School Department Facing unexpected $250,000 Deficit for Fiscal 2020

It is not sound financial practice to start the school year with a budget in deficit, one that is being put in deficit by a policy change by the city without any prior information being supplied in writing to the School Dept or School Committee before presenting and voting on a budget. If this is typical of the communication coming out of the City CFO and Manager’s Office, no wonder so many experienced professional Dept Heads are leaving!

Best financial practice now requires the SC to hold a special meeting to cut an additional $250,000 in the approved budget to be effective July 1 2019 before the school department can start the new fiscal year.

Even though the School Committee and School Dept. had several public meetings and a public hearing and from what I have heard, the School Dept and City Finance team along with the City Manager and Superintendent have met on numerous occasions to plan a budget based on fiscal availability the City’s CFO has decided that the city taking on the cost of Water and Sewage has part of their required Net School spending for the 2018/2019 school year was just a one shot deal but never informed anyone in the School Dept prior to the school committee approving the budget !

It was just this week that the school department was informed of this !

The agreement to waive water and sewer for the schools was a handshake deal between the City Manager and the former Superintendent to help with the FY2019 school budget and will expire on 6/30 (aka the Schools will be responsible for water and sewer charges again beginning on 7/1/2019)

Apparently The City CFO and the City Manager felt that information did not need to be explained to a Supt or School CFO who were not part of last year’s agreement even though the City CFO and City Manager were , until after the school committee had voted on a budget that did not include a $250,000 line item to cover that cost.

Despite the fact that the city will be charging $33,000,000 (33million) in maintenance of effort charges in 2019/2020 they have decided that the $250,000 for water and sewage will not be included and must be paid in the form of cash from the school budget. Cash the city supplies that is less than they supplied before Education Reform.

In Massachusetts when you rent property , water and sewage is included. The fire department with multiple buildings in the city, the health department on Pine St or the DPW on Middlsex St do not get charged for water or sewer. The police stations the cities rent / lease in neighborhood precincts already include water and sewage in the lease, they do not pay, why should the students of lowell have to?

There is Nothing in the current written and signed Maintenance of Effort that requires the School Department to pay for ANY Utility! I do not know when the school department started allowing for Water and Sewage but we have a binding agreement that the city seems willing to violate and they do not seem willing to sit with us to construct a new agreement despite several attempts by us asking for one .

I Will request a special meeting of the school committee to address this potential shortfall, to ask the Mayor to find out why the city manager’s office or CFO never informed our finance team or the Supt or the mayor or the school committee until after a budget was voted on that this $250,000 must be paid in cash and not counted toward NET School Spending?

I will ask the school committee to request our attorney to contact DESE, The Department of Education and the Attorney Generals office to look at our current Agreement to see if we can force the city to not charge the School Dept cash for water and sewage but to agree to leave it as a charge against their Net School spending requirement.


1 thought on “School Department Facing unexpected $250,000 Deficit for Fiscal 2020

  1. Hi Gerry!  I think I will disagree with you on this, as I think the users (not just schools, but other departments that have separate facilities) should have water, sewer, heat and electricity in their respective budgets since they are the ones who control usage. That said, I feel that the City should increase its cash contribution to the school department accordingly.  I haven’t seen much of the FY 2020 budget, but I am disappointed with a couple of things, first of which is that the administration continues to find it necessary to submit a budget that increases the base tax levy by less than 2.5%.  Without greater increases now we can expect some sticker shock in coming years, rather than gradually phasing in the tax rate increases.  The second issue is the use of reserve funds to make the budget balance, in this case (I think) there is $600K taken from the Capital reserve fund.  Why deplete that fund knowing the impending capital expenses we will be seeing ? Finally, on the school spending side, I have already noted the substantial increase in workman’s comp, and I expect there will be contract issues coming up.   As for the teachers’ contract, I noticed in prior contracts there are step raises that seem to average around 4.5% in addition to the COLA increase of 2-3%, although maybe the longer serving teachers get reduced or no step raises.  Maybe the contract could be reviewed to provide smaller steps over a longer period of time, and then tie the COLA to a federal parameter such as CPI-W, although that could come at the risk of high inflation busting future budget. So, rather than fight the use charges I would recommend a corresponding increase in cash contribution, and have the CM increase the percentage tax increase to cover it. Good luck!

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