BEVERLY — The city is facing a projected budget gap of $3.75 million for fiscal year 2011 and gaps of more than $5 million beyond that, according to a report issued last week by the city's Financial Forecasting Committee.
The 35-page report says the city is facing a "structural deficit" because projected increases in revenue cannot cover the costs of city services and new debt for the high school project.
"This forecast requires significant policy decisions to reduce spending," the report says. "In other words, a plan to allow for community input and participation to determine service reductions most likely in combination with new revenue decisions."
The City Council is required by law to pass a balanced budget, so the differences between projected revenues and projected spending must be reconciled by July 1, 2010, the start of fiscal year 2011.
"We have to balance the budget," Ward 1 Councilor Maureen Troubetaris said at last week's City Council meeting, when the report was presented. "It's going to be a painful year for many cities and towns in Massachusetts."
The projections are based on a variety of assumptions, including a 10 percent cut in state aid, the city's second biggest source of revenue after property taxes.
The forecast also assumes 2 percent annual raises for city and school employees and 9 percent annual increases for their health insurance. It also factors in new debt payments of more than $1.5 million next year and $2.6 million in 2012 and 2013, mostly to pay for the high school project.
The report lists a variety of options to close the gaps, from cutting services to negotiating a reduction in employee raises to adopting the local option meals tax.
Forecasting committee chairwoman and City Councilor Pat Grimes said the group was not advocating any course of action. She described the forecast as a "tool to plan ahead, a jumping-off point."
Steve Cohen, one of the citizen representatives on the forecasting committee, said the city should focus "not just on cuts but on expanding revenue."
"It will take some guts and hard work, but it will pay off far more than impoverishing the community with cuts in education and services," he told the City Council.
Other members of the committee are City Councilors Troubetaris and James Latter, School Committee member Paul Manzo, and resident Doreen Maciak.
Staff writer Paul Leighton can be reached at 978-338-2675 or pleighton@salemnews.com.
Projected budget gaps
2011 — $3.75 million
2012 — $5.4 million
2013 — $5.75 million
Source: Financial Forecasting Committee
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