By Bryan Harvey

Something very unusual is happening in this year’s local budget process. For the first time I can recall, budget-makers are at loggerheads over a major component of the budget — specifically, the assessment for the Amherst-Pelham Regional schools. 

This is not supposed to happen. For decades our budgeting system has been designed to avoid surprises and dole out whatever resources we have in a predictable and responsible way. Any sudden disruption — especially in an area that accounts for around a quarter of the whole operating budget — creates confusion and uncertainty in all the other parts. So what the heck’s going on?

What’s the Issue?

There are two ways to answer that. The in-front-of-our-faces issue is that the spending request exceeds what there is to spend. Every year the town calculates how much new revenue it will have to spend in the coming year (taking into account the allowed 2 ½% increase in the tax levy, new growth, and state aid), and sets this as the target for all the major components of the budget: municipal, the elementary and regional schools, and the library. 

For the coming year that target was 3.5%. But early on the Regional schools signaled their requested increase might be as much as 12%. Why? One factor seemed to be that temporary federal COVID funding had been used to hire permanent staff, and the COVID funds are drying up. Another seemed to be the recent collective bargaining agreements. But whatever the trigger, it was not a one-time thing: the Region indicated that requests would likely exceed the guidelines in future years, as well. 

The official request was voted at 8.2%. The Amherst Town Manager took advantage of a one-time dip in the town’s retirement assessment to raise the budget target for FY25 to 4% (with the understanding that this would make the crunch even more difficult in future years). The school committee revised its FY25 request to 6%, and the three other towns agreed to one-time funding at that level. In Amherst the Manager proposed a similar stop-gap appropriation to provide time for the community and the new Superintendent to address the many questions and concerns that have been raised, and the Finance Committee is recommending that approach to the Council. 

So the in-our-faces issue remains, with some temporary steps to postpone the full reckoning until next year. But to me the real issue is how we got to this point in the first place. Why is the Regional budget suddenly busting through the guardrails? What’s the big picture that explains how we got here and, more important, where do we go from here?

How We Got Here

This story goes back many years, to the passage of Proposition 2 ½. I happened to be one of the town’s budget-makers at the time. Suddenly, there was a hard cap on tax receipts. We couldn’t blunder through four disconnected budgeting processes and hope the books would balance at the end, so to get our fiscal feet on the ground the town adopted a simple budgeting approach: give each of the major components the same percentage increase while we learned how to live in a post-Proposition 2 ½ world. 

That was in the 1980s. There was no intention that this would be the budgeting approach for all time, but also no plan for how or when it might change. When I left the Selectboard in 2001 it was still in use. It wasn’t perfect, but relative service demands had remained fairly stable, and state aid was substantial enough to provide a cushion. And so we fell into the habit of a sort of “reverse-budgeting” process, in which every year we began with the answer and let the parts work out the details. 

Three Big Changes

Fast-forward to today. Two more decades have passed, and while our “temporary” budgeting approach still reigns, it’s clearly in distress. But why? When the dispute over next year’s Regional assessment emerged, for me it was a pain of unknown origin. I couldn’t figure out why the budgeting system was suddenly breaking down. So I delved into the publicly available data to try to get a clearer understanding of what might be ailing us. Read on to see what I discovered. And be prepared to be surprised. I know I was.

Spoiler alert: it’s evident that this “sudden” budget gap has been a long time coming. For at least the past twenty years, three clear and consistent trends have been in motion, like tectonic plates. As they’ve rubbed up against each other tensions have been building. Eventually something was going to come along to make the earth start to move.

Our forty-year-old system is based on stability, but the past twenty years have been anything but stable. In fact, the picture today is nearly unrecognizable compared with 2003. 

Change #1: Who pays the bills?

Amherst has five basic sources of revenue: 

• The residential property tax (paid by homeowners through their tax bills and renters through their rent payments).
• Unrestricted state aid.
• State education (“Chapter 70”) aid.
• Taxes on commercial property.
• An assortment of “other” local revenues ranging from reimbursement for ambulance runs to interest income. 

