Education Budget In The Black, But Looming Pension Disaster Is Hard To Ignore

For a person who's life is based on working with numbers, the reality is inevitably painful.

Finance Director Stacey Busby delivered a report on the outcome of the education department's FY11 budget Wednesday night and after a tumultuous year of hurdling obstacles from cuts in state aid, a lawsuit by the city, and seemingly impossible recommendations by auditors, Busby reported a small surplus of $157,251 for the year which ended in June. But the finance director is keenly aware that the victory is temporary.

The budget, a 120 page document with more than 5,000 line items was whittled down to three pages for Wednesday night's presentation. The largest expenditure to exceed the department's projections for the year was the line item for salaries. The nearly $600,000 extra lost on employee compensation was mainly the result, Busby explained, of severance pay for the roughly 50 positions cut from payroll to balance next year's budget, and overtime expenses for snow removal through a particularly harsh winter.

The positive highlights included significant gains in medicaid reimbursement. As of May 4, when Busby sat down with auditors that the city hired to evaluate the department's spending, they recommended a projected revenue of $900,000 in incoming funds.

"As of today's date- it's still climbing- we actually have revenue from medicaid reimbursement of $1,607,491," said Busby. "We still have back money that we have not accounted for. We can actually bill up to November for the previous fiscal year."

The gains are the result of two positions created with federal ARRA funds that deal specifically with medicaid reimbursements. Busby documented how the two jobs, which cost a mere $90,000 a year, have resulted in gains of nearly $1 million in the two years since their inception. As ARRA funds dry up, Busby recommended that the department keep the two jobs, which constitute a clear investment. 

"These two positions are more than paying for themselves," she said.

The presentation, however, was overshadowed by the dark cloud looming over every serious discussion about finances in Woonsocket right now: pensions. Employer contributions for this line item are expected to double in 2013 and in a distressed community where every dollar counts, the change could be the difference between survival and bankruptcy.  

The expense for the education department will jump from 13.2% in 2012 to 20.98% for the 2013 employee portion. On the municipal side, the rate of 3.44% will increase to 14.19%.

"For fiscal year 2013, if we kept everything the same, we would have an increase in our budget of $2,672,428 - just for pension liabilities that the district would be responsible for," Busby explained. The increase would result in a total of more than $6 million annually for teacher's pensions alone.

"The legislature is due to discuss the pension reform in October and when the General Assembly reconvenes in January, I really think they're going to implement this prior to FY13," Busby said. "If they do, its going to send our budget in a tailspin downward."

Committee member Anita McGuire Forcier added that she is also very concerned about the problem. "If it happens this year, we're going bankrupt, that's all there is to it. There's no more to cut."

To add to the department's dilemma, the state withholds education aide if the pension obligation is not paid monthly. The city, Busby pointed out, at least has the option to pay late. 

"The next two years are going to be worse than anything we've ever seen," said McGuire Forcier. "We are seriously in trouble and it's bigger than us."