MINUTES OF THE CUMBERLAND TOWN COUNCIL

JOINT WORKSHOP WITH SCHOOL COMMITTEE

MONDAY, APRIL 13, 2009 AT 7:00P.M.

EDWARD J. HAYDEN CENTER, MEETING ROOM #1-2

1464 Diamond Hill Road, Cumberland, RI 02864

 

The meeting was called to order at 7:00 p.m. by President Higgins.  

 

MEMBERS PRESENT:

 

President Higgins, Councilors Dwyer, Ackerman, Lemois, Albuquerque, and Kirkpatrick    

 

Also present is Town Solicitor Thomas Hefner, Finance Director Thomas Bruce, School Committee members Donald Costa, Ryan Pearson and Lisa Beaulieu, School Superintendent Donna Morelle and Business Manager Alex Prignano.

 

MEMBERS ABSENT:

 

Councilor Morris

 

The meeting was called to order at 7:00 p.m. by President Higgins.

 

1.  Discussion regarding potential budget amendment as relates to the Fiscal Year 2008-2009 Town and School Budget

 

President Higgins announced that on Wednesday the Town Council will be presented with Ordinance 09-07 to Reopen and Amend the Existing Budget for the Fiscal Year 2008-2009.  He explained that according to the Finance Director Thomas Bruce the town’s budget is being decreased approximately 1.22% from $24,134,262 to $23,840,795 and the Ordinance includes a proposed decrease to the School Committee budget of .77%, or approximately $414,000.  He pointed out that he received a letter from Mr. Costa on behalf of the School Committee dated April 6, 2009 but he did not receive it until Thursday requesting a joint meeting with the School Committee to discuss the possibility of the mid-year budget amendment.  He added that the letter contained some questions but he will let the School Committee determine what questions they want to ask.  He stressed that they are all there to gather information.  He stated that the Mayor’s proposal is the result of a cut in general revenue sharing and under current scenario it is apparent that the hole cannot be plugged entirely on the town’s side.  President Higgins explained that the Council would be holding two public hearings next Tuesday at 7:00 p.m. at the Library Hayden Center and Wednesday at 7:00 p.m. in the Town Hall Chambers with a Finance Sub-Committee meeting as well on Monday in the Town Council Chambers at 7:00 p.m.  He noted that School Committee members, Ryan Pearson and Lisa Beaulieu, are present and Chairman Donald Costa had a family emergency, so they are not sure when he will be arriving.  He stated that he has had discussions with the superintendent and the chairman of the School Committee so for purposes of this discussion, it is not really appropriate to go line by line into the proposed budget amendment because there will be hearings to do that.  He stressed that however the line items that affect their department is certainly on the table for discussion.  He explained that late last week was hectic in terms of trying to schedule this meeting as well as the budget amendment hearings due to the short window in order to get the tax bills out in time.  He stated that what he has indicated to the Superintendent, though he doesn’t speak for the whole council, is that if there are alternatives available to the Council that would avoid this they are certainly willing to listen to that.  He believed that they are in a difficult place and neither side is to blame because he firmly believes that both sides have kept their fiscal houses in as much order as possible under the circumstances.  He also believes that it is ironic because this Council has always stood with the School Department in terms of trying to get as much funding to them as possible and just last year they amended the Mayor’s proposed budget and it is pretty close to what is proposed now, which is about $89,000 more that what he proposed. 

 

Mr. Pearson explained that one of their goals is to come before the Council to present the situation the School Department finds itself in and also possible steps forward from where they are today.  He further explained that the School Committee is very aware of the position the Town Council is in and they all need to work through it.  He stated that at the School Committee’s request the School Department put together the a few handouts which they would like to go through with the Council and answer any questions as they go through.  He refers first to their budget summary report which shows what they budgeted, what has happened, what is projected to happen now to the end of the fiscal year, and the projected variance.  He mentioned that there are several key things such as the State Aid reduction enacted last week, the $162,680 difference they had funded through “Twin River Fund” which has been suspended from this point and the reimbursement under the town master lease.  He wanted to point those items out because overall with all the different factors they are looking at $2.6 million in changes in revenues.  He mentioned that the line item under Federal Stimulus Aid is about $800,000, and it is his understanding of that money is very competitive and the Superintendent and the School Committee would have to go out and compete for that money based on different parameters for different programs that qualify which is not guaranteed money.

