Thursday night (May 28th) the Aldermen face the first in a series of very tough choices on the FY2010 budget.

It's not the Aldermen's fault that this vote is necessary. They didn't create this fiscal crisis – in fact, their work in recent years has greatly strengthened Somerville's financial future. But neither they nor I can ignore the position we're in as a community.

Simply put – and due largely to deep cuts in state aid and rapidly escalating health care costs – this city faces a budget gap (based on the latest information from the state) of roughly $13 million.

If we do everything we can to manage costs and raise revenues – and if the state closes the telecommunications property tax loophole and green-lights local option meals and hotel taxes – it's possible for us to reduce our budget shortfall to between $5 and $6 million: We'd still be facing some difficult choices – including some layoffs and service reductions – but their magnitude would be significantly reduced.

In order, however, to get to that "best-case" scenario of a budget shortfall that's only $6 million, we still need to take a number of strong actions, and we need to take them quickly.

Several of those actions mirror recommendations made by the Financial Advisory Committee I convened last January. The FAC was charged with examining our existing policies and procedures and recommending ways to reduce costs and improve revenue. After a comprehensive review of the City's finances and municipal operations, the FAC concluded that the structure of our health insurance system was one of the areas in which Somerville could achieve significant savings with no loss of access or coverage.

Some of those savings depend on the willingness of the state to give cities and towns more control over the design of local health care plans – but one of the specific recommendations within our control is to bring retiree health care costs more in line with what other Massachusetts cities and towns pay – not to mention bringing these costs more in line with what Somerville pays to insure its active employees.

When I took office in 2004, every City employee and retiree paid for, at most, only 10 percent of their total health care costs. With health insurance costs rising fast, that system was simply unsustainable. As of July 1, Somerville's non-union workforce (including city side, school side and elected officials) pays 25% of the cost of its health insurance premiums – the City pays the other 75%. In our unionized workforce, the split currently varies from 85/15 to 80/20 – and we're working through the collective bargaining process to get everyone to move to the 75/25 share.

So far, however, our retirees have not been asked to play any part in addressing this problem. They still pay only ten percent of the cost for their health care plans; for the so-called "indemnity plan" (the least efficient and most expensive plan for the city, but one that doesn't provide much preventive care) 203 of our 1255 retirees pay only one percent of the cost of their premiums. In fact, it takes the entire property tax contribution of six average residential taxpayers to cover the cost to the city of one indemnity plan. It's a system that can't continue in the face of the current fiscal crisis. the Board of Aldermen votes to require retirees to pay for 25% of the cost of their premiums (which is the norm for municipal retirees in Massachusetts), and if they also raise that share to 40% for the outmoded indemnity plan (thereby providing an incentive for retirees to move to a more efficient HMO or PPO – Preferred Provider

Organization – plan), they can save the City $2.8 million per year without reducing access or coverage.

I understand that this is a hard vote. We can all agree that dealing with this crisis will require everyone to make some sacrifices: wage freezes, furloughs, and higher health care costs for active employees (including elected officials); higher fines and fees for residents; and if necessary, cuts in services and staff layoffs. But when that spirit of shared sacrifice is extended to our retirees, it's not surprising that some aldermen are reluctant to make the call.

So I will make the choice as clear and simple as I can: Since the budget situation at the state level won't be clear for some weeks to come, and since contractual requirements mandate a minimum of 30 days notice prior to layoffs – and since the new fiscal year starts on July 1st – I must begin sending out layoff notices on Friday, May 29th. The School Department will be doing the same.

If the Board approves the retirees' insurance proposal, they will reduce the potential need for city-side layoffs, substantial service reductions and cuts by $1.4 million. The Board will also reduce the cuts needed on the school side by an equal amount.

There is no "splitting the difference" on this – or any future – FY2010 budget vote. We need the full $2.8 million in savings from this proposal – and we need to press ahead with other measures as well, including the raising of fines and fees. Even then, we will still face a harsher fiscal environment in which some layoffs will be necessary.

But with this change to retiree health benefits – and a number of others changes, including increases to fines and fees – we will be able to preserve core services at their current level.

This isn't fun, folks. But it is the math. We are all going to have to do our part to get through this. Our Police and E911 unions have already agreed to contracts with zero percent wage adjustments and a one-week furlough – the same terms as non-union employees. They have increased the share they pay for their healthcare costs.

Taxpayers have had to step up, too: they'll be paying more in fees and fines. Everyone has to do his or her part in order to maintain city services. Even, at long last, our retirees.