How schools ended up with $4.9M deficit

With much change occurring over the course of the past few months, an overview of where the school budget currently stands has become important to clarify. As of today’s paper, the schools are staring at a $4.9 million deficit for their FY19 budget, which runs from July 1, 2018 to June 30, 2019.

That number has indeed changed quite a few times from the original projected need of $8.1 million that was requested at budget time this past spring, for various reasons.

The budgetary impasse began in April, when the initial recommended budget by Superintendent Philip Thornton that was approved by the Warwick School Committee outlined a need for $8.1 million in additional funding from the city to counteract rising costs of education, and loss of revenue from the state due largely to declining enrollment but also due to changes in the state funding formula.

The Warwick City Council then awarded the schools $1.5 million of that request, citing their inability to even raise $6 million with a maximum tax increase, even if the entirety of the newly generated money went to the school department. Some council members openly questioned the integrity of the school department’s request, wondering how more money was not saved through recent efforts to consolidate the district by closing two schools and re-purposing another two.

This left the impasse at $6.6 million. The school committee then proceeded to approve about $6 million in cuts, in addition to a $500,000 set-aside “contingency” that they would need to find funding for at a later date – a measure that was taken in order to keep secondary level sports off the chopping block, which was being considered.

This “balanced” the budget for a time, however the cuts included measures that were deemed against state education laws, most prominently a request to waive the city’s mandated expenses in providing tuition to out of district students under the state’s Pathways program – a waiver that would have saved $690,000 if approved, but was rejected by the Rhode Island Department of Education.

In total, about $4 million of those cuts were deemed unallowable by RIDE or by a programmatic audit conducted to seek a third party opinion of the school’s fiscal situation. This $4 million constitutes the bulk of the remaining deficit that persists today.

The balance of the deficit has been realized in light of updated financial information that has become available since the closing of last fiscal year and the start of the new school year – a gap that isn’t accounted for in the preliminary budget that goes out over the summer.

Among the surprise expenses was the fact that 23 more students than were budgeted for requested out of district placement at other schools in Rhode Island, including 21 more than expected that sought to go to North Kingstown for its technical education program. This amounted to $373,722 in unexpected expense, around $18,000 per pupil, according to Anthony Ferrucci, school finance director.

Fringe benefits, unemployment costs and legal fees beyond budgeted levels contributed to a total of $1.16 million in unbudgeted increased costs. A small unexpected surplus of $157,847 lowered this amount, but ultimately adds up to a deficit of $4,942,759, according to school budget documents.

An important note to keep in mind is that this deficit includes gaps that by law must be filled before others. For example, money must be found to fill the RIDE Pathways mandate before and of the cut $750,000 can be re-allocated to restore custodians. The same goes for the $500,000 contingency that was put aside to save sports, and $1.75 million to satisfy principal and interest payments that the schools had been paying for the 2006 voter-approved, $25 million bond.

Mayor Joseph Solomon extended an offer over the summer to provide that $1.75 million to the school department to cover the bond interest, but Ferrucci has said in the past the offer would need to be officially made through the city council, and that the details of the offer have not been made clear. The council has had a resolution regarding that potential allocation on their meeting docket the past few meetings, but it has been held each time without discussion, including again on Nov. 14, when it was held until January 9 by the resolution’s sponsor, council president Steve Merolla.

School and city officials have met multiple times in the past months to discuss the impasse, but nothing of significance has been reported from those meetings. Ferrucci indicated on Monday morning that the schools were awaiting word on another meeting to be scheduled, but hadn’t heard anything as of press time. Merolla did not respond to an afternoon text asking if a meeting was in the works prior to deadline.