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Committee projects surplus, discusses fund balance options and a $5,000 merit warrant article
Summary
Finance staff reported an unexpectedly strong fund balance position and the committee discussed options for reducing excess reserves over three years and creating a small separate warrant article to authorize merit increases.
The Budget Committee heard updated fund‑balance projections from finance staff showing the town beginning the fiscal year with roughly $5.1 million in available fund balance and a projected operating surplus of approximately $100,000–$200,000 for the current fiscal year, reversing an expected drawdown in the adopted budget.
Finance staff explained that prior‑period adjustments and stronger‑than‑expected revenues combined with lower expenditures in several departments led to the higher available fund balance. The committee discussed policy options to bring unassigned fund balance closer to the town's fund‑balance policy limit (25% of expenditures) over a multi‑year timeframe rather than making large one‑year moves that could destabilize future budgets.
Committee discussion and recommended actions: Finance staff (Mark) recommended three approaches: tighten FY26 budgeted expenditures and revenue estimates to avoid over‑raising taxes; appropriate portions of the excess to capital reserves for specific projects; or increase planned use of fund balance as part of the warrant schedule, phased over three years. The committee agreed the multi‑year approach is prudent.
Merit increases: The committee also discussed handling merit increases. Staff proposed a separate warrant article (a standalone appropriation) authorizing the town manager to appropriate up to $5,000 from fund balance during the year for merit awards. Committee members expressed support for that approach; the intent is to avoid including a pooled merit line in departmental budgets when accounting treatment (GASB) complicates original vs. final budget reporting.
Why it matters: A larger-than-expected fund balance affects how much the town needs to raise from property taxes and whether some projects could be paid from reserves rather than borrowed funds.
Ending: Staff will refine revenue estimates, identify candidate reserve appropriations, and prepare wording for a $5,000 merit warrant article for the draft warrant.