 

President Higgins asked where they came up with the figure of $823,000.

 

Mr. Pearson replied that it came from the State Department of Education. 

 

President Higgins then asked if that was Cumberland’s potential share.

 

Alex Prignano, the School Department’s Business Manager, confirmed it was Cumberland’s potential share but they only used it for 4 or 5 things that money can be used for.  He explained that the Superintendent would have to write a letter to Rhode Island Department of Education showing that Cumberland in fact meets certain criteria to get the money, so it isn’t like they are saying we are going to give you this money to replace the State Aid they took away.  He stated that he thinks they can do it but he thinks it is more important to remember that the State is not sure they can do it because they need a waiver from federal government to use stimulus money in this way. 

 

Superintendent Donna Morrelle added that it is a multi step process where the first step the federal government has to allow the state to use the money in a certain way, which is the money the governor has control over, then if he gets that waiver then they have four different ways they can use it.  She also explained that this is part of the stabilization money, for example, one of the ways is that they can use it for underachieving schools which means they could only use it at Aston and B.F. Norton but couldn’t use it for general operating expenses.  She concluded that as though they might look at it as money coming in to the district they couldn’t use it across the entire budget but only in restrictive ways. 

 

President Higgins asked if they know the timetable on receiving the money.

 

Superintendent Morrelle replied that when they know how they are able to use it, they would have to start writing for it. She is attending a meeting on April 24^th, but no other time line has been given. 

 

Mr. Pearson explained that much of it depends on the federal waiver and whether it is granted. 

 

Finance Director Tom Bruce questioned how much of the $2 million State Aid reduction could the School Department offset with the pension aid being bypassed specifically, $662,386 for certified retirement.  He clarified by asking if this payment is mandatory and if so can it be deferred.

 

Mr. Prignano explained that the deferral of employer contribution of the pension has not taken place in the first payroll in April so there are some February and March pension contributions that will have to be made.  He further explained that the original talk was that they would pay 25% and defer 75% and that should have had taken place in February but because it took place later they now have to factor that there are so few payrolls left they rolled zero for the rest of the year on the employee contributions. 

 

Mr. Bruce stated that it is a lot of money and asked Mr. Prignano if he is aware of any other Districts that began back in February.

 

Mr. Prignano stated that he wasn’t aware of any.  He also added that the plan was to make up that $2 million with the $823,000 in stimulus money and $1.1 million of deferred pensions.

 

President Higgins asked what they are saying is that there isn’t a savings of $1.1 million.

 

Mr. Pearson stated that there is a savings but this is just the offset.

 

Mr. Bruce added that because of the loss of State Aid the actual $2 million figure had a net affect to the operating result of the school fund a negative affect of a $1 million.

 

President Higgins questioned whether in their report is the added revenue by not having paid the certified retirement.

 

Mr. Pearson directed them review the last page of their expenditures summary shows there is a positive variance.

 

President Higgins stated that he sees that but asked whether there should be some type of offset on the summary.

 

Mr. Prignano explained that the first page of that report is just the revenues but there are two ways they are letting them make up the $2 million shortfall in revenues to State Aid.  He stated that the first is if they qualify to get the waiver they will be give them the $823,000 of stimulus money then basically they say now “theoretically” they are $1.2 million short so they will let them make up the $1.2 million by not making the pension payment.  He clarified that it is a combination of added revenues and given the stability to not make certain expenditures that are going combined make up for the $2 million they are not getting in State Aid.

 

Councilor Lemois asked how they get a $2 million variance with State Aid.

 

Mr. Prignano explained that the projected number on the report may be number that was before the State Aid that was projected that he may have not changed the formula for but the number they received from the State was $2,019,050 as a reduction.

 

Mr. Bruce asked if they could get a corrected report reflecting the correct numbers by Friday.

 

Mr. Prignano and Mr. Pearson apologized for the error and assured that they would get the corrected report by Friday. 

 

Mr. Pearson directed them to the expenditures, pages 2 through 7 of the report, where they will see the breakdown per school.  He pointed out that effective February 1^st, the School Department put in place a budget freeze in effort of the situation that was to come with the many different variables in this budget.  He explained that the Dr. Morelle and Mr. Prignano were somewhat reluctant in having this done but he has projected out to the end of the year and those numbers are his best estimate at this point for where the School department may find it selves.  He pointed out that materials and supplies line items are where a lot of the budget freeze items came from.  He also explained that when you look at the negative variance on the revenue side and positive variance on the expenditure side the difference is $345,600 at this point which is certainly a good thing that they have been able to do that.  He mentioned an example of some of the things affected by budget freeze, the principal of B. F. Norton had to ask to purchase 25 clipboards at 74 cents each and it has been a frugal situation from that point on.

 

President Higgins asked if he was correct in saying that what he just heard that because of the steps that they have taken the School Department is projecting a shortfall of $345,600.

 

Mr. Pearson corrected him by explained that it is actually a surplus of $345,600 and that is a projection and any number of things can affect that especially health coverage. 

 

Mr. Prignano stated that he feels the purchasing freeze will save about $300,000.

 

Superintendent Morrelle explained that in addition to a purchasing freeze, there are not that many positions that they were able to look at in terms of a hiring freeze but she would have brought recommendations to the School Committee where there were vacancies for hiring but instead they filled the positions with long-term substitutes.  She stated that was one of those short term decisions that do have impacts but made a conscious decision in this instance to put a fiscal lens on those issues than finding a highly-qualified candidate for the position.  She also stated that the other issue is in terms of looking at that $345,000 the Council needs to remember that these numbers are just estimates, which means that they could come in a more favorable light in some schools and less favorable from others.  She mentioned that the School Department also knows that there is one account, the gas bills, that are coming to them much later than anticipated because they have had some scrutiny going on with matching accounts etc. and they are just now paying the December bill, therefore they have to understand that they are talking about 2 to 3 more $50,000 bills in the utility area which will have an impact on that $345,000.  She indicated that they felt it was their responsibility to come before the Council to discuss the status to the best of their ability.    

 

Mr. Prignano explained that the School Department is constantly shopping for utility suppliers and in the fall they went out to bid, resulting in them switch to a Direct Energy for gas.  He further explained that although National Grid is still the vehicle for distribution buy they are just very difficult to work with for these companies in getting the right account numbers.  He stated that because of the Direct Energy has just recently sent them their bills from when they assumed responsibility so it is not that the bills are late or there is a cash-flow issue it is more an issue at National Grid with getting correct account numbers, etc. 

 

Mr. Pearson next directed everyone to review the Fund Balance Report that serves as a ten-year recap of Cumberland Public Schools and the general fund balance whether positive or negative.  He summarized that for quite a few years the School Department did run budget deficit at that point in time but at this point luckily they have been able to run a few substantial surpluses that have allowed them to fund the department and being fiscally prudent.  He mentioned that in the 2009 budget they used much of those dollars in the current budget and the 2010 budget they will notice that they zero-out the cumulative fund balance of undesignated monies bunching $521,065 for next years budget.         

 

President Higgins asked if they are stating that right now the School Department has $1.4 million in designated fund balances

 

Mr. Pearson replied yes.

 

President Higgins asked where that money is maintained. 

 

Mr. Prignano explained that it was less than that and that the funds are in the town’s accounts.

 

Councilor Lemois asked how the general fund designated increase.   

 

Mr. Prignano explained that there are different things such as in the general fund designated column of the report from 2000 to 2005 all of those are encumbrances that were outstanding at the year end and the $174,000 that the School owed the Town for food service.  He further explained that it was always part of their surplus but reserved similar to how the Town reserve money for their water and sewer.  He stated that when they made that payment in 2007 that was part of last year surplus of $520,000 but because the auditors moved it out of the designated to undesignated column.  He added that the big jump in the undesignated fund balance was when he was hired late in the process and he wanted to make sure the budget balanced.  He informed that at that time they had $400,000 committed for capital expenditure and $400,000 for computer repairs, however, at that time there was no IT Director, and they didn’t want to just spend the money to spend it they reserved that $800,000.  Mr. Prignano indicated that because the Council was good enough to give them that master lease that year $200,000 to buy those computers they money that they designated they chose to designate for capital improvements because there are some many things that need to be done to their buildings. 

 

President Higgins asked what is the law or the practice on the money in that reserve in terms if that money is not spent in terms of whether that money goes back to the Town to be re-appropriated. 

 

Mr. Bruce replied that all bank accounts including student activities are in custody of the Town. 

 

President Higgins rephrases his question by stating that they have a budget which they have a request for a number to which they give a number to the Town. So his question is, are they allowed to get more money than what they vote on. 

 

Dr. Morelle replied that was incorrect.  She explained that what happens is that when they transition into the new fiscal year the School Committee took those funds and puts them into a designated or undesignated fund balance account.

 

Ms. Beaulieu added that it also take into account all the efficiencies that they have realized over time so as they reduced costs on various items through out the district that can also help to provide a fund balance.

 

Councilor Lemois noted that these figures are as of 6/30/08 and questioned whether they will change for 6/30/09.

 

Mr. Prignano replies yes, and explained that the balance of $397,180 under general fund undesignated 2007 is being used as part of this year’s budget and the $521,065 is being used in the FY 2010 budget, so that allowed the School Department to reduce its request to the town. 

 

President Higgins asked for clarification on how they get permission to use those funds for general expenses and are their procedures in place for that.

 

Mr. Bruce explained that the Town Charter states that the Town Council appropriates a budget for one-year ending June 30^th so the Charter and State Law supports that a deficit can be held but it has been traditionally under the control of the municipal side.  He stated that to appropriate it and skip a year is a very good practice but he has always seen the Town Council manage that not the School Department but he can name some communities that do this and he thinks that it has worked out quite well so far to date.  He reiterates that State Law and Charter the Town Council approves and appropriates all funds so the question becomes is that approval in year one of that money of which some is left over at the end of the year does that approval carry into subsequent years or should the School Committee at the time come back to the Town Council to request approval to use that money. 

 

Dr. Morelle and Mr. Prignano stated that they believe that the money stays with the School Department per State Law. 

 

Mr. Bruce suggested that the Town Solicitor review the law and get back to them.

 

President Higgins asked if the total surplus for June 30, 2008, $2.3 million which was confirmed by both Tom Bruce and Mr. Prignano

 

Dr. Morrelle explained that of the $2.3 million, $397,180 is being used as part of this year’s budget, and $520,160 is being used in the 2010 budget with the balance is in the designated fund balance, which money is money that has been designated for specific purposes by vote of the School Committee. Dr. Morrelle gave two examples, the first example being the health care account which is a reserve account in order to prevent a catastrophe if there were spikes in health care claims.  She explained that the other account is the textbook account where the School Committee has set money aside and is waiting for a curriculum review before purchasing textbooks.  She added that they are basically restricted accounts designated for a specific purpose and the funds can be transferred by the School Committee. 

 

Councilor Lemois asked if there is a way to be notified of surpluses and where the funds are being transferred. 

 

President Higgins said that is a question he has had from Mr. Bruce and the Town Solicitor and there seems to be an issue so if there is a legal issue that needs to be addressed to conform to the law they will get that answer and make those changes.    

 

Ms. Beaulieu stated that this process is done by the School Committee and it would appear on the agenda for the School Committee meeting.

 

President Higgins stated that they don’t receive the School Committee’s agenda.

 

Mr. Pearson asked if they would like to have the School Committee’s agenda email to them.

 

President Higgins replied that any information they can receive would be helpful.  He stated that they are in an emergency situation and they need to find out if there is a possibility in one shot deal within a two week time table to fix (at no fault to any of them) and is there any money that can help contribute to so that they don’t have to reduce the Town’s contribution to the School by $414,000. 

 

Mr. Pearson believed that goes with the next part of their presentation which is town adjustments to the school budget after adoption.  He explained that in 2009, the School Committee had budgeted $75,000 in interest income and typically what would happen there would be some type of cash balances within the School Department’s checking accounts which generated some of the interest.  He added that at this time the Town has kept that in their accounts and has earned interest on it, which is already something that is already a positive for the Town.   

 

Ms. Beaulieu added to that point that the $75,000 is no longer available to the School Department, which also no longer has a master lease for 2009 available.

 

Tom Bruce stated that all accounts including the school accounts are town accounts with their federal id number, and to say it is a school account he doesn’t agree with but previously interest was credited to the School Department and this year, the income was used to help balance the town budget.  He explained that with the increase of their surplus the Town has custody of those funds because of cash flow.  He pointed out that the commitment in the Town Council approved budget has nothing to do with the School Department’s interest income.     

 

Ms. Beaulieu stated that they went aware that was changing so they budget for it this year but now they are faced with the fact that it is no longer available to them.  She stressed that historically it has been made available to them that is no longer available and it came post budget approval by the Town so that is an encumbrance for them now. 

 

Mr. Pearson moved on to the issue of the master lease.  He stated that the original maser lease in 2009 was going to be an issue. To his understanding the Finance Sub-Committee met after the joint committee meeting at the beginning of the year at which point there was a solution developed between them and both Dr. Morelle and Mr. Prignano, but there seems to have been another solution from that time forward.  He believes that they should lay out what that agreement was.    

 

Councilor Kirkpatrick explained that as Mr. Pearson mentioned the Finance Sub-Committee met because it was brought to their attention that there was an issue which he thought they had resolved during that meeting but tonight he reads in the School Department’s handouts that there is no flexibility with the 2008 master lease so he would have to differ to Mr. Bruce.

 

Tom Bruce stated that 2008 both for the lease firm and for the Town Council resolution there is a difference in the particular items that were earlier approved by the both the Town Council and the lease firm so Mr. Prignano needs to correct that listing and do another resolution.   

 

Mr. Prignano stated that during the Finance Sub-Committee meeting they discussed that the School Department understood that there would most likely not be a 2009 master lease but if they had some flexibility from the money that they hadn’t spent in 2008 they would get through the year.  He added that there is a list attached that shows the items that are in the $294,000 that the Council did approve.  He added that they thought that some of the documents were written broad enough, for example, when they go out to buy classroom furniture they don’t say I am going to buy two chairs for Ashton instead they classify it as school department classroom furniture so that if a need becomes at one school over another they can move it around.  He pointed out that the other day they heard that the Mayor doesn’t want to do it that way instead he wants to go by the letter of what was on the 2008 list. 

 

Dr. Morelle added that the items that they have gone ahead and purchased they are going to have to go way to pay for them out of their budget and maybe become an increased shortfall. 

 

Mr. Bruce explained that the $294,000 has not had any type of proposed legislation for the Town Council from the School Department at all because it would involve going out to bid and then coming back to the Council with the lowest bidder with the desired items for approval. 

 

Mr. Prignano stated that they did a resolution back in August and it never made the agenda and then shortly after they met with the Mayor who stated that he didn’t want to go with a master lease this year so that put them back.  He indicated that it had been worked out, until just recently when they sent down about $45,000 of bills that the Finance Department couldn’t process them at that time.

 

Mr. Bruce explained that those bills can’t be processed because they are not on the lease firms list and the fiscal note and the resolution had a list last year attached to it that now is having some changes, which he said is fine as long as they re-submit a resolution. 

 

President Higgins stated that he believes he had the idea of what is going on and he will speak to the Council Finance Chair to see what happens next and where they go from here. 

 

Mr. Bruce suggested that the School Department re-present the resolution and present to the Mayor.

 

Mr. Prignano stated that he doesn’t want to do a 2009 lease at this particular time but they need the flexibility and will probably need something in 2010 because there are numerous important items that they have not purchased and that they are without this year because they knew there wasn’t going to be a lease.  He indicated that he would call Mr. Bruce to find out what they need to do to correct the issue with the 2008 lease.

 

Mr. Pearson stated that the School Committee has had discussions with the Administration, as a possible solutions, where they can go from this point because as Councilor Higgins stated earlier we are in the mess at no fault of any of them but they need to move forward from it.  He explained that some ideas were thrown around and he thinks that the 2010 budget is where they are going to have some of the more the difficult problems as where the State Funding is going to be.    

 

Ms. Beaulieu agreed with Mr. Pearson concerns with the 2010 budget but she believes that the real problem is still in this year’s budget.  She also believes that it needs to be understood that they are 10 months in their fiscal year and the bulk of their spending occurs from September through June and in a February report they had accounted for 14 of their 26 pay periods for certified payroll which means from March to June they have to make up the other 50% of their payroll.  She explained that they have huge encumbrances before the end of 2009 and with facing a reduction they will struggle to provide any of the extra programs.  She indicated that the School Department can only continue to freeze spending for so long without having an impact on the instruction.  She stated that the solution for this year isn’t a $414,000 reduction instead the solution is to try to share ideas.  She added that they have identified the master lease is likely to be something that they will be able to work towards a solution which is a good thing because that will not impact next years money.  She emphasized that right now they have a $414,000 problem and they need to find some solutions for that because the School Department cannot absorb a reduction of $414,000 this late in the year because they have too many obligations.  She pointed out that they have done the due diligence to control spending but at this point in the school year they don’t have the capability to afford to continue to hold off on the schools having the ability to buy materials to support instruction and they can’t lose sight of that.    

 

President Higgins asked what she proposes as a solution. 

 

Ms. Beaulieu stated that the school’s idea is to loan the Town their surplus for a period of time. 

 

Dr. Morelle stated that the School Department is very concerned about “maintenance of effort” and they are trying to find a solution.   

 

Mr. Bruce stated that the Mayor is looking for a distribution across the entire town budget including the school.

 

Dr. Morelle stated that the Mayor is also not here for this discussion. 

 

Council President Higgins stated that Dr. Morelle’s comment was a cheap shot because as he previously explained the School Department requested a meeting on short notice and the Mayor was not available, that he didn’t consult with the Mayor before setting this meeting up so if there is anyone to be angry with he is the one to be angry with. 

 

Mr. Bruce continued to state that the Mayor’s direction as well as finance department have looked in every possible area for money which they found $1.7 million in unbudgeted revenues.  He explained that this minimized the problem that is represented by anyone’s perception as the $414,000 amount.   He added that the school budget is 69% of the town-wide budget, $414,000 is less than that 69% and the municipal side has also been making cuts.  He indicated that the Mayor has proposed 3.5% rate increase for tax bills, but he believes that this is the year of taxpayer hardship and he is determined not to propose the tax increase beyond the 3.5%.    

 

President Higgins stated that this is a tough time for everyone and they are looking for solutions but they aren’t going to solve the problem without working together. 

 

Ms. Beaulieu stated that they need to understand that as they move forward in their 2010 budget they have put adjustments into that budget that are necessary.  She explained that they have frozen wages, they are looking to gain savings in health care to the tune of $1.2 million they are looking at transportation savings, and they are looking at significant program and staff reductions.  She concluded that the School Department does not want to compromise their programs any more than what they have done in the 2010 budget. 

 

Councilor Lemois stated that the real problem stems from the state’s cut of $2 million to the town, and asked what the School Department been doing to combat the real problem the State.    

 

Dr. Morelle stated that she has done quite a bit on her level with the Superintendents’ Association and have done quite a bit on the legislative level.    

 

Councilor Kirkpatrick stated that everyone needs to consider how the cut is going to affect student proficiency because at the end of the day, it is all about the education of students in the Town of Cumberland.  He stated the schedule for the hearings on the amendment and the meeting of the Finance Sub-Committee and invited the School Committee to attend. 

 

Dr. Morelle stated that last year everyone agreed that while they asked for the $1.2 million they couldn’t agree they need but they did agree they need the $600,000 and essentially what they are doing is reversing that decision because now there is a financial problem.  She believed that all of those discussions that lead to that decision they can set aside because there is a different problem now but they are here to say they get that there is a financial issue but that doesn’t dismiss all that discussion they had last year.  She emphasized that they can take one of those restricted accounts and move some of that money it should solve the problem. 

 

Mr. Bruce stated that there is a difference between a loan and having them expense it through school restricted fund, he has a lot of problems with this loan because it really just delays the problem and would look bad to the bond rating agencies. 

 

Councilor Kirkpatrick stated that he would entertain continuing this conversation because he is in the mind set that they are in interesting times and at this point any and all options put on the table to be considered. 

 

Mr. Costa thanked the Council President for allowing them to meet to continue the openness and honesty that they have had through the years because he thought that this was an issue that needed to be discussed sooner rather than later. 

 

ADJOURNMENT

 

MOTION BY COUNCILOR KIRKPATRICK, SECONDED BY COUNCILOR DWYER AND IT IS UNANIMOUSLY VOTED TO ADJOURN.  VOTE 6/0.

 

 

 

___________________________________________                              

                                                            Sandra M. Giovanelli, Town Clerk  

 

THE DVD AND MINUTES OF THE ENTIRE MEETING IS AVAILABLE AT THE EDWARD J. HAYDEN LIBRARY