WOONSOCKET â€“ There was yet another dose of sobering financial news for the School Department yesterday as Finance Director Thomas M. Bruce III informed officials that its local appropriation of $13 million is exhausted, about a month earlier than last year.
The school department is still due some $4.7 million a month from state and federal sources for the balance of the fiscal year, but Bruce said the depletion of local funds could translate into a cash crunch when salary payouts for teachers and other bills are due.
The earliest potential crunch date is Dec. 30, when the school department is due to distribute roughly $1.7 million in payroll checks to teachers and other employees. The money needs to be in the bank two days before the checks are issued, but Bruce says the school department might not receive its state allotment in time.
â€śThe city lacks any ability in terms of our annual cash requirements to provide further General Fund originated cash transfers to the School Department for the remainder of the fiscal year,â€ť Bruce informed School Department Business Manager Stacey R. Busby by e-mail yesterday. â€śAll other School Department related funds received by the City such as State Aid to Education will be relayed by the City to the School Department in a timely manner.â€ť
Bruce said that in past years the city has borrowed money in anticipation of tax receipts to provide a safety net for times of restricted cash flow. Because the city is operating under its own set of austerity guidelines, that didnâ€™t happen this year, so the school department wonâ€™t be able to look to the city for help.
It could be bad news for the city if the school department bounces payroll checks, as it did once last year. Mayor Leo T. Fontaine thinks the event would promptly cause a further downgrade in the cityâ€™s Ba1 bond rating, which is already considered junk status.
â€śEven if it happened just once, weâ€™d be sunk,â€ť the mayor said.
Of the $13 million that the city contributed to the School Departmentâ€™s $56.4 million budget for the fiscal year that began July 1, Bruce said there was only $99,319 left as of yesterday, prompting him to advise Busby of the allotmentâ€™s depletion. The balance, he said, is â€śan insignificant sumâ€ť in terms of the districtâ€™s obligations.
The news came just a day after School Supt. Giovanna Donoyan submitted a state-mandated plan of correction to eliminate a deficit of $2.2 to $2.6 million for last fiscal year. State Revenue Director Rosemary Booth Gallogly and Auditor General Dennis Hoyle have the authority to demand such a plan as a condition of enforcing an agreement that allowed the city to float a five-year, $12 million bond to eliminate prior yearsâ€™ deficits several months ago.
Gallogly is already expressing concern about the cutoff of city revenues. In an e-mail obtained by The Call, the revenue director has asked Busby to provide her with a cash-flow analysis of school department revenues for the balance of the fiscal year.
â€śPlease send me a cash flow that shows how you expect to meet the school departmentâ€™s obligations until the end of the year, including a schedule of federal draws from RIDE (Rhode Island Department of Education), separating what is owed as currently and projected earned federal funds,â€ť Gallogly wrote. â€śThis is of great concern to me.â€ť
Gallogly is also waiting for a detailed breakdown of personnel and payroll records from the school department to determine whether it is overspending on salaries and, possibly, digging an even deeper fiscal hole for itself during the current year. During a meeting on Monday, Gallogly gave the school department until today to turn over those records, according to Bruce.
But there is already concern that the issue may not be whether the department is racking up another deficit, but how big it is. During a meeting with him earlier this week, Fontaine said the superintendent told him that she believes the current budget is tracking about $750,000 in the red.
Meanwhile, Braver PC, the cityâ€™s auditors, has not yet confirmed the size of the deficit for last fiscal year. The final numbers are due in a few days, says Bruce.
So far, there has been no indication from Gallogly whether the proposed corrective action plan is satisfactory or needs further tweaking. Among other things, it calls for spending and hiring freezes and the elimination of the Feinstein Learning Academy, a program for disobedient youth at the middle school.
After analyzing the he payroll data, Gallogly may order additional oversight of local finances in attempts to improve cityâ€™s financial situation, including the imposition of a state monitor.