In his "Roadmap to Sustainability and Prosperity," Mayor Scott Jackson points to six critical areas that must be addressed to restore financial stability to the town.
The budget the Mayor's proposed Monday increases spending by 3.75 percent over the Legislative Council's FY 2012/2013. Of the $7,230,254.93 increase, $6,730,880 is for Pension,Medical, Board of Education, Debt Service and State Fee Reimbursement and $331,889 in contractually mandated salary increases.
The proposed budget raises the mill rate from 37.1370 to 38.583, an increase of 1.447 mills. That means homeowners will pay $38.58 for every $1,000 their home is assessed. For an average home assessed at $200,000, the tax bill will increase from $7,428 to $7,716, an increase of $288.
Jackson's first point is possibly the biggest point: Pension and Retirement Reform. Currently the Pension Fund contains only about $56 million when it should be funded at more than $400 million, which experts have warned will lead to the fund running out, forcing pension payments to be made from the operating budget. Should that happen, the mill rate would skyrocket to accommodate those payments.
Seven years ago, the town closed the pension plan to new police and fire hirees, and a year later closed it to service employees, instead giving those employees the option to participate in the Connecticut Employees Retirement System.
Last month, town leaders heard from the Segal Company as to how to best deal with the depleted pension fund and how to shore it up. Its recommendations included the consideration of Pension Obligation Bonds for as much as $125,000, and a schedule of yearly hefty pension fund allocations such as Jackson is proposing this year.
"First and foremost, we must reform the way in which retirement benefits are issued," Jackson told the council Monday. Pension benefits are bargained collectively and neither the mayor or the council has th authority to make changes, he said.
"But I know that our labor unions want to work with us to resolve the pension underfunding issue and the time is ripe as our contract expire this coming June 30," Jackson said. "I committed, and this budget established the preparations for comprehensive pension reform."
His proposed budget includes $100,000 to create a 401(k) defined contribution retirement program that will be offered to new employees instead of pension benefits, Jackson said. "Long-term sustainability and prosperity demands this transition."
Over the years, contributions — or lack of — has led to the current problems that has left the fund funded only at 14 percent of what it should be. Click here for a history of pension fund contributions over the past years.
"With a pension contribution of $12.5 million and $13.5 million for all retirement benefits, this is the highest one-year increase in the pension contributions in the fund's history," Jackson said. It includes the amount recommended by the town's actuaries who are preparing a long-term plan to turn the pension fund around. "This budget acknowledges and accepts their work," Jackson said. "We can fix this issue."