On September 25, the North Haven Town Meeting will be asked to vote on certain transfers (due to underestimated budget items) over $20,000. This year, the Town Meeting is being asked to approve 17 of these budget item transfers totaling $830,000. Below is information you’ll need to decide how to vote, and arguments for why you should vote "No" on this resolution.

The Problem in a Nutshell

1. The majority of these budget items ("budget items" are the categories by which the finance department divides up town expenditures, within each area or department, such as overtime or building maintenance) have been underestimated year after year. If our town budget had honest numbers, very few transfers over $20,000 would be required. This would happen only when there were truly unexpected occurrences.

2. Town officials, including the Board of Selectmen, the Board of Finance, and the Finance Director, did not follow state or town law regarding Board of Finance and Town Meeting approval of budget transfers. Most important, the Town Meeting is supposed to approve department overexpenditures over $20,000 before they are made, not three months after the end of the fiscal year.

3. Budget item transfers over $20,000 between departments or from the Contingent Fund for the fiscal year 2006-2007 totaled $1.8 million, but the Town Meeting is only being asked to approve $830,000 of these transfers. The rest came from the Contingent Fund, but according to state and town law, these transfers also require Town Meeting approval.

What a "No" Vote Will Accomplish

By voting against the budget transfers, the Town Meeting will tell town officials to follow the law. A vote against the budget transfers will force town officials to acknowledge that they did not follow the law. Otherwise they will keep breaking the law and putting the Town Meeting in a position where it only rubber stamps irresponsible decisions made long before. A vote against the budget transfers will also force town officials to come back and request Town Meeting approval of all transfers over $20,000 (the timing of the request for approval cannot be corrected this year).

More Information About These Issues

Some of the budget transfers represent unexpected expenses – such as legal judgments, emergencies, and increases in costs – but most represent budget items that are seriously underestimated year after year, despite ongoing calls by citizens for more realistic budget numbers. 13 budget items have been underestimated by at least $20,000 for four straight years, an underestimation totaling $711,000 for 2006-2007 alone, or 86% of the sum town officials are asking the Town Meeting to approve. Another 9 budget items have been underestimated by at least $20,000 3 of the last 4 years, an underestimation totaling another $571,000 for 2006-2007 alone. It doesn’t take a crystal ball to predict next year’s numbers; in most cases, all it takes is a look at the past and at present needs. (For more on this, see my blog entry on the subject.)

Although for years town officials have denied that items are intentionally underestimated, suddenly, after the first budget was voted down this year, with pressure from citizens and the press, and with a tough election approaching, officials intentionally fixed many of the underestimated budget items for the second budget, finally admitting (in effect) what they had denied for so many years. But they didn’t finish the job, and there’s no reason to believe they will go any further if the Town Meeting rubber stamps their transfers once again.

To see which budget items have become realistic and which have not, take a look at the two sheets I've done, one sheet for the budget transfers the Town Meeting is being asked to approve (and intra-departmental transfers the Town Meeting is not required to approve – but town officials could ask us anyway, especially since one of the largest, police overtime, also received a big chunk out of the Contingent Fund), and another sheet for budget transfers taken from the town’s Contingent Fund, which the Town Meeting is not being asked to approve.

The numbers are bolded for budget items where the first 2007-2008 budget stayed with the same underestimated numbers as the year before. The numbers are in red for budget items where even the second budget preserved the old underestimated numbers, meaning that sizeable transfers will almost certainly be requested again at the end of next year, if nothing is done to change the way town officials operate.

Also take a look at the budget transfers under $20,000. They also reveal a great deal of what has been going on. There are numerous budget items here that are also underestimated year after year, often by large percentages, even if the totals are not as large. There are also some unrelated revelations, which are discussed in margin notes: that the emergency funds for phasing in the property tax revaluation were not spent (pp. 9 and 27); some examples of serious overestimating, such as with respect to auditing (where we clearly needed to spend more money; p. 7), cemetery caretaking (p. 5), and full-time police officers’ salaries ($137,000 was unspent, which is mostly why the Town Meeting does not get to approve any of the $190,000 transferred due to other underestimated police budget items; p. 11).