What’s happened over the past twenty years? Pretty simple: they’ve all flatlined except taxes on people’s homes (Figure 1). And since the CPI grew by 66% over this period, the “flat” revenue sources actually lost substantial buying power. Yet even accounting for inflation, residential property tax spending still jumped by about 75%. 

Residential taxes used to cover half our spending. Last year that had risen to two-thirds, and there is no reason to think the upward trend will not continue.

No one planned this. It’s just what happened as the levy grew by its allowed 2 ½%, taxable new growth added to that, and the voters agreed twice (2005 and 2011) to override the levy limit to support operating budgets. 

The decline in the buying power of state aid really hurt (Figure 2). 

With flat dollars falling far behind inflation, costs were relentlessly shifted to the property tax. And because so much of our state aid comes as earmarked assistance for the schools, the loss in buying power particularly affected education financing (although we need to be careful how much we blame state aid — more on that in a moment).

A shift of this magnitude can be felt in many ways. One of them is shown in Figure 3. 

Average tax bills grew twice as fast as inflation. The shift also helps explain the sky-high rents in Amherst.

Change #2: What do we spend?

A revenue crunch by itself does not create a crisis. The other side of the equation is spending, and what we spend has grown steadily. Here, education again takes center stage, as it accounts for more than half our operating budget (Figure 4). 

With spending running ahead of inflation the increases had nowhere to go except the residential property tax (Figure 5), which had to rise 118% to support a 72% increase in spending. 

Change #3: Who do we educate?

If this were the whole story, we’d certainly be feeling the pinch. But another critical chapter puts our situation in a different light: we’re also experiencing dramatic changes in who we educate. 

Birth rates have been falling nationally since the 2008-09 recession, a trend that is accelerating. The record lowest birth rate in American history was set in 2018, broken in 2019, and shattered in 2020. There was a pause around COVID, but the record was broken yet again in 2023. The implications for the schools have been stark (Figure 6). 

Total Pre-K-12 enrollment peaked in 2001-02, and has since fallen by 41%. This is a sea change not seen since the Baby Boom sent enrollments soaring decades ago. And based on recent birth rates it seems almost certain that enrollments will continue to decline for as far as we can see.

The composition of our student population has changed, as well. Figures 7 and 8 show two populations with specific educational and service needs (note: graphs reflect total enrollment at the Amherst elementary and Regional schools). 

After peaking ten to fifteen years ago, the number of students with disabilities receded but has begun to edge up again, while the percentage has been gradually increasing. The number and percentage of English Language Learners remained fairly flat.   

These data do not describe the nature or severity of students’ disabilities, so they do not provide a clear picture of cost implications. It will be essential for us to fully understand the needs of these and other populations of students as we go forward.

The First Tremor

For two decades, each year education spending grew by an average of 2.8%, while enrollment fell by 2.4%. There was nothing shocking about the spending number, which was on par with the CPI and municipal and library budgets. And the enrollment number in any given year made no headlines. But when year after year spending rises while enrollment falls, the cost per student spikes. And if the property tax is the only revenue growth option, the results can be eye-popping.

Total unadjusted town spending per student (from all sources, including Chapter 70 aid) rose from $7,119 to $20,870. But the piece of that paid for by residential taxes rose even faster, from $3,436 to $12,759. Figure 9 tells the story: total spending per student rose nearly three times the rate of inflation, while residential tax spending per student grew almost four times as fast. And the gap is still growing.

All this helps put the debate over the Regional assessment into focus. Staffing and curricular decisions have assumed that budgets would grow each year regardless of how many students there were to teach, the perfectly natural consequence of our reverse-budgeting approach. It might have gone on forever if revenues had kept up. But we’re tapped out. We use every inch of our taxing capacity. New growth seems to have plateaued. Our last operating budget override was in 2011, and its buying power has eroded along with everything else. Our rickety financial structure cannot produce 8%, or 6%, or probably even 4%, spending increases going forward. 

The first tremor rattled this year’s Regional assessment, but really the ground is moving under all of us. After forty years, we need to take a step back and think long and hard about how we pay for the services that are important to us. 

Meeting the Challenge

We need a better approach than what we’ve employed for these last decades. I have no doubt we will continue to prioritize education, but we have to figure out what that means in a much different environment. How do we get back in balance and create a sustainable plan for all our commitments? 

It won’t be easy, and it won’t be quick. These tectonic plates have been grinding for decades, and easing the tension will require patience, cooperation, and creativity. But we need to begin. 

My professional career was as a planner. One of the best pieces of planning advice I ever encountered was also the simplest: when you find yourself in a hole, the first step is to stop digging. In our situation, I think “stopping digging” means two things:

First, our legacy budgeting approach is like lashing down the wheel of the ship: nobody has to steer, but you have no idea where you’re going to end up. It may be a while before we can say what a new one should look like, but we can at least decide to put our hands back on the wheel.

Second, we need to let go of the vestigial assumptions and habits of mind that have brought our allocation system to the breaking point. Our world has changed, and we need to understand it, from two angles: 

Understanding #1: What the Community Has to Work With. We desperately need an updated understanding of our revenue options:

• We know what the standard 2 ½% levy increases yield. What about new growth? The recent burst of large-scale residential development gave us a boost. Can something take its place? How can we help make that happen? 
• Past overrides provide about fifteen cents of every dollar we spend today. Next year the debt exclusion for the new elementary school will hit tax bills, averaging around $500. Speaking as one of the organizers or supporters of every override in Amherst’s history, I know that the voters can be extraordinarily generous. But I also know that successful efforts require a compelling case. Are additional overrides feasible?
• State aid dollars haven’t budged in decades. There are some efforts to change that. What’s a realistic expectation? And let‘s not forget that declining enrollment affects this, as well. In fact, between 2003 and 2022 state education aid per Amherst student rose 74%, noticeably ahead of inflation.
• Are there any opportunities to nudge “other” revenues in a favorable direction? What would be a reasonable expectation?

And we’ll need a correspondingly clear view of our future spending obligations. Our funding for schools and everything else is what’s left after our legally required bills are paid. These now consume about 20% of available revenue (almost double twenty years ago). What is a reasonable estimate of future growth? 

Achieving this “first understanding” has many technical aspects, but it’s not simply a technical exercise. It’s an opportunity for the community to learn where it stands and bring a solid sense of opportunities and trade-offs to the difficult choices we’ll face going forward.

Understanding #2: How Our Educational System Has Evolved. The view from space offered above suggests, but does not answer, some critical questions: 

• How have our schools adapted to enrollment declines to date in terms of staffing, class size, curriculum, and other elements of effective education? Going forward, what is a realistic enrollment projection?
• As expenditures per student have climbed, how have those resources been allocated? Where, exactly, has the money gone?
• How well do our current assumptions and practices position us for a successful transition to a smaller, high-quality educational enterprise? 

Again, answering these questions has many technical aspects, but much of the value resides in raising the community’s awareness of where we stand after years of change, and how best to frame the discussion of where we go next.

A New Way Forward

Figuring out a new way forward will not be easy, but we have to take it on. The community is already grappling with this. The Town Manager has called for an examination of these and related issues. Some members of the Regional School Committee and the Town Council have expressed similar feelings. The Finance Committee is working on recommendations along those lines for the Council. Not surprisingly, exactly how to tinker with the engine while the plane is in the air presents many logistical and political challenges. But a sustainable strategy for our schools requires that we tackle these questions. 

Once we’ve fully digested the community’s financial situation, and the schools’ trajectory to this point, we’ll be in a position to come together and imagine what comes next. But one thing that should not change is an idea that has guided us for generations: that education is our core value, and that preparing our young people to contribute fully to the world they will soon inherit is our first responsibility. Many things may be different in the future, but that commitment should remain the star we steer by.

This post was updated to revise the projected property tax impact of the debt exclusion for the elementary school building project. It is projected to be around $500, not more than $600.

This post was updated to revise for clarity the description preceding Figure 9: Change in Expenditures per Student vs. CPI.

Bryan Harvey served as chair of the 2001-03 Amherst Charter Commission. He also served on the Amherst Finance Committee from 1981 to 1991, and on the Amherst Selectboard from 1991-2001.