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Budget Commission seeks fast-track of state aid

June 2, 2012

Woonsocket School Superintendent Giovanna Donoyan answers questions about the financial status of the school department during the first Budget Commission working session at City Hall Friday. Listening, at left, is Richard Ackerman, legal counsel for the School Committee. (Photo/Ernest A. Brown)

WOONSOCKET – As expected, one of the newly seated Woonsocket Budget Commission’s first official deeds was to ask the state to hand over some $3.1 million in school aid to the cash-strapped Woonsocket Education Department nearly a month sooner than it was due.
It’s still not enough to get the WED through its last pay period of the year, on June 29, and the panel will go back to the drawing board on Tuesday to reassess its options.
On tap is the critical question on whether the House will reconsider the city’s request for permission to issue a 13 percent supplemental tax bill. Lawmakers shelved the plan last week, voicing a preference for the appointment of a receiver to handle the city’s affairs, but the bill could be resurrected.
“With this uncertainty out there it makes the job a lot harder,” said State Revenue Director Rosemary Booth Gallogly. “I would certainly hope the General Assembly would reconsider.”
Gallogly, who appointed the panel at the request of the City Council, attended its first meeting at Harris Hall on Friday. The meeting lasted over three hours and drew some 60 spectators.
Among other things, the panel unanimously chose East Greenwich Town Manager William Sequino Jr. as its chairman. The other members include Peder A. Shaefer, Associate Director of the Rhode Island League of Cities and Towns, Dina Dutremble, the WED’s former business manager, Mayor Leo T. Fontaine and City Council President John F. Ward. The Fiscal Stability Act of 2010, the law that allows for state intervention in fiscally distressed communities in need of help, requires the elected locals to serve as members of the commission.
The panel was called in to address a $10 million deficit on the WED’s books, creating a cash crunch which has been worsening for months. Briefing the panel, Schools Supt. Giovanna Donoyan said the WED stands some $6.5 million in arrears to vendors as of May 31, with over 63 percent of the accounts payable more than 90 days past due –much more, in some cases.
More ominously, Donoyan said that even if the department drains its $1.5 million account for operating expenses, it will still overdraft its payroll by more than a half-million dollars on June 15 without an emergency infusion of cash.
“The city’s education department finds itself in a dire and unprecedented predicament, insufficient funding now places us at risk of not meeting payroll and federal and state tax liabilities for the remainder of this school year,’ Donoyan said. “We remain unable to pay our vendors.”
Finance Director Tom Bruce told the panel that the city would have been in a position to help the school department had House lawmakers granted the okay to issue supplemental tax bills. The measure would have raised some $6.6 million, including $4.3 million during the current fiscal year that could have been applied toward the largest portion of the deficit.
Also, Bruce said, the tax law would have enabled the city to immediately borrow another $3.2 million to help with cash flow.
Commissioner Schaefer strongly suggested that the panel explore the feasibility of doing an end-run around around the legislature, issuing the supplemental tax bill without enabling legislation. The tax, or lack of it, he said, will help determine the budget commission’s options.
“I think we ought to have further discussion on that,” Schafer said after the meeting. “All the dynamics are different depending on whether that happens or not.”
The budget numbers, still in flux, illustrate Schaefer’s point. Without supplemental taxes, Bruce told the panel, the city can bank on only a four percent hike in the tax levy, the maximum allowed under state law, at least in the absence of a special waiver which also needs legislative approval. Thus, Bruce said the budget he’s proposing in lieu of supplemental taxes is about $122 million for fiscal 2013, a figure that includes $62 million for the WED.
The current school budget – the one that yielded $7.3 million worth of the department’s projected $10 million deficit – was about $59 million. That budget, Donoyan said, was “unrealistic in its design. Line items were slashed below historical expenditures and further added to the deficit.”
Notwithstanding Bruce’s no-supplemental-tax budget sketch, Donoyan now proposes a WED budget for next fiscal year of nearly $70 million. Donoyan said the figure represents a first step toward righting the WED’s fiscal house, but it still does little other than offer children a barebones education.
“It is basic,” she said. “In my professional opinion, it does not serve the educational needs of our students to engage them in a challenging learning environment.” she said. “It is basic.”
Even if some mix of cuts and new taxes can bridge the gap going forward, the $10 million hole on the WED’s books would still be there.
Ward, the council president, also underscored the importance of determining, quickly, if the supplemental tax is to be part of the solution. Without it, he said, the budget commission’s options grow increasingly narrow and less savory. They include pushing “an enormous increase” in the levy onto taxpayers in one fell swoop next fiscal year, or alternatively, some very deep cuts.
Ward says the General Assembly has put the city between a rock and a hard place. While the city needs the approval of state lawmakers to impose supplemental taxes or waive the cap on ordinary taxes, the General Assembly may end the 2012 session in a few days, and it’s unlikely they’ll come back to do either.
“If it’s the desire of the General Assembly to push us into receivership and municipal bankruptcy, that’s the way to do it,” said Ward. “I can’t say it’s impossible but it would be extremely difficult to close that gap without the passage of the supplemental bill.”
With a budget commission in place, Woonsocket becomes the third community operating under some form of state oversight, including East Providence and Central Falls. The panel assumes all the spending authority of the City Council, the School Committee and the Fontaine administration, but Gallogly’s advice was for those panels to continue working on budget issues as they would normally. The budget commission expects their input and support, she said, but decisions will be left to the state commission.
Dave Easton, fiscal advisor to the budget commission, said all meeting notices will be posted online, along with the minutes of previous meetings. A link to the information will be displayed on the city’s homepage.
Except for next week, the panel voted to meet twice a week, Mondays at 8 a.m. and Wednesdays at 3 p.m. in Harris Hall. On Sequino’s suggestion, the panel voted to reserve a 15-minute period for public comments at the beginning of each meeting.
Gallogly said the panel has more leeway to operate outside the boundaries of the state Open Meetings Act than elected government bodies, leaving open the possibility that some meetings will be held without public notice, perhaps in places that aren’t disclosed until after the fact. To keep information flowing between members and meet deadlines, Gallogly said it might sometimes be necessary to circumvent the OMA, though she’d rather see the panel meet the same standard as elected bodies.
“One of the challenges is going to be providing a lot of transparency in this process and still getting the work done,” she said.

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