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Norwalk schools not paying back $900K, at least not from 2013-2014 budget

Council Finance 061412 028
A protest sign at a Norwalk finance committee meeting last year refers to the difference between then-Superintendent Susan Marks’ budget request and the amount of money granted by the city, plus an unexpected $4 million shortfall.

NORWALK, Conn. – There’s something missing from Norwalk Board of Education’s proposed operating budget for the next school year: a repayment to the city.

Although the board was originally expected to repay the city $900,000 out of its 2013-2014 operating budget following last spring’s dramatic and devastating budget shortfall, there is no dollar figure for that amount included in the $165 million budget request. BOE Chief Operating Officer Elio Longo said he was told by Norwalk Finance Director Thomas Hamilton not to include it.

The board also was expected to repay the city $2.2 million in 2014-2015. Longo says it may not be a problem.

Longo explained the history of the financial obligation, revisiting what happened last year: When a projected $4 million shortfall in the BOE’s insurance fund was discovered last spring, the BOE was looking at $10 million in cuts to then-Superintendent Susan Marks’ initial budget request. The city lowered the amount of the cuts necessary by allowing the board to underfund the 2012-2013 insurance fund by $2.2 million. The city then gave the board two restorations to its budget, one for $466,000, the other for $433,000.

That is a total of $3.1 million owed to the city. The replenishment plan was for $900,000 in 2013-2014, and $2.2 million in 2014-2015.

Yet Longo informed Common Council members Monday night that the money is not in the budget, on Hamilton’s recommendation. “I asked repeatedly whether or not I had to build it into the budget,” he said. “We were told not to include it.”

Councilman Bruce Kimmel (D-District A) responded, “I’ve got to say regarding what happened last spring, and what I just heard, I’m not surprised. I had no idea of how it was going to happen, forgiving your debt or whatever it’s called. I’m glad it happened the way you described it. It’s all behind us.”

The discussion moved on without further explanation.

What happened?

On Thursday, Longo said the board had taken a $700,000 end-of-2011-2012 surplus and applied it to the insurance fund. “We took the prudent fiscal approach, during late June of 2012, to apply any line item surpluses to the insurance fund, as of June 30, almost as a prepayment against future debt obligations,” he said.

In essence, it was applied to the $900,000. That would leave $200,000, but Longo said the notorious $4 million shortfall was an estimate. It worked out to be less than that.

Hamilton did not return an afternoon email looking for the exact dollar figure, but Longo said, “Hypothetically speaking, that number, $700,000 covered most – if not all – of the obligation.”

Longo said it is possible that a contribution may show up in the city’s ledger rather than the board’s ledger. That is because state law mandates that municipalities cannot drop the amount of money they allocate to a board of education from one year to another.

“At no time can a municipality fund the local school district below the prior year’s appropriation,” he said.

So if the board included a one-time expense on its budget, it would, in essence, inflate its budget. The city would then be obligated to maintain that amount.

Theoretically, the board is still expected to repay the city $2.2 million in its 2014-2015 budget, but, as Longo understands it, Hamilton is working on the problem.

“At this time, as I understand it, Mr. Hamilton is looking, or devising a plan, to address all city-wide insurance obligations,” he said. “City-wide would be inclusive of the Board of Education’s responsibility, not only health insurance but worker’s compensation as well. … He is looking at it not only for the upcoming year, 13-14, he’s looking at it over the course of next couple of years, which would capture the BOE’s obligation for 13-14, 14-15.”

He doesn’t know what will happen.

“I haven’t been given a definitive answer to the question of what becomes of it in 14-15 as of yet,” he said.

Comments

14 responses to “Norwalk schools not paying back $900K, at least not from 2013-2014 budget”

  1. Lisa Thomson

    I’m confused? Does the BOE have to repay the money or not? This city was brought to its knees last year over this accounting fiasco and a superintendent quit! Now, it’s an election year, so we let it ride into the sunset?? Only to have it return this summer when we are discussing buying textbooks for the Common Core? Both Mike Lyons (R) and Mike Barbis (D) need to sit down with Tom Hamilton sooner rather than later.

  2. Diane C2`

    Why bother having loan commitments if they are all forgiven? Are these more “wink wink” deals?
    Next they’ll be forgiving the $35 million Maritime Aquarium debt and the $3+ million Oak Hills Park Authority Debt. Who else owes money, how much, and for how long?
    And more importantly, where do I sign up for MY low-interest, no-payback loan?

