East Providence Could Face Deficit Approaching $11 Million--Clarified

CLARIFICATION: The story has been updated to reflect that the city's general fund budget is $94 million, the approved overall budget with enterprise funds and other funding included totals about $141 million.

City leaders now think the deficit East Providence faces could approach $11 million. 

The figure came out during a meeting of the deficit elimination committee at City Hall Thursday. Leaders knew that they were facing a more than $6.3 million deficit on the school side of the budget from fiscal year 2010, based on a previous audit. The current fiscal year's approved budget is about $94 million in the general fund nd totals about $141 million.

But as part of the work of the committee, they went over unanticipated costs since then, including a $13,000 loan to replace food service equipment at East Providence High School to a shortage of about $80,000 for life insurance, according to Mary King, finance director for the schools division. 

The city had also planned on more than $1 million coming in from the state when calculating the current budget, although there was some indication the money might not come in. A legal settlement of $11,250 and about $6,800 for sewer repairs were other unexpected costs, but the division was expected savings of about $75,000 from the transportation department, according to King. 

She emphasized the figures were based on projections and that the city is still waiting for some information on state aid. But she anticipated that the new deficit the school division could face could be more than $7.7 million. 

On the city side, early information from an audit the city is anticipating has suggested East Providence could be $1.4 million short of what was budgeted for in fiscal year 10 in the wastewater fund.  

Public works director Steve Coutu said one of the biggest charges came from the Narragansett Bay Commission, which runs a wastewater treatment plant that serves residents in the top third of East Providence. The city bills residents and then pays the commission. 

Expenses were budgeted for about $2 million and they wound up closer to $3 million, based on the preliminary information, Coutu said. He also said there had been no rate increase in fiscal year 10 and that consumption was down. 

Putting together anticipated deficits on the school and city sides, Committee Chairman William Conley said the deficit figure the city is now looking at based on projections is more than $10.9 million. Acting City Manager Orlando Andreoni said he suspected it could come out a little higher than that. 

Conley said the knows that it may seem that the committee is moving slowly, but he thinks that analyzing the number will not only help with deficit elimination, but with the upcoming budget. 

Andreoni said the city had already been working with some labor groups to see what concessions they can get. 

"I think the school department should do the same thing," he said. 

Superintendent Mario Cirillo said the school system had already started down the road of seeking savings in previous budget years and had gotten concessions from the four unions that work with the schools. If that hadn't already happened, the school division would be facing a deficit triple the more than $7 million, he said. 

"We’ve started," Cirillo said. "We can definitely document around $18 million between cost avoidance and actual concessions we’ve gotten from the unions."

But King acknowledged that the deficit reduction plan the city had submitted to the auditor general last year did not address her ongoing concern of paying vendors, as the plan was spread out over four years and backloaded.  

Andreoni also suggested potentially asking the city's retirees to lend East Providence some money from their pension fund. 

"We’ve got to come up with some type of program we can sell to the auditor general and get us out of this hole," Andreoni said. 

Conley said for legal purposes, the auditor general would only be looking at the $6.3 million. But he said borrowing from the pension fund would be illegal and would require special legislative approval. 

Another issue the committee briefly discussed was the city's pension obligation of $80 million in unfunded liability, according to Andreoni. He and Conley called figures that ran in reports by the Providence Journal "scary."

"The pension increases are going to kill us," King said. 

In terms of revenue coming into the city, Andreoni said the city has closed and received a check on the sale of the former school on Grove Avenue. The City Council and School Committee still have not resolved whether that money will go back to the school division, where the anticipated $450,000 sale was used in budget calculations, or remain on the city side of the budget. 

School committee member Chrissy Rossi also questioned the number of positions in the fire department in relation to the budget. She said 92 positions were budgeted for.

But Chief Joe Klucznik said he has 102 positions filled at the department and the department always budgets for full strength of 120.

“This is just one of the many things that we’ve been able to come up with that could put us in a tailspin,” Rossi said, adding that that was just one department.

Conley suggested there be more number-crunching on how much the city can anticipate from the meals tax and state aid before the committee considers potential options. 

The committee is scheduled to meet again on May 26 at 6:30 p.m.