NEWS

Budget picture remains in limbo

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Approval of a budget plan that includes a projected increase of more than $4 million in state education aid for Cranston Public Schools could leave the city responsible for that funding in the event it does not fully materialize, the City Council’s attorney has found.

Based on a memorandum from Evan Kirshenbaum – and due to the uncertainty surrounding the state’s budget picture for the fiscal year that begins July 1 – the City Council’s Finance Committee last week opted to forego its typical amendments process at the conclusion of its review of Mayor Allan Fung’s $302.9 million budget proposal.

The committee instead voted unanimously to forward the budget without recommendation to the full council, which was due to convene for a special virtual meeting on May 27 to consider any amendments and a vote on the full spending plan. The hope was that in the days following the May 20 Finance Committee meeting, more clarity might emerge regarding the General Assembly’s plans and what options are available.

“This crisis has caused some tremendous problems … I think we need more time to formalize the budget,” Council Vice President Michael Favicchio, who represents Ward 6 and chairs the Finance Committee, said during the meeting.

He added: “I think we’d all like to get the budget finalized and get the tax bills out, but based on what I’ve heard from many of you and my own research on this, I think it might be better to hold the amendments.”

In an email Tuesday, Council President Michael Farina said the plan was still to “proceed as scheduled,” with the May 27 budget amendment and adoption meeting followed by a June 3 meeting to act on any mayoral vetoes, if necessary.

He added, however, that additional research on the part of legal counsel has indicated the council may be able to extend its deadline until June 14, based on the June 15 date by which it appears tax rolls must be submitted.

“As a body the council will have to discuss the option of continuing the final adoption until the 14th of June to allow as much time as we can for updates from the state on revenues,” Farina wrote. “The attorneys will have a final opinion for us by Wednesday’s Meeting and we will discuss as a group.”

Much of the concern centers around the school budget, given the current spending plan’s reliance on an increase in state aid included in Gov. Gina Raimondo’s January state budget proposal.

The COVID-19 crisis has since upended revenues and projections, with a combined shortfall of roughly $900 million facing Rhode Island between the current and coming fiscal years. The General Assembly has started its hearings on the state budget, but uncertainty remains on all levels – including in Washington, D.C., where it remains unclear if action will be taken on a new stimulus aimed at helping states bridge budget gaps.

Fung’s $168 million budget plan for Cranston Public Schools includes the roughly $4.2 million state aid increase proposed by the governor as well as a $400,000 increase in the city’s funding to the district. Superintendent Jeannine Nota-Masse’s initial $169.2 million school budget proposal also included the state aid increase and sought a $1.76 million increase in the city’s contribution.

Kirshenbaum, who reviewed the school funding issue based on the council’s discussions, told council members on May 20 that approval of the city’s budget as presented would result in both the projected state aid increase and the additional local funding becoming “baked in” to the city’s spending plans for the coming year and those ahead.

“The question posed to myself as City Council attorney is the following: Do those funds allocated in the 2021 budget become a baseline for future maintenance of effort, even if the Rhode Island Department of Education does not fund all or any of that additional $4 million as anticipated?” he wrote in a memorandum. “The answer is ‘Yes’ as to both sources of funds.”

It continues: “In the first instance, if the tax receipts from the City of Cranston are not sufficient to support the $400,000.00 increase given to the maintenance of effort for the school department, the City of Cranston will continue to owe those funds in perpetuity. In other words, the $400,000.00 allocated becomes the new baseline ‘maintenance of effort’ for the School Department of the City of Cranston. Likewise, the amount of money formerly promised from the Rhode Island Department of Education, if not actually received by the City from the State (due to their own financial situation), also becomes a structural part of the maintenance of effort of effort for all future years stressing whether the City receives the $4.2 million in this year or any subsequent year.”

Daniel Parrillo, Fung’s director of administration, told council members the administration agrees with Kirshenbaum’s assessment of the situation.

There was disagreement over a portion of Kirshenbaum’s opinion that suggests the city would be responsible for approximately $42 million in additional school funding over the next 10 years if the budget is approved and the $4.2 million in new state aid fails to materialize.

Fung has cited the need to issue tax bills as a driver of the push to adopt a budget sooner than later, and city Finance Director Robert Strom on May 20 expanded on that point.

He said the city deliberately schedules the majority of its debt service payments for July. That, he said, is the city’s largest revenue month due to business entities making up-front tax payments for the year.

“My only concern is, we need to get tax bills out …I’m concerned about our cash flow and I’m concerned about paying our debt,” he said.

Fung’s budget plan for the coming year includes no tax increase. In light of the pandemic, the tax payment deadline for the fourth quarter of the current fiscal year was delayed from April 15 to May 15.

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