Control Board Budget Message from Phillip Puccia

June 7, 2007

Dear Members of the Springfield Finance Control Board:

I am pleased to submit the budget for Fiscal Year 2008. It is the third annual budget that has been developed since the 2004 implementation of Chapter 169, the act that created the Control Board. As was the case for Fiscal Year 2007 budget, this year’s budget is balanced and does not contain a structural deficit.  However, unlike prior budgets, this budget relies solely on recurring revenue to finance expenditures and does not rely on reserves to support operating expenses. 

We believe this is a major accomplishment; one that is a result of the outstanding cooperation and partnership between Mayor Ryan and the Springfield Finance Control Board. Success in delivering the City’s third balanced budget in as many years has been based on our joint emphasis on sound financial management, conservative budgeting, prudent contract negotiations, development and execution of cost-saving initiatives and the implementation of best-practices. 

Looking Back

As we plan for Fiscal Year 2008, it is important to understand the context for the City’s emerging recovery.  The City today is a much different place than it was three years ago because of the enormous efforts of many dedicated and committed public servants and volunteers. Below is a list of several of the major improvements and changes which have contributed greatly to the

City’s improved financial position:

• Health insurance plan design changes and the transfer of City employee and retiree health insurance to the Group Insurance Commission.  This year, the increase in health insurance rates is only 4%, compared to the city’s historical annual 18% increase. 
• Adoption of Chapter 32B Section 18 of the Massachusetts General Laws which makes Medicare the primary payer of retiree health insurance costs, saving $18.7 million for the City and retirees over a three year period (FY06 – FY08).
  
• Successful negotiation and implementation of all City and School Department labor contracts, most of which are long term contracts, and all of which provide for improved departmental management and predictable, affordable wage increases. 
• Implementation of MUNIS, an integrated financial management system for the City and School Department.  This system will improve accountability and transparency, streamline inefficient processes and eliminate the vast majority of (often redundant) manual processing for municipal processes.
  
• Collection of $25.8 million in overdue taxes, including fees and related interest charges.
• Transfer of Retirement System assets to the Commonwealth’s Pension Reserves Investment Management Board, a decision which increased retirement system earnings by $25 million in one year, compared to the City’s prior investment performance. 
• Implementation of performance-based budgeting to increase the accountability and efficiency of service output.
• Utilization of a comprehensive payroll system that has improved efficiency, reliability and has helped us to improve many other areas of municipal operation.
• Increase in the size of the city’s Police Department and Fire Department through hiring, and by transferring dozens of sworn personnel from desk duty to street patrol and fire suppression duties.
• Significant investment in a system to track and manage repairs in the City’s infrastructure of parks, schools and other municipal buildings.

The improvements we have made have had unexpected benefits as well.  The City’s better financial position, for example, has allowed us to improve cash management, be prepared for unexpected expenses and deliver more timely services.

These improvements – and many others – have been viewed in Springfield and beyond as appropriate steps and fiscally prudent.  Two independent bond rating agencies – Moody’s and Standard and Poor’s – have acknowledged these and other improvements by giving the City an outlook upgrade (Moody’s) and by giving the City a double bond rating upgrade, from junk bond status to BBB (Standard and Poor’s).  These improved ratings are even more impressive when one reflects on the City’s eroding ratings history, and the fact that Standard and Poor’s declined to assign a bond rating to Springfield in Fiscal Year 2005 due to lack of financial information available.

These changes have been made without the wholesale layoffs that many predicted would be necessary.  Certain operations have outsourced, but all outsourcing has occurred through a process of managed competition in which public employees were allowed to compete with the private sector to provide the service.  This ensures that the City’s employees have a chance to continue to provide a particular service if – as was the case for solid waste collection and disposal – our employees can provide the same service at a better price than can the private sector.

Fiscal Year 2008

Fiscal Year 2008 remains a challenging year for the City.  A City the size of Springfield should have approximately $50 million in stabilization reserves.  Springfield’s current balance in its “rainy day” fund is only $8 million.  The City should have a multi-million dollar program of annual capital renewal, but is currently only able to invest on a limited basis.  The backlog of deferred maintenance in school buildings exceeds 3100 work order requests, with $190 million in new construction and major renovation projects needed.

We believe that we must adopt and adhere to the financial policies proposed earlier this calendar year.  Both Standard and Poor’s and Moody’s rating agencies cited these policies as strongly positive steps for the City, and they represent the best practices in financial management from well-run cities and counties across the nation.

We must finalize, adopt and adhere to the human resources policies being completed by the City and the Control Board.  These policies will bring the City’s human resource policies into compliance with appropriate practice and will better meet the needs of the City and its employees.

The City remains under enormous spending pressure, with municipal departments requesting additional staffing and other spending, while the public is seeking additional or expanded services.  Because of the precarious nature of the City’s financial recovery, it is not possible to meet these needs without risking the City’s financial and operational recovery.  The City is expanding at its financial capacity.  We must continue to improve the efficiency of City services and foster continued economic development if additional funds are to be made available to expand services.

The City’s recovery is still fragile, but enormous progress has been made.  The Control Board was formed in the days of a $41 million budget deficit, the year after it laid off 325 employees.  Few could have imagined in 2004 that the City – where there was open talk of receivership and the streetlights had been turned off due to lack of funds – would today be able to invest in its roads and parks and would be building a new Putnam Vocation Technical High School.  Despite this impressive evolution, it is important to remember that reforms are still in their early stages and can be reversed easily by opponents of change or by those who prefer the status quo. 