2. Town officials, including the Board of Selectmen, the Board of Finance, and the Finance Director, did not follow state or town law regarding Board of Finance and Town Meeting approval of budget transfers. Most important, the Town Meeting is supposed to approve department overexpenditures of $20,000 before they are made, not three months after the end of the fiscal year.

Last September, the Town Meeting was asked to vote for only two budget transfers over $20,000: $20,062 for tipping (or, waste disposal) fees (the actual budget transfer was $75,000) and $235,262.17 for unidentified "personnel policy expenses." However, these were not nearly all the transfers approved by the Board of Finance for 2005-2006. It also approved 37 transfers each in the amount of $19,999 (totaling $740,000, and including one for tipping fees), so that the Town Meeting wouldn’t know how much they had underestimated many budget items. There were also $800,000 in budget transfers over $20,000 that came from the Contingent Fund, and another $460,000 in budget transfers under $20,000.

I said that we should vote against the budget transfers for 2005-2006 to stop town officials from giving us false numbers and playing games, such as the 37 budget transfers of $19,999 each intended solely to get around Town Meeting approval. Finance Director Vincent Palmeri said this was the way these things are done, and not one town official disagreed with him, not a member of the Board of Finance, our only financial watchdog in town, which did not even bother to discuss the sneaky $19,999 budget transfers. Not even Kevin Kopetz, who is a full-fledged member of the Board of Finance and Mr. Palmeri’s boss, said otherwise.

The $19,999 transfers showed a complete disregard for the spirit of the law and disrespect for the powers and the members of the Town Meeting. Thankfully, this year, with Mr. Palmeri out of the way, with a petition demanding an end to this practice, and with Mr. Kopetz deeply worried about being re-elected, they didn’t play this particular game again. There are no transfers of $19,999 and, on my request, the acting Finance Director, Ed Swinkoski, made all the budget transfer figures available to North Haven Info, so that Town Meeting members can see the big picture before they vote on September 25.

But town officials are still not following the law. Here is the state law, which is referenced as town law in Section 707(D) of the Town Charter:

Connecticut General Statutes Sec. 7-348. Towns not to contract in excess of appropriations. Town meeting to increase amount. No officer of such town shall expend or enter into any contract by which the town shall become liable for any sum which, with any contract then in force, shall exceed the appropriation for the department, except in cases of necessity connected with the repair of highways, bridges, sidewalks and water and sewer systems and the care of the town poor, and then not more than one thousand dollars. If any occasion arises whereby more money is needed for any department of the town than has been appropriated as provided for in this chapter, the selectmen shall notify the board of finance of such fact, and the chairman of such board shall forthwith call a meeting thereof to consider the appropriation for such department and the board may make the necessary appropriation therefor, after inquiry, but ... in towns where the grand list exceeds twenty million dollars, if the amount required or the amount required, together with the sum of any such additional appropriations, exceeds twenty thousand dollars, such appropriation shall not be made until, upon the recommendation of the board, the same has been voted by the town at a meeting called for such purpose, provided no more than one such additional appropriation for any one department shall be made in one year without town meeting approval, and provided the board may make additional appropriations for the care of town poor without town meeting approval not exceeding, in the aggregate, ... four thousand dollars in towns where the grand list exceeds twenty million dollars. The board may call a public hearing prior to the town meeting at which parties in interest and citizens shall have an opportunity to be heard so that the board may obtain information to assist in making its recommendations. The amount required for such appropriation may be drawn either from any cash surplus available or from any contingent fund established as hereinafter provided. If no cash surplus exists and no funds are available in the contingent fund, such appropriation may be financed by borrowing, and the amount of such borrowing shall be included in and made a part of the next tax levied. ...

It is clear from this provision that the Board of Finance must approve overexpenditures before they are made, and that if the overexpenditure is over $20,000, the Town Meeting must also approve the overexpenditure before it is made, not three months after the end of the fiscal year.

But this is not what has been done in North Haven. Here, the Finance Director presents the Board of Finance with a monthly "Current Over Expenditures" list. By accepting this, the Board of Finance is considered to have effectively approved the overexpenditures, even if they have already been paid. These overexpenditures are then collected months after the end of the fiscal year, and categorized so that the Town Meeting may approve as few as possible. And when the Town Meeting does not get to approve budget transfers, it does not get to see them, either, unless individuals request them from the finance department. At least they were not easily available until now, due to North Haven Info.

