The town of Winthrop may have to borrow nearly $2 million to pay back a school funding shortfall and cover the town’s operating costs, an auditor told the Town Council during a meeting Monday night.
“There’s no way that I can sit here and say that it’s going to be an easy pill to swallow,” said Ron Smith, managing partner of the accounting firm RHR Smith & Co., of the steps the town will need to take to recover from that shortfall. “The town did not raise enough money in the past two years. … We need a solution on how to make that up.”
The Town Council and the School Department are putting together their 2017-2018 budgets now, and Smith was delivering a presentation about the state of the town’s finances. About 40 residents attended the meeting.
Over the next two Mondays, May 8 and 15, the council plans to hold two budget workshops to consider Smith’s recommendations, Council Chairwoman Sarah Fuller said. Each meeting will begin at 6 p.m.
Also this week, Gary Rosenthal, the superintendent of the school department, presented an $11.36 million budget proposal to the council, which is up 1.14 percent from this year’s budget. The council will not discuss the school budget until next week, however.
The school funding error that has led to the current shortfall was made two years ago, when officials were putting together their 2015-2016 budgets and mistakenly overcounted — by about $717,000 — the amount of revenue the school district would be receiving that year. The mistake was not noticed until more than a year later, when it already had been carried into this year’s budget, incurring additional costs and more than doubling its impact.
Now, Smith said, the shortfall has snowballed to about $1.5 million and could take seven years to repay.
“What’s happened is, because of the wrong estimates on the school side, the town has been paying for the school budget that didn’t have the revenues it thought it had,” Fuller said. That has drained the town’s surplus funds, she said, leaving it with “a deficit and no cash on hand.”
Speaking to the Town Council, Smith put the problem another way: “You’ve used all your cash to subsidize the problem, so you have no equity. It’s all used up.”
Besides borrowing a hefty sum, Smith also said the town will need to consider a mix of tax hikes and cost cuts to come back from the current shortfall. The town’s current property tax rate is $15.80 per $1,000 in valuation, but if it had kept pace with the actual costs to the town, it would have been $18.30 per $1,000, Smith said.
Local officials discovered the budgeting errors late last summer, after the current year’s budget already had been approved. The town’s tax assessor died and an interim assessor noticed the discrepancy. Rather than sending out tax bills that were steeper than what already had been approved, the officials instead decided that the School Department would try to find as many savings as possible in its budget this year.
This year, the School Department has recouped about $300,000 after imposing a spending freeze and other measures, Smith said.
But Fuller said the department’s proposed $11.36 million school budget could meet some resistance on the council next week. Last month, the council asked Rosenthal to present a budget with no increases.
The School Department has spent about $10.9 million this year, Fuller said this week, and she hopes it will be able to keep spending at that level next year. The council is planning to remove about $22,000 in spending from next year’s town budget, Fuller said. The current year’s town budget is $7 million.
“The town has eliminated a bunch of things from capital expenditures,” Fuller said. “They (school officials) should take that into consideration, that we’ve got to dig ourselves out of a hole before we can talk about increasing spending. … We certainly want the best schools we can afford, but right now it puts us in a pretty difficult situation. We also don’t want to be pushing people out of homes because they can’t afford to pay taxes.”
Rosenthal has said that some increases are unavoidable, and others will be needed to keep the district’s programming at its current levels.
Increases in the proposed school budget include $198,000 for special education costs, $150,000 in health insurance, $42,000 for heating oil, $25,000 for additional maintenance work, $35,000 to hire an educational technician who can help students with medical and social needs, $10,000 for the replacement of a light pole at a football field, $52,000 for a new third-grade teacher and $16,000 for a new part-time reading and English technician.
The district has found savings in its workers’ compensation costs and removed $35,000 from the budget proposal by eliminating a technician position from Winthrop Grade School.
At this week’s council meeting, Rosenthal said, “We’re doing everything to get as much money into the classrooms as we can, given the circumstances that we’re under at this point in time.”
Charles Eichacker — 621-5642
Twitter: @ceichacker
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