John J. Sullivan

School spending ‘thorn in our side,’ mayor says

By THOMAS GRILLO

LYNN — Five months after the state threatened to withhold millions in school funds, the city is on the hook again as they face a spending shortfall, The Item has learned.

On Thursday, the Department of Education is expected to tell Mayor Judith Flanagan Kennedy that following a review of the city’s finances, school spending is off by about $826,000. As a result, the state may withhold that amount from Lynn’s $11 million monthly allocation of Chapter 70 school payments in June.

Peter Caron, Lynn’s chief financial officer, said the city is again working to get school spending back on track.

“It’s challenging,” he said. “We are trying to guess how much money we will spend on schools, but the state doesn’t do the accounting until six months after the fiscal year is over. It all goes back to the health insurance; we don’t know in May how much we will spend on it. It’s a crap shoot.”

Kennedy said she expects the school spending issue to be resolved, but she’s not sure how.

“Overall, net school spending has been a thorn in our side for a number of years,” she said. “When you increase the number of students in the schools by nearly 20 percent over the last six years, it causes problems on how to pay for it.”

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Lynn is the fifth largest district in the Bay State with more than 16,000 students.

“Until we can slow the increase in school population or look to possible federal assistance, we will not be able to meet the threshold spending for the foreseeable future,” she said.

The city’s finances came into focus last year when the Massachusetts Department of Elementary and Secondary Education told the mayor that the city’s contribution to school funding was short by $7.5 million and the state threatened to withhold its $11 million November payment in school funds until City Hall came up with more cash.

Since then, the school deficit has been reduced to less than $1 million and the state money was released to the city.

John J. Sullivan, DOE’s associate commissioner, declined to comment until the letter is issued to the mayor.


Thomas Grillo can be reached at tgrillo@itemlive.com.

 

Lynn mayor prepares for council questioning

ITEM FILE PHOTO
Lynn Mayor Judith Flanagan Kennedy is seen in this file photo.

By THOMAS GRILLO

LYNN — The city council, making good on their promise to grill Mayor Judith Flanagan Kennedy on the city’s budget woes next week, has submitted a list of questions to the corner office.

The mayor is expected to appear before the 11-member panel on Tuesday night to answer queries about how the city got into a financial crisis; whether they should be building two new schools in the face of such money troubles; how the city will comply with school spending and whether the mayor plans layoffs or tax hikes to balance the budget.

The city charter gives councilors the authority to summon the mayor to the city council to answer written questions prepared in advance.

Jamie Cerulli, the mayor’s chief of staff, said Kennedy was working on the questions and declined to be interviewed.

Councilor-at-Large Brian LaPierre said the public hearing will be quite a session.

Down to brass tacks in Lynn

“We are encouraged that the mayor has accepted our invitation to take part in a budgetary discussion with us,” he said. “We are hopeful that we can come away from that conversation with answers and her plan to make sure that we balance this budget someway, somehow.”

One of the frustrations has been that the council has been unable to identify the exact amount of the deficit, he said.

“We really don’t know the number yet,” he said. “It’s ranged from $300,000 to $2.5 million to $7.5 million.”

The mayor too has said the figure has been a moving target.

Council wants to make sense of dollars

One of the questions, posed by Ward 3 Councilor Darren Cyr, asks the mayor to provide a complete list of the shortfalls to the 2017 budget.

Cyr, who has the votes to be the next city council president, according to City Hall sources, did not return a call seeking comment.   

At the last council meeting, several councilors questioned Chief Financial Officer Peter Caron about the state of Lynn’s finances. At the time, he said while the mayor has recently rejected a Proposition 2 ½ override to make up for the shortfall, he’s not so sure that’s the right decision.

The city’s finances came into focus last month when the Massachusetts Department of Elementary and Secondary Education told the mayor that the city’s contribution to school funding was short by $7.5 million and the state threatened to withhold its $11 million November payment in school funds until City Hall came up with more school spending.

Since then, the school funding deficit has been reduced to $2.5 million and the state money was released to the city.

“After numerous conversations with the school department and the city, we have allowed the November payment to go through,” said John J. Sullivan, the department’s associate commissioner. “We continue to work with the schools & city to resolve the issue.”

The budget deficit list includes how to pay for a wage hike for the Lynn Police Department over four years that will cost more than $3 million and the city’s prospective share for the cost of building two new middle schools of $68.5 million.

In addition, the Lynn International Association of Firefighters Local 739 is in arbitration discussions on a wage hike.

Peter Capano, the Ward 6 city councilor, who along with others councilors raised the question of a hiring freeze.

“The purpose of our questions is to come up with some clarity on the city’s financial situation,”  he said. “That’s what I’m hoping to get.  We have important decisions to make.”


Thomas Grillo can be reached at tgrillo@itemlive.com.

School math may add new taxes in Lynn

By THOMAS GRILLO

LYNN — The city’s chief financial officer is considering a Proposition 2 ½ property tax override next year — a first in the city’s history  —  to pay for a school budget shortfall, two new schools and raises for union members.

“We’re looking at options and an override is definitely a possibility that should be on the table,” said Peter Caron. “If officials don’t want to do that, we’ll have to examine other options, such as cutting services.”

Caron called on City Council President Daniel Cahill to schedule an emergency meeting of the council for next Tuesday to approve a home rule petition to send out the third quarter tax bills early, Cahill said. By doing so, the city buys time to figure out how to deal with the lack of school money.

“If we get approval, I won’t have to set the tax rate until mid-March and we can consider our options to find money in the existing budget or to find new revenue to address the problem,” Caron said.

The CFO declined to say how much money the city needs or how much it would cost taxpayers.

There are a handful of large ticket costs that must be addressed.

The list includes a $7.5 million shortfall in school spending. A wage increase for the Lynn Police Department over four years will cost more than $3 million and the city’s prospective share for the cost of building two new middle schools is $68.5 million.

And there’s more debt coming. The Lynn International Association of Firefighters Local 739 is in arbitration discussions on a wage hike.

In an interview early in the day, Mayor Judith Flanagan Kennedy said the city’s schools are not facing a financial crisis.

“It’s not insurmountable,” she said. “It’s just going to be a process in collecting tax money in the most expeditious manner possible,” she said.  

Lynn is the only city in Essex County that has not opted to impose a .75 percent local tax on top of the state’s 6.25 percent meals tax. The tax would add 75 cents to a $100 dinner bill, about 19 cents to a $25 meal and raise about $600,000 annually for the city.

“The mayor is opposed to any new taxes,” Caron said. “But she has an obligation to make sure that the city is run, you can’t just ignore this problem, she’s got to address it.”

Originally, the city was planning to ask voters to approve a  so-called debt exclusion in February to pay for the new schools that would add $163 annually to the real estate tax bill for 25 years.  

“We were planning on a debt exclusion for the new schools,” Caron said, referring to the temporary tax increase. “If any solution involves going to the public for a vote, it should be a single vote, not a debt exclusion and a Prop 2 ½ override.”

Under Prop 2 ½, the amount of property tax raised can never exceed 2 ½ percent of the full cash value of all taxable property in a community. An override is a permanent addition to the levy limit.

The city’s finances came into focus earlier this week when the Massachusetts Department of Elementary and Secondary Education told the mayor that the city’s contribution to school funding was short by $7.5 million. As a result, the department was prepared to withhold $11 million in Chapter 70 school funds this month until City Hall makes the cash available for schools.

Caron said he talked with John J. Sullivan, the department’s associate commissioner, and explained the shortfall was based on an “unanticipated reallocation of health insurance for the active and retirees.” In addition, he said the city is reviewing the calculations that resulted in changes to health insurance to make sure they are accurate.  

The fix would require an infusion of new revenue into the school budget as a way to address the problem. It’s unclear where that money would come from. The city budget is $299.6 million. Of that, $197.4 million is allocated for schools in fiscal year 2017.

“The Department of Elementary and Secondary Education understand the parameters of the issue,” said Caron. “It appears they are willing to give us some leeway to devise a workable plan that allows us to make the schools whole before imposing any penalties.”  

Still, Sullivan said the issue has not been resolved yet.

“I’m waiting for Mr. Caron to email me so that we can internally discuss possible next steps,” Sullivan told The Item in an email.


Thomas Grillo can be reached at tgrillo@itemlive.com.

Dept. of Ed threatens to withhold $11 million from Lynn

By THOMAS GRILLO

LYNN — The state Department of Education is threatening to withhold $11 million in school funds this month until City Hall ponies up its school spending money.

“We consider this very serious,” John J. Sullivan, associate commissioner, told The Item. “I would not hold out Chapter 70 payment if I didn’t think so, this is not common at all.”

In a letter to Mayor Judith Flanagan Kennedy on Monday, Sullivan said a review of the city’s fiscal year end financial report discovered that Lynn was in violation of state law.

“Your plan stated that in fiscal year 2016 through 2019 the city would appropriate $2.2 million in addition to each year’s net school spending requirement … the city did not even meet the FY16 net school spending requirement and you have not budgeted sufficiently to meet the city’s obligation in FY17,” Sullivan’s letter said. “I need to inform you that violation of this agreement is serious and will require immediate attention.”

Kennedy was unavailable for comment. In an emailed statement she wrote, “I just received the letter from the Department of Elementary and Secondary Education. I have asked the chief financial officer to review the figures presented, and if we have an additional funding obligation to the schools, we will certainly address it promptly.”

Peter Caron, the city’s chief financial officer, declined to comment, and School Superintendent Dr. Catherine Latham could not be reached for comment.

By law, school districts are required to spend a certain amount of money annually. In Lynn, that figure was $191.9 million in fiscal year 2016 and $197.4 million in 2017. To help meet that requirement, Lynn is provided with state aid to public schools, known as Chapter 70 money, which covers most local education costs. Lynn received $147 million for fiscal year 2016.

But in addition, the city must come up with $2.2 million annually to supplement their required net school spending over four years to phase in retirees’ insurance costs as a contribution to net school spending. That solution is aimed at solving a problem, in Lynn’s case, that dates back a decade.

At the heart of the problem is a formula calculating how retired teachers’ health insurance costs are counted toward “net school spending,” a basic calculation outlining a community’s contribution as to how much money public schools receive.

Lynn is not permitted under state law to include retiree insurance costs toward net spending. The excluded costs play a role in spending calculations.

“There was a law passed a few years ago to count their retiree health insurance as part of net school spending even though Lynn had not done so in the past,” said Sullivan. “But in order to do that they had to come up with a four-year payment plan and agree to about $2.2 million in addition to their required net school spending for that fiscal year.”

This is not the first time the city has faced a dire warning from the state. Two years ago, state Education Commissioner Mitchell Chester told the superintendent that Lynn has fallen $8.6 million below its net spending requirement.

School funding comes as the cash-strapped city faces a number of financial challenges.

Last summer, the mayor and Lynn police agreed to a more than $3 million wage hike over four years. The retroactive agreement provides a 1 percent boost for 2014, a 2 percent increase for 2015, 2016 and 2017, and a 1 percent raise for 2018. The contract for 2014 to 2017 will cost taxpayers $2.1 million.

For months, the city and the Lynn Firefighters Local 739 have been in negotiations on a new contract that is expected to be completed by year’s end.


Thomas Grillo can be reached at tgrillo@itemlive.com.