  3. LWitherspoon

    Longo said the notorious $4 million shortfall was an estimate. It worked out to be less than that.

    Hamilton did not return an afternoon email looking for the exact dollar figure, but Longo said, “Hypothetically speaking, that number, $700,000 covered most – if not all – of the obligation.”

    So what looked like a $4 million shortfall turned into a “hypothetical” $700,000? This is very murky, and given all the hoopla surrounding the $4 million last summer, the BoE would be well-served to provide a clearer explanation.

  4. Bryan Meek

    The number is 4,529,000 according to the audit done. Maybe they are taking 700,000 off of that figure?

    It is page 10 on the city’s website. Listed as a significant deficiency in internal control. In audit terms, this is one step down from a material weakness. A material weakness could impact the city’s debt rating.

    http://www.norwalkct.org/Archive.aspx?AMID=41

    The bigger unanswered question is what is the impact of our waiver from NCLB.

    For years, NCLB was used as an excuse for runaway costs. Seems logical that we should find savings now that we are exempt from this. It is a disservice to taxpayers that it isn’t even part of the conversation.

  5. BARIN

    You cant make this stuff up. What can they do to fix the mess?

  6. LWitherspoon

    @Bryan Meek

    To which audit are you referring? There was going to be an audit of the account to figure out how the shortfall occurred. I don’t think that audit is complete. If it is, there hasn’t been any announcement of the results.
    Longo’s comments need to be clarified. I read them as saying the shortfall was less than $4 million, which would indicate that $4,529,000 from the report is not the right figure.

  7. oldtimer

    There is a state law that prohibits funding a BOE budget for anything less than the prior year. There is apparently some concern that putting that “loan payment” into this year’s budget would require putting it into every subsequent budget. When that law was written, nobody imagined any city ever “loaning” money to a school board and requiring it to be paid back. After the lawyers and the accountants get through with this, it may turn out this year’s budget must include the same amount that was called a loan last year, over and above last year’s budget. Wasn’t that widely publicised as 4 million ? If this year’s budget exceeds last year’s total, including the “loan”, by the amount “loaned” last year, there is no problem.

  8. oldtimer

    Some of us argued, at the time, that giving the BOE more money and calling it a loan was silly. I asked what other source of income to repay a loan did the school system have,cupcake and cookie sales.

  9. When Mr. Longo said the $700,000 covered most of the obligation, he meant the $900,000 due from the 2013-2014 budget. The $2.2 million due in 2014-2015 is still an issue. The total of both obligations is $3.1 million, which is much closer to the $4 million we all heard about.

    Again, Longo said the total owed was $3.1 million. That was expected to be repaid with $900,000 from 2013-2014 and $2.2 million in 2014-2015.

    Mr. Longo said Mr. Hamilton is working on a city-wide plan to address all city-wide insurance obligations. That would cover 2012-2013 and 2013-2104. Mr. Longo thinks that may erase the remaining $2.2 million owed by the BOE, but does not know.

    Mr. Hamilton still has not returned my email.

  10. Bryan Meek

    @LWitherspoon. The 4,529,000 figure was arrived at by our auditors McGladrey. It is the Federal and State audit for FY 2012. This is a requirement for any entity that receives Federal (OMB circular A133) or state funds (State single audit act). Part of the scope of these audits is responsibility of the auditor to point out material weaknesses and/or significant deficiencies in internal control.

    If you read the audit from the link I gave, you will see that further recommendations will be forthcoming to make sure it doesn’t happen again.

  11. jjones

    this shows how overfunded insurance fund is.

  12. Oldtimer

    The BOE is part of the City, just as the DPW is part of the City. Both get their budgets from the City. Are we next going to lend the DPW money for some expense in their budget and expect it to be repaid ? How did we possibly justify a loan to the BOE to cover a budget that was miscalculated and too small to cover that year’s expenses ? If that four million, or whatever the true number is, was included in the original budget request, it would have been funded and we would not now be going through the silly exercise of giving them enough in their budget so they will be able to repay this so-called loan.

  13. BARIN

    Off subject for a moment Oldtimer mentioned DPW, the DPW transfer station on South Smith Street was closed Friday. I was told they’re only open Wednesday’s seven to three.
    Now keep in mind we had a wind storm that downed entire trees, limbs and branches. Say what!! Wednesday? I have a ton of debris in the back of my pickup until Wednesday, unless there is inclimate weather, then I must wait another week. Most