By state law, both the city and schools cannot run a deficit and, as soon as they project a deficit, are required to file a corrective action plan with the state general auditor.
But while Mayor Joseph Solomon in his state of the city address said the city faces a potential $18 million deficit going into the next fiscal year, which in part is made up from projected shortfalls in the current budget, no plan has been filed with the state. Additionally, as recently as last week the School Department forecast a $4.6 million deficit in its current budget unless it makes dramatic cuts or receives added city funding in the next three months. The department has not filed a corrective plan with the auditor, either.
Mayor Joseph Solomon said Tuesday he has been “proactive” in addressing the city’s financial position having called on departments for a 5 percent budget reduction and a freeze on all but essential expenditures. He also cited administrative efforts to sell or lease surplus city property.
“We’re using a fine tooth comb to go through our expenses,” he said.
General Auditor Dennis Hoyle said Friday he is “concerned” yet, as the city and schools are meeting in budget mediation this week, he sees an effort to address the projected deficit. He has attended sessions and said Mayor Solomon is “actively engaged in the issue.” Hoyle further reported that he has extended the deadline for the city’s financial audit that was due Dec. 31, 2018 to April 30.
“There’s active efforts to get this done,” Hoyle said. Although the auditor has the authority to levy a $10,000 fine for failing to complete the audit, Hoyle said, “We don’t like to use that.”
The audit will show the city’s financial position as of June 30, 2018 and the status of city reserves – which Solomon projected at $13-14 million during the mayoral campaign last summer, not the $22.5 million that former Mayor Scott Avedisian said the city had when he left last May. The $22.5 million amount came from the audit for the fiscal year ending June 30, 2017.
Hoyle attributed delays in completing the audit to turnover in the city’s financial department. The challenge he foresees is that the longer it takes to complete the audit for FY 2018, the less time the city has to prepare for the next cycle and the 2019 audit.
“They are mostly trying to get caught up,” he said.
As for the projected school deficit, the School Committee dropped its lawsuit calling on the city for an additional $4.9 million in favor of mediation and, if it comes to it, arbitration. The decision was made by the newly elected school committee – which cycled in three new members who, along with new chairwoman Karen Bacchus, have vowed intentions to work more collaboratively with city officials towards solving the financial challenge.
School financial director Anthony Ferrucci said Friday he is in contact with Hoyle on an ongoing basis. He reiterated the department’s position that the $164 million approved for the current year is $2 million less than what was appropriated for the prior year. The mayor and the City Council approved a $163 million budget for FY 2017, however, to fund the settlement ending the prolonged teacher contract impasse, schools received an additional $3 million, thereby raising its budget to $166 million last year.
In order to cover those contractual increases and taking into account savings from the consolidation of schools, Ferrucci said the current budget “should have gone to $168 million to $169 million.”
Nonetheless, Ferrucci sees movement with continuing discussions between the school department and the city.
“Honest dialogue is going on right now,” he said, without elaborating on where he thought the parties might settle.
He said a school spending freeze is currently in place, which recently was displayed at the school committee meeting last week, where there was a measure to deny an allotment of about $17,000 to go towards a professional development experience for 90 teachers.
Even if the schools and the city manage to close the current gap, the school department also faces a projected additional increase of $12 million in new expenses for the upcoming budget, including $2.2 million for the final 3 percent pay increase for Warwick Teachers’ Union members.