The City has a long and difficult list of needs – capital, operational and personnel-related – but we have reached the starting line.  We are now at a place where Springfield’s city government should have been long ago, and where it can set aside a crisis-management mode of operation and begin planning for a transition back to normal government representation.  This of course, is the proper an ultimate goal of the Springfield Finance Control Board.  This progress is the result of a true partnership between the Control Board and Mayor Charles V. Ryan.  Without the Mayor’s commitment to improving this City, Springfield would be in a much more difficult position than it is today.

I would like to highlight a few of the City’s ongoing needs as we look to Fiscal Year 2008. 

Implementation of Munis and other Information Technology Initiatives

The City will roll out a significant portion of the Munis system on July 1^st, with other portions of the software being rolled out in the months that follow.  This system will revolutionize financial management in Springfield, saving tens of thousands of hours of staff time, improving financial accountability, transparency and control.  Other information technology systems can provide similar returns for the City – time and labor management, use of a single payroll system throughout Springfield and staffing software in public safety departments.  We must ensure that these improvements continue and that we make appropriate investments to prevent the waste of taxpayer dollars through inefficiency.

Implementation of Financial and Human Resource Polices and Procedures

All large organizations have standard operating procedures to ensure consistency in management and fairness.  The City must adopt the proposed financial policies and soon-to-be-released human resource policies, and then must ensure adherence to them.  The financial policies will help prevent the problems of the past, including opaque financial reporting, mismanagement and the lack of internal control. 

In addition, we must continue the City’s efforts to standardize job descriptions, criteria for hiring and promotion and to improve recruiting within the community. Such guiding principles will help ensure that the same standards are applied fairly to all city applicants and employees. An objective and clearly defined approach to human resource policies is a positive and necessary step toward the guarantee of a level playing field in a city that is as culturally diverse as is Springfield. The days of getting ahead solely based on who you know and not what you know, must not return. 

We intend to complete a management review of all human resources functions this fiscal year and funds for non-bargaining raises, based on performance metrics agreed to by cabinet and department heads, have been included in the FY 08 budget.

Both sets of policies will provide departments with a blueprint for sound management, with the taxpayers and residents of Springfield being the beneficiaries.

Investigation of Pay-As-You-Throw

The City’s trash fee program will be implemented as of July 1^st, but we must continue to investigate pay-as-you-throw.  Such systems increase recycling and reduce trash tonnage.  This, in turn, reduces the cost to dispose of solid waste.  Pay-as-you-throw systems also give residents the ability to control their own solid waste costs; if a resident recycles more, he or she needs to dispose of less trash, thereby avoiding the need to buy additional trash bags.

School Management and Results

For the first time, the Springfield Public School District is shifting towards school-based budgeting.  The purpose is to empower the principals and provide for more accountability in student performance.  The FY2008 budget is allocated to individual schools with each school having a specific set of performance criteria to meet.  In other words, the Springfield Public Schools’administrative structure has been realigned to be school-based and performance-driven. In this budget, a resident of Springfield now has the ability to look up the MCAS scores and compare them to the state average as a whole, as well as other urban school districts that are similar to Springfield.  This allows residents to have a better understanding of the strengths, weaknesses, and core competencies of each school.

CitiStat

The FY08 budget contains funding to establish the CitiStat program for the City of Springfield.  Citistat is a computer based management tracking system designed to improve the performance of City Departments.  The City of Baltimore was the first community to establish this system to manage all city programs and ser­vices. The goal is to ensure accountability and productivity from City employees, gauge the effectiveness of the delivery of services in the City, and to provide the swift deployment of resources to address issues in most time efficient manner. Information is collected based upon various performance metrics.  These metrics include including response times for services such as trash collection, snow removal and the time it takes to fix potholes or the prevalence of issues such as illegal dumping, vacant buildings, and sewage overflows. This information is analyzed and strategies are developed to effectively deal with the problems. 

Looking Forward

While challenges clearly remain, the City appears to be well past the immediate fiscal crisis stage.  Integral to this turn around is, of course, the resiliency of the Springfield residents and community. It is my hope that we are on the verge of emerging from this difficult situation as a stronger, more efficient, and more responsive government, one that deserves the community’s confidence and trust.

I would like to thank Mayor Ryan for his clear vision in developing the City’s spending priorities.  In addition, thank you to Control Board Deputy Director Steve Lisauskas and Executive Assistant Ann-Marie Mahnken, Springfield C.F.O. Mary Tzambazakis, Finance/Budget Director T.J. Plante, Auditor/Acting C.F.O. for Schools Mark Ianello, Deputy Auditor Pat Burns, Treasurer/Collector Salvatore Calvanese, as well as the City’s finance staff:  Michael Marcinkewich, Steve Lonergan, Joan Saunders, and Joanne Raleigh for their hard work and dedication to putting the budget together.

I would like to offer my deepest thanks and appreciation to you, Messrs. Alan LeBovidge, Jake Jacobson and Tom Gloster, as well as to past Control Board member and former Administration and Finance Secretary Tom Trimarco. Any progress that the City of Springfield and the Control Board staff have made these past three years is due in large measure to our outgoing Board members whose enormous contributions of time, intellectual capital and unyielding dedication have improved the lives of the residents of Springfield.  In addition, I offer my personal thanks for your constant clear and compassionate guidance in my day-to-day work.

Sincerely,