CFO reveals proposed Norwalk budget; BoE ‘very concerned’

NORWALK, Conn. — Norwalk’s finance director has recommended a $400 million operating budget for the coming fiscal year, an increase of $15 million from 2020-21. That factors in a proposed $8 million drawdown of the City’s fund balance, or “rainy day fund,” and estimates a 3.67% mill rate increase for the Fourth Taxing District.

Chief Financial Officer Henry Dachowitz’ recommendation would increase the Board of Education’s budget by $4.2 million. This falls short of the Board’s requested increase of $11.7 million.

The BoE requested increase is described by Norwalk Superintendent of Schools Alexandra Estrella as “pretty flat,” given that most of the increase is due to items outside the Board’s control.

“We are deeply concerned by the City’s choice to recommend only a 2.0% increase for next year’s school operating budget,” the Board of Education and Norwalk Public Schools said in a statement.

Dachowitz presented his budget to the Board of Estimate and Taxation, drawing a discussion about the use of the fund balance.

“Why did we do that? Because we did this budget right after COVID hit,” Dachowitz said. “And we said we have so much uncertainty we don’t know. But at the same time, we knew that our citizens and taxpayers were under financial duress. This is when we had the illness raging. And we had lockdowns. So we said, let’s use $8 million of our surplus to diminish the amount of increase in the mill rate.”

Last year, the budget factored in a $6 million drawdown from the fund balance, but “we needed less than $1 million,” Dachowitz said. So, $4 million was “rolled over” to the Board of Education in a non-expiring account, and “therefore if they don’t spend it all this year, it could be used in next year’s budget. We also took about $1 million and gave it to certain departments on a city site.”

Norwalk has planned to draw down its rainy day fund for the past four years but “we have a history of not drawing down the entire amount that we budgeted,” Dachowitz said. In 19-20, the planned $6 million drop turned instead to a $6 million increase due to “terrific management.”

If, worst case scenario, Norwalk did have to use the planned $8 million in 21-22 it would still have 10.6% of the operating budget in reserve and “There are other cities who are doing worse,” Dachowitz said.

“Also let me add, our pension and OPEB (other post employment benefits) contributions were at about 75% funded,” he said. “There are many places including the state of Connecticut that is only 50% funded on pension. And they are I think half the cities in Connecticut do not even have an OPEB trust.”

So comparing liabilities to reserve, “our percentage funded is pretty high,” he said. “Very pleased with that, especially relative to other cities.”

Dachowitz characterized the overall budget growth as 2.9% per year over Mayor Harry Rilling’s seven years in office. That “compound annual growth rate” is “just a mathematical way of trying to explain the 22 and a half percent growth,” he said.

He also pointed out that in two of those years, the City’s expenditures decreased.

“Our seven-year total growth was 17 percent,” he said. “And our annual rate of growth was 2.3 percent. However, the numbers here are a bit misleading because we in the City have expenditures in our budget that are really for the benefit of the Board of Education.”

He spoke of the efficiency audit agreed to by the BoE at the end of last year’s budget cycle and explained that a request for proposals had generated 11 or 12 responses in September “and the quality of the firm’s and the quality of the written responses are excellent.” In December, a Committee was “very close to making a final decision” on which four firms would be invited to make a presentation via Zoom.

“It was then determined that because Dr. Estrella was new to the schools, that we put the RFP on hold,” Dachowitz said. “And we are working diligently now to refine the details. And I am hopeful that we will be able to select one of the firms in the next several weeks by the end of February.”

As a “good example” of why the efficiency audit is necessary, Dachowitz said Norwalk Public Schools has added 292 fulltime employees in two years, an increase of 23.8% to its workforce. The City, by comparison, issued an early retirement incentive program and “ended up with a net headcount decline this year.”

He went on to compare the staff numbers to the enrollment data and said that in 2018-19, NPS was at at 9.3 students per full time employee (FTE), which dropped to 8.2 students per FTE in 19-20 and 7.55 per FTE in 20-21.

“What’s driving this? What are the reasons for the increased staffing?” he asked. “…This is where an independent expert knowledgeable about school operations throughout New England or even nationally, could look into these numbers and look into the operations and get a better handle on what is reasonable and what is inefficient than could be saved.”

The Board has openly spoken of adding positions in recent budget cycles. Last year, Adamowski moved at least 10 new positions, most of them involving support for English Language Learners, to the grant funding column, so that they didn’t come from Norwalk taxpayer dollars.

There’s also been talk of adding paraeducators for the Special Education department, widely praised for improving in recent years.

The statement from NPS and the BoE said:

“The Board of Education carefully considered many factors before recommending a modest 5.6% increase for next year, including the sharp rise expected in health insurance costs for teachers and staff under the State of Connecticut’s 2.0 health plan.”

“The BOE’s budget request also included a 2.7% increase to meet priority staffing needs and contractual obligations to teachers, principals, paraeducators, nurses and custodians, who have been giving their all on behalf of our students in these challenging times. Funding at a level below the amount required to meet even our basic contractual obligations will have significant consequences.”

Rilling and Dachowitz both referenced the pain caused by COVID-19; Dachowitz said the pandemic is affecting three budget years, 2019-20, 20-21 and probably 21-22.

“I hope next year COVID is addressed with the vaccinations, businesses can reopen, and some of that financial pressure will be alleviated,” Dachowitz said. “But we budget for the worst and hope for the best and manage for the best. So that’s what we’re doing with our fund balances.”

“We know that during this past year, many, many people have lost their jobs,” Rilling said. “We see the significant increase in unemployment claims that we see significant numbers of people, a large numbers of people coming every week for food distribution. So we know that food insecurity is certainly a thing that we’re dealing with.”

He continued,“I think it’s appropriate that as a responsible board with the city funds. We need to do everything we can to help the citizens of this community who are experiencing very, very difficult times as difficult as it is for us. The easy thing to do is to raise taxes. The tough thing to do, and the right thing to do is to keep taxes as low as we possibly can any tax increase as low as we possibly can. And, again, I think that’s what we should be trying to do.”