Ex-FinCom Chair: Municipal contracts are a balancing act

By Guest

By Mark Porter

After reading several pieces on the unfortunate situation with Canton’s teachers, I thought it might be valuable to share my perspective on the situation as someone who is currently unplugged from the current goings-on in municipal government but also someone with 12 years of municipal finance experience.

First and foremost, I have great respect for our teachers, the volunteers on the School Committee and the town employees who support them. I hope that before this gets published, a resolution is found. That said, I fear that the financial realities of the current economic environment are going to continue to pose challenges to finding a good solution. Again, I have not spoken to any parties involved to prepare this letter, so I am speaking for myself and any numbers I use are my own estimates.

While a collective bargaining is a multi-layered process, one of the major components is always going to be the COLA, or cost of living adjustment. COLAs are important to ensure the salaries of our town employees keep pace with inflation. It is true that teachers may also be eligible for pay increases based on steps (years of service) and lanes (additional education they have sought out on their own time). These increases themselves can be significant, but the reality is that they mostly accrue to teachers in the first 15 or so years of their careers, leaving our most experienced educators relying mostly on the COLA to combat the impacts of inflation.

The simple (and fair) solution is simply to give our teachers a COLA in line with current inflation levels, but the realities of municipal finance make this solution far from simple. Prop 2 1/2 limits the increase in the tax levy to 2.5 percent per year without additional voter approval. This does not necessarily mean that municipal revenues or your property taxes will increase by only 2.5 percent per year, but for the sake of keeping this from developing into a novella, it’s a reasonable approximation.

During budget season, town leadership projects the total revenue for the coming year and then divides that revenue between the schools, municipal departments and fixed costs (debt payments, pension, health insurance, etc.). If town meeting votes to support these projections, that is the amount the schools have to spend. I don’t believe I have ever seen a year where the superintendent’s initial budget request was in line with the amount the town can afford to provide. The reality is due to contractual obligations, unfunded state mandates, and a general desire to offer the best public education available, the ideal school budget is always more than revenues can support.

This is where municipal finance deviates greatly from private finance or federal finance. In the private sector, giving your employees a significant COLA may simply mean a reduction in profits, which could be offset by increasing prices. In the federal sector, a significant COLA can be offset by deficit spending. Neither of these are options in Canton. In the short run, if we increase our spending on teacher salaries at a rate greater than our revenue increases, cuts must be made either to programs or to staffing. Canton’s leadership has spreadsheet upon spreadsheet informing them exactly how high they can go before cuts are necessary. A vast majority of this information is public record, so the well-resourced CTA, supported by the MTA, no doubt has a very similar spreadsheet. If this was a game of poker, everyone knows the cards that the other player is holding with respect to COLA.

There is one other off-ramp that is worth bringing up as there are many citizens in our town that feel passionately about meeting the CTA’s requests. The town can increase the tax levy by more than 2.5 percent using something called an operating override. Last done in Canton about 15 years ago, an override asks the voters directly to approve an increase to their taxes above and beyond the usual 2.5 percent. Operating override campaigns can be contentious (the last successful one in Canton followed a failed attempt one year earlier), and an additional tax increase can have a negative impact on our seniors and others living on fixed incomes, but, in my opinion, it would be the only way to pay a COLA in line with current inflation while avoiding cuts to programs and staffing.

I would also be remiss if I didn’t mention that if our teachers were to receive a large COLA, it would be reasonable to assume that our municipal employees, including DPW, Fire and Police, would seek similar increases in their next contract. The financial ask (tax increase) of an operating override would likely go beyond what it would take simply to fund the teachers’ contract. If town leadership were to seriously consider putting an override to the voters, I’d also personally push for more funding to support funding our OPEB liability — promises made to cover certain costs to our past and current employees.

At the end of the day, I’m glad I’m not involved in resolving this negotiation and there is no clear or easy solution. I’m not offering this in support of one ‘side’ or the other or to propose a solution that they’ve missed. I simply wanted to offer a little more context for those who have been following this issue in the news but who maybe haven’t fully immersed themselves in the fun of municipal finance.

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