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Analysis: In a Sea of Perils, Springfield’s Fiscal Ship Steams on…

Mayor Domenic Sarno presenting the FY2017 budget on June 13. (WMassP&I)

Mayor Domenic Sarno presenting the FY2017 budget on June 13. (WMassP&I)

On June 20, the Springfield City Council unanimously authorized a $1 million transfer into a reserve account for the city’s beleaguered pension system. The Council’s approval was hardly a surprise. Yet, the mere fact that it happened at all was a welcome development as the city begins a new fiscal year Friday.

The million dollar item was a mere down payment on the hundreds of millions in unfunded pension obligations, which councilor had urged action in the preceding weeks. What made the item unique was that it seemed to come about because the legislative and executive branches were working together, if indirectly.

“It’s good enough for me in this year,” said Council President Michael Fenton, who had against the budget on June 13 because, at the time, too little was appropriated for the pension liability. Only 27% of the city’s future pension obligations are currently funded.

While Springfield still faces tremendous financial challenges, the budget process this year reflects better fiscal stewardship for a city that nearly tipped into receivership 12 years ago.

Past members and staff of the Finance Control Board (via Springfield City Hall)

Since the Control Board came to town in 2004, Springfield has effected governed (or been governed) with an austerity budget. Any hope of ending that sooner died with the financial crisis in 2008 and into 2009. Many needs in Springfield have gone unmet and any number of beneficial wants have been overlooked. It could have been much worse, however, and Mayor Domenic Sarno has mostly kept the Control Board’s fiscal practices in place.

Sarno has had little choice. The legislature wrote permanent changes into the city charter that gave the city’s chief administrative and financial officer, currently Timothy Plante and Lee Erdman before him, some autonomy no city financial officer had before. The state retains some oversight, but it has shown little interest in that. Still a plucky pol could easily have sidestepped much of this for political expediency. The mayor has not done so.

While there are any number of things one could fault Sarno’s administration for—resident outreach, concentrating power, economic development priorities, political posturing, and some of the priorities within his budget—his fiscal practices are praiseworthy.

The stabilization the city’s workforce, which represent most of the investments in his budget, also suggests the city is on firmer footing. The budget for FY2017 which begins July 1, is the latest in a series of budgets without layoffs—though attrition still exists—and no major cutbacks in services. For a community at its levy ceiling under Proposition 2 ½, among the state’s poorest, this is progress.

No cuts this year from the Council, but nobody's perfect. (WMassP&I)

No cuts this year from the Council, but nobody’s perfect. (WMassP&I)

There is still plenty to quibble about. Certainly the Council could have and perhaps should have trimmed the budget a little. Cutting a million or two would have been a welcome, if minute, relief to taxpayers or an impetus for alternative investments.

Certainly the revenue side of the ledger deserves scrutiny. Fiscal hawks like Fenton have decried the use of one-time funds to balance the budget. In times past, one-time revenue had been from reserves, though Sarno and Plante have avoided that recently This year one-time funds came from the multitudinous permits MGM is expected to pull as construction finally begins.

This is a fair criticism. Permit revenue from MGM’s permits or the railcar factory on Page Boulevard should be steered to capital projects or one-time expenses, not recurring ones. However, here too, the city should be graded on a curve. In darker fiscal times, the city borrowed for regular expenses, assumed 100% tax collection—a dream of any government—or outright misrepresented the numbers.

CAFO T.J. Plante (WMassP&I)

CAFO T.J. Plante (WMassP&I)

With a career to think of, Plante has not allowed such funny business. While fiscal hawks may not always care for the mayor’s fiscal policies, they trust Plante, a one-time Beacon Hill aide for a former North Shore senator.

Another area of criticism are grants, which fund the city’s “gray” budget, a little more than $100 million in spending outside the city’s official half billion dollar budget. This conceals the true size of the city’s spending and can affect city policy. Springfield’s controversial use of Community Development Block Grant for sidewalks repairs (as opposed to the capital budget) is an example.

But the overall impact is negligible. Grants fund a fraction of the city’s non-school workforce—less than 100 out of roughly 1500 citywide—minimizing the exposure the city has should that money evaporate.

On balance the fiscal stewardship has been good, considering the hand dealt to Springfield.

Councilor Tim Allen in 2012. (WMassP&I)

Councilor Tim Allen in 2012. (WMassP&I)

What makes fiscal policy is Springfield all the more curiously good is the fitful cooperation on pensions. The mayor seemed to take umbrage at Ward 7 Councilor Timothy Allen’s push to make cuts, even as he applauded the councilor’s diligence. Allen had proposed 80% of free cash go to the pension fund. Sarno said that was too high. Though both were interested in one, no compromise seemed in the offing.

Then, in the following hours and days, suddenly Sarno proposed the $1 million for a pension trust fund.

Sources both inside the Sarno administration and out both saw this outcome as a collaboration between the branches. Sarno was not against putting more money aside for the pension gap, but the Council’s insistence, particularly Allen’s, provided the momentum and conversations to figure out how to tackle the unfunded pension liabilities.

Plante told WMassP&I he had “zero problem” with putting money aside for the pension liability, noting the city added $2.3 million to its general stabilization reserves, too. “I’m happy on both fronts.”

Adding to the peculiarity of the city’s fiscal politics, Sarno’s initial resistance not only faded away—he never outright opposed additional action on the pension liability—he did not hog the credit in public and in interviews.

Tension and distrust between the Council and the mayor’s office is very real but the budget in Springfield appears different. There will always be disagreements, but they led to better results and not just more theater. Pair this with tighter fiscal controls the Control Board left behind and Erdman and Plante have fostered, Springfield’s overall financial condition seems better than it has been in years.

Trouble may still lie ahead. MGM’s long-term impact remains uncertain. Poverty undermines the tax base, which remains very weak. Costs rise even as some needs go unfunded. Another recession could slash local aide from the state. Pensions remain a monumental liability. In short, another bailout from Beacon Hill may one day be needed. But if things stay as they are, it should not be due to malfeasance or mismanagement at 36 Court Street.

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