I took a look at the March 2007 Current Over Expenditures list (the list begins on page 4 of the file). At least 10 budget items were already $20,000 or more over budget in March, only 9 months into the fiscal year. Another 2 budget items were already $18,000 over in March. A Town Meeting should have been called before March, that is, 7 months ago.

When this issue was once brought up in the Board of Finance, Finance Director Vincent Palmeri argued that getting Town Meeting approval as needs arose would bring the town’s financial operations to "a grinding halt." This is similar to the "nightmare" of phase-in that never materialized. It’s amazing how, without a crisis, the Town Meeting can approve special appropriations for unbudgeted items, such as phase-in or fire equipment, but can’t approve special appropriations for budgeted items!

The easy solution is to do better, more honest budgeting, so that the need for Town Meeting approval rarely arises, or arises only toward the end of the fiscal year, when one meeting could deal with all needs, not long after the needs have been met, but before they arise. This takes financial planning, but isn’t that what we pay the finance department to do?

I don’t mean to pin all the blame on Mr. Palmeri. Everything he did and said was approved by Mr. Kopetz, by the Board of Finance, and by the Town Meeting. When I and others spoke up against financial practices, we were publicly berated by people such as Joseph Ierardi, whose financial practices were so upstanding that no one questioned them either.

Town officials may think that it is not a serious crime to ignore a law such as this. Well, the state doesn’t agree. Sec. 7-349 of the CT General Statutes states, "Any officer who, in violation of any provision of this chapter, expends or causes to be expended any money of such town, except for the purpose of paying judgments rendered against such town, shall be liable in a civil action in the name of such town..." And Sec. 4-100 states, "Whenever any specific appropriation of money has been made... by any community or corporation as provided in sections 7-121, each ... executive officer... of any town... who willfully authorizes or contracts for the expenditure of any money or the creation of any debt for any purpose in excess of the amount specifically appropriated for such purpose by... the community... of which he is... executive officer, unless such expenditure is made or debt contracted for the necessary repair of roads or bridges, or the necessary support of schools or paupers, in cases arising after the proper appropriation has been exhausted, shall be fined not more than one thousand dollars or imprisoned in a community correctional center not more than one year or both."

It is also clear from the state law provision above that, although the money to cover overexpenditures may be taken from the Contingent Fund (otherwise, the money comes either from underexpenditures in other departments, or occasionally from underexpenditures in the same department), doing this does not affect the right of the Town Meeting to approve an overexpenditure over $20,000.

Here’s the specific language from state law: "The amount required for such appropriation may be drawn either from any cash surplus available or from any contingent fund established as hereinafter provided."

Even if it weren’t so clear, why wouldn’t the Board of Finance and Board of Selectmen bring these budget transfers to the Town Meeting for approval anyway? What harm would it do? Why is there always a presumption in this town that unless it is absolutely required and no one is putting up a big fight, it won’t happen. Delaying revaluation is perfectly example. Despite a petition, despite ongoing pleas, the Board of Selectmen would not let the issue go the Town Meeting because it was no absolutely required. The only reason we were able to phase-in revaluation was because it was absolutely required by law.

After town residents signed a petition this year demanding more honest budget numbers, especially with respect to the budget items that are intentionally underestimated year after year, the Board of Finance, in its second budget, took money out of the Contingent Fund to increase many of these underestimated budget items. Now they won’t be able to dole as much money out of the Contingent Fund as they would like. They won’t be able to ignore the law as much.

The Contingent Fund is not for regular underestimating and overspending. It’s there for unexpected emergencies. For 2006-2007, 10 of the 17 transfers from the Contingent Fund were for budget items that have been underestimated in 3 or 4 of the last 4 years. Hardly emergencies. The Contingent Fund has been abused, and its abuses have not been placed before the Town Meeting for approval. It’s pretty clear why.

In the first budget, the Board of Finance approved a Contingent Fund of $1 million. In the second budget, there was only $300,000 left in it. So this problem has been largely solved for 2007-2008, but only due to people voting down a budget and telling the Board of Finance what they wanted to be done, and two newspapers – the Post and the Register – telling people the truth about the budget. Once again, we must tell the Board of Finance what we want to be done, or it won’t be done.