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Peabody Would See Small Cut Under Gov.'s Local Aid Proposal

City officials are still concerned with any cut to local aid, but say the proposal from the governor to trim unrestricted local aid mid-year would have a minimal affect on Peabody's budget.

While much ado is being made at the state level on proposed emergency budget cuts to local aid for cities and towns, the net effect in Peabody will likely be minimal, according to city finance officials.

The cut, while unwelcome, may only amount to about $56,000 in unrestricted local aid within a city budget of $140 million for Fiscal 2013.

"Anytime there are cuts to local aid that affect the city budget, they are a concern," said Mayor Ted Bettencourt Wednesday. "It will have an impact on Peabody, regardless of the number."

Finance Director Patricia Schaffer said her understanding is that only general government aid would be trimmed by 1 percent under the governor's plan, not the $25.5 million Peabody received for local aid as a whole, which includes education or Chapter 70 funding.

Bettencourt said further that the continuing year-over-year trend from the state to cut local aid in the midst of a struggling economy does pose a big challenge for cities and towns to come up with lasting solutions.

Peabody is down about $2 million in local aid since Fiscal 2009 while the city's budget has grown by more than $8 million.

Bettencourt said that rather than just hit up taxpayers for more money or draw down on the city's reserves, he wants to explore alternative sources of revenue and reduce spending where appropriate.

He said that's why he quickly went to work on a health insurance deal with the city's unions shortly after entering office. Now, the city can expect to save up to $5 million a year for the duration of the four-year agreement.

"We have to be careful with our finances," Bettencourt said, echoing remarks often heard by his predecessor.

Gov. Deval Patrick announced the emergency or 9C cuts on Tuesday to deal with an anticipated $540 million budget gap for the state. The majority of the cuts are within Patrick's executive discretion to balance the budget and not subject to approval by the legislature, except for local aid and Chapter 70 education aid.

For example, one cut that will directly affect Peabody and other cities and towns is to special education reimbursements (more commonly known as circuit breaker funding). That money is accounted for outside of general education aid. Patrick is cutting $11.5 million or approximately 5 percent.

Schaffer did not have exact numbers Wednesday for how that affects Peabody's budget -- it's based on a specific formula -- but said she has spoken with school officials and the consensus is that it does not put a significant strain on school finances.

School Superintendent Joe Mastrocola that in addition to the circuit breaker account, homeless student transportation and regional transportation funding were cut, but neither is a significant expense for the Peabody Public Schools.

He said no staff or services will be affected and is confident the existing budget can absorb the cuts with some adjustments.

"It's another distraction for us to go through," he said, agreeing with Patrick that the 9C cuts are directly related to the fiscal gridlock in Congress. "Everyone feels the effects of the politics."

State Rep. Ted Speliotis, who represents West Peabody, Danvers and part of Middleton, said on Wednesday he's unsure which way fellow lawmakers will go on Patrick's proposal for local aid. He said it's too early to tell if local aid will in fact get the 1 percent cut.

"I know local officials are concerned about local aid and they have a right to be," he said, adding lawmakers may return to Beacon Hill in special session before the close of the year to deliberate on the local aid proposal.

"I recognize that no governor does this lightly," said Speliotis. He agreed with Patrick that revenues are down mainly because the economy has not improved as economists had projected, and in part due to the ongoing budget gridlock in Washington.

Speliotis commended Patrick for taking action now instead of at the close of the year when fewer options, and likely less palatable ones, will exist to make up the difference.

"This is an admission that there is not enough revenue in the budget," he said, pointing out that while Republican lawmakers criticize Patrick on the 9C cuts and say he vetoed bills that could have spurred business growth and generated tax revenue, most of them did vote for the budget now in place. "It's a bottom line issue."

Speliotis said he was particularly concerned with significant cuts to circuit breaker funding and homeless transportation, and the legislature cannot reject those cuts, likely forcing added burdens to cities and towns.

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