Cranston Mayor Allan W. Fung has rejected the School Committee's request for the forgiving of the school district's upcoming $1.57 million deficit reduction payment.
The School Committee requested the city forgive the loan payment in lieu of an increase in the city's appropriation to the school district for fiscal 2013. Tn, or 3.5 percent, over last year's budget.
With everyone expecting the mayor to level fund the school district and not give that extra $1.6 million, school officials had hoped that the loan payment could be forgiven to make it a wash.
But Fung, citing the recent , said in a March 5 letter to School Committee Chairwoman Andrea Iannazzi obtained by Cranston Patch that the city could not accommodate the request.
While the city still maintains an "A" rating and investment grade, Moody's report highlights analysts' concerns about the school's accumulated $8.9 million deficit, Fung said. That, along with conversation with his finance staff and the analyst "cause me to not be able to consider your request."
"On our ratings calls with the analyst, he asked numerous questions about the school budget, anticipated state education aid, the school's deficit reduction plan and how it would be repaid and the impact on the city's fund balance if it is not," Fung wrote, warning of future downgrades if the city does not show "consistent improvement of General Fund and School Fund balance positions" and "improved liquidity levels."
Essentially, Moody's will unfavorably view efforts to reduce the accumulated deficit by shuffling budget line items and wants to see bona fide payments to the city to reduce the balance, Fung suggested.
"As you know, the city has been gracious these past few years to loan the schools money to over its deficits," Fung said. "Wit the latest bond rating reduction, we are no longer in a position to 'cover' the school's deficits, particularly with the city having to strive towards funding 100 percent of our local pension obligation in the near future."
Superintendent Peter Nero said today that the district will make the payment. It won't come without some pain, but Nero said the district is not in the position of trying to fill a $3 to $4 million hole as in recent years. He has repeatedly told residents and school officials that there is now "a light at the end of the tunnel" and Cranston schools are far from the precipice they once were dangling over
Still, Nero said he is concerned about revenue hits associated with students who end up going to the new mayoral academy charter school that will be opening next year in Providence and will be operated by Achievement First. Each student who goes to a charter school takes a chunk of money with them to the new school. Fung was an advocate for a mayoral academy in Cranston, much to the ire of school officials, and Nero said he thinks Fung is being contradictory when he says the city is not in a financial state to forgive loan payments.
Fung said the city and school district can't turn to taxpayers to fund structural deficits anymore.
"We must take steps to bring our spending under control," Fung said. "While the city appreciates the steps that the school district has taken to reduce expenses, we must do more if we are to reduce the tax burden on residents."
Updated 4:07 p.m.: Superintendent Peter Nero's comments have been clarified. An earlier version of this story did not accuratley portray his comments in regards to the impact on the school budget.