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Accounts committee presses for clarity on school shortfalls cited by Department of Revenue
Summary
Committee examined a Department of Revenue letter flagging a CARES Act-related deficit (~$3.79M) and a $4.6M non-net school spending request; auditors and staff discussed limited reserves, circuit-breaker timing and realistic revenue expectations for investment income.
The Accounts Committee reviewed a Department of Revenue (Division of Local Services) letter and focused on school-related fiscal pressures, including a CARES Act-linked deficit and an immediate $4.6 million request from the school superintendent.
Committee members asked whether the $3,791,387 CARES Act deficit in a special revenue fund was resolvable; the auditor said negotiations were ongoing between the chief financial officer and the schools and that the city would need to address the amount before setting the tax rate. "Those negotiations ... are still ongoing between the CFO and the schools," the auditor said.
The committee also discussed non-net school spending: the superintendent had requested $4.6 million for FY26. Members noted the city has few meaningful reserves beyond a stabilization fund and a pension-stabilization reserve and that free cash must be certified before setting the FY27 tax rate. The auditor explained free-cash certification timing and cautioned there is an unwritten rule against publicizing preliminary free-cash estimates: "we really don't know for sure until November," he said, noting the 60'day and 90'day recognition windows for certain revenues and reimbursements.
Separately, the Division of Local Services had noted optimistic budget estimates for local receipts: $5.35 million for investment income and $2 million for solar credits. The auditor told the committee the city was unlikely to realize the full amounts and estimated actual investment income closer to $2.3'$2.5 million given limited cash-on-hand for capital investments. Committee members were also told that circuit-breaker receipts are received quarterly and that Munis currently shows about $3.2 million in that account.
The committee asked staff to keep the Accounts Committee informed of CFO-school negotiations over how to cover the CARES Act deficit and the $4.6 million shortfall and requested updated projections for investment receipts, circuit-breaker timing and any transfers that would affect free cash before tax-rate decisions.
Next steps: the auditor and CFO to report back with updated projections and, if needed, proposed options to resolve the school shortfalls ahead of tax-rate setting.
