How will the school system close a potential $30 million deficit this coming fiscal year?
Not with the help of a bailout from the city or the state, according to city financial staff and the mayor’s proposed budget.
The New Haven Public Schools’ (NHPS) financial woes were at the center of the latest monthly meeting of the Financial Review and Audit Commission (FRAC) on the second floor of City Hall.
A half-dozen budget watchdogs showed up for the hour-and-a-half-long meeting, which was the independent financial review board’s first public get-to-together since Mayor Toni Harp released her proposed $556.6 million new fiscal year operating budget.
FRAC commissioners asked city financial staffers at the meeting Tuesday evening how they think the Board of Education will close a projected deficit of up to $30 million next fiscal year with only a $750,000 proposed increase in funding from the city. The new fiscal year begins July 1.
Beyond pledging to work more closely with the schools’ financial staff, Acting City Budget Director Michael Gormany and City Controller Daryl Jones had few specifics.
“I think on this side we have a lot of concerns just looking at the Board of Education in general,” Gormany said. “I think we have a lot of work to do.”
“That’s still being reviewed from our side,” Jones added.
The mayor’s proposed budget includes a $750,000 increase to the Board of Education, bringing the proposed total schools budget to $187.9 million.
But city dollars make up only a percentage of the annual budget of the Board of Education, which is a department of the city but a creature of the state.
According to Gov. Ned Lamont’s proposed state budget, the city’s Board of Education should receive $142.5 million in unrestricted Education Cost Sharing (ECS) grant money next fiscal year.
That’s $272,323 less than the city received in unrestricted ECS for the current fiscal year, and essentially the same amount that the city has received from the state every fiscal year since FY2012, according to the mayor’s budget.
The city expects no increase in unrestricted state education funding, which can be used for general operating expenses like teacher salaries. But FRAC Chair Mohit Agrawal noted that the governor’s proposed budget does include a $2.6 million increase in ECS Alliance Grant funding for New Haven, bumping that funding source from around $15.5 million to $18.1 million for next fiscal year. The governor’s budget proposes increasing Alliance Grant funding even further to $20.7 million for Fiscal Year 2020-2021 (FY21).
“How does that affect the way we fund education?” Agrawal asked.
Gormany said that, unlike with unrestricted ECS money, Alliance Grant funds are restricted for specific projects such as training educators or supporting high-needs students or investing in technology and school operations.
Furthermore, the city’s Board of Education has to apply for all Alliance Grant funds, Gormany noted. “It’s not guaranteed money,” unlike the unrestricted ECS.
But, Agrawal said, the mayor’s proposed budget seems to assume that the Board of Education will receive all $18.1 million in Alliance Grant funding next fiscal year.
“On the grants side,” Gormany said, “we give estimations of the major grants that we’re gonna get. Nothing’s in stone until you apply for it.”
Jones added that the governor’s proposed budget includes a provision that would allow municipalities to use up to 50 percent of the increase in Alliance Grant funding on schools general operating expenses.
So, Gormany said, a little over $1 million of the $2.6 million proposed increase in Alliance Grant funds could potentially be used to help defray local school operating costs. “But,” he said, “that has to be approved by the state.”
In the big picture, Agrawal pressed, how do city officials think the Board of Education can close its deficit? The latest monthly financial report projects that the Board of Ed will end the current fiscal year with a $8.9 million deficit. Last month, Superintendent Carol Birks estimated that the school system could face a $30 million deficit next fiscal year in a worst-case scenario, and could face a $10 million deficit next fiscal year in a best-case scenario.
With only $750,000 more from the city and no new unrestricted ECS from the state, Agrawal asked, “how do we square that?”
Gormany said that the $30 million deficit projection is if the school system makes no cuts to personnel, transportation, or other fixed costs. The $10 million deficit projection, he said, assumes a variety of pretty drastic cuts to the school system.
“How do we get from 10 to 0?” Agrawal asked.
Gormany said that he and Jones are working with the school system on that, but that they are concerned, especially since the school system does not currently have a chief financial officer and hasn’t had once since the middle of last year.
Before the meeting ended, Wooster Square resident Aaron Goode asked about the governor’s new proposal that towns and cities cover 25 percent of the “normal cost” of teacher pensions. Does the mayor’s current budget take that new cost into account? he asked.
It does indeed, Jones said. The city plans to contribute $183,768 next fiscal year towards the State Teacher Retirement System. Since New Haven qualifies as a “distressed municipality” from the state’s perspective, he said, New Haven only has to contribute 5 percent of the “normal cost” of its teacher pensions. Agrawal explained that “normal cost” refers to the amount required to pay the pensions for currently employed teachers, not taking into account the pension fund’s current unfunded liabilities.
Jones said that, since New Haven is the second largest school system in the state, he was a bit relieved to see that New Haven’s required teacher pension contribution for next fiscal year is only $183,000.
“We expected to be paying a lot more,” he said.