LYNN — Despite having to exhaust a state loan to balance the last two years’ budgets, the city’s chief financial officer and state fiscal overseer remain optimistic Lynn will be able to close its projected $5 million deficit for this year.
City officials will not have the safety net of a $14 million state loan through legislation that was used to balance fiscal year 2018 and FY19 budgets.
For FY20, the budget deficit has been projected at $5 million. In FY20 and annually for 10 years, the city will have to pay back $1.25 million on the loan, which will accrue interest, according to Michael Bertino, the city’s chief financial officer.
Despite the challenges, Sean Cronin, senior deputy commissioner of local services for the Department of Revenue, who oversees the city’s budget, and Bertino remain “cautiously optimistic” the city will be able to balance its FY20 budget.
“I know they’re going to balance the budget because they have to,” Cronin said. “There’s nothing to make me see they’re going to be unable to balance the FY20 budget or lead to different financial oversight. I’m cautiously optimistic that going forward, things will continue to improve.”
Although the city had been offered a state receiver to dig itself out of its financial crisis, and refused, Cronin said he doesn’t believe receivership will be needed.
Chelsea is the only community in Massachusetts that has gone into receivership, which was 28 years ago. In that instance, a state receiver was given complete control over the city’s finances, effectively replacing the mayor. It took legislative and executive powers away from top city officials and put it all on the hands of the receiver, according to Cronin.
When Chelsea was forced into receivership, the city was facing a $9.5 million budget deficit. Since that time, city government changed from a mayor and City Council format to a city manager and Council structure.
Right now, Lynn has a fiscal stability officer, a consultant role that Cronin has and the weakest form of state oversight, which came as a result of borrowing funds through the legislation, or home rule petition.
Cronin is Methuen’s fiscal stability officer and is the financial overseer in Lawrence, a higher step up in the state oversight structure, which gives him more control over the city budget and contracts. The next step up would be the finance control board that has been used in Springfield and a state receiver would be at the top of the pyramid for oversight.
In Massachusetts, Cronin said there’s no general law that says how state oversight works, as there are different circumstances and results in each case. In Lynn’s case, its home rule petition, or deficit financing bill, created the fiscal stability officer, but doesn’t say what would happen next.
In Lawrence, if the financial overseer believes stronger oversight is needed, the city’s legislation allows for a finance control board to be created. Lynn’s legislation is silent on next steps, and if there would need to be a progression to stronger oversight, there would need to be conversations on that on the state and city level.
“We’ve had no conversations about additional state oversight,” Cronin said. “There’s nothing to lead me to believe we would need to have those conversations. That could change if things don’t go in the direction they need to.”
In order to balance the city’s budget, Cronin said Lynn needs to address its employee health insurance, a significant part of their budget that landed them in financial trouble several years ago because it wasn’t being funded appropriately. He said Mayor Thomas M. McGee is working with the city’s unions to try to save money on health insurance.
Another significant factor is collective bargaining agreements. All of the city’s union contracts have expired, were not funded in FY19, and are being negotiated. If the city wanted to provide raises in those contracts for FY20, that would put additional pressure on the budget, something Cronin said the mayor needs to be cognizant of.
Cronin said the city needs to implement a capital plan that addresses the lack of capital investment in the past couple of years. The city’s tentative five-year capital improvement plan was presented by its consultant, the Edward J. Collins Center at the University of Massachusetts-Boston to the City Council last week.
Another strategy would be to focus on economic development and growing the city’s tax base, which could go a long way toward helping Lynn with long-term financial sustainability.
The only way a community can grow its tax levy above 2½ percent, besides a voter-approved override of Proposition 2½ is new growth, or new commercial or residential development, Cronin said.
If there isn’t enough additional revenue, cuts would have to be made. Because Lynn’s schools are underfunded by an estimated $47.1 million annually, Cronin said the city doesn’t have the option to cut the school budget, but municipal operations such as police, fire and the Department of Public Works could see some paring down.
“We’re doing everything and anything we can,” said Bertino. “We’re trying to work with the departments to see if they have any savings. We’re looking at minor adjustments and fees. We’re also negotiating collaboratively with the unions to see if we can get some of the larger expenses knocked down.”
Bertino said the city is still waiting on final numbers from the governor’s state budget, but tentative figures on state aid released in January are more than the city anticipated. But he said the aid was disproportional to what Lynn’s budget needs are.
There was a $15.1 million increase in Chapter 70 aid to the Lynn Public Schools due to the governor’s recommended revamp of the 1993 foundation budget formula over a seven-year period. But that increase was a lot more than the city got in unrestricted government aid, which would go toward the whole city.
Bertino said he’s committed to having a balanced budget, but said not having the lifeline of the state loan anymore is a “prominent challenge.”
“We’re looking at the budget as a whole and we’re going to try to develop a plan that meets everybody’s needs,” Bertino said. “Although it will be difficult, we’re committed to doing it. The problem took many years to get here, so we know we’re not going to solve it in one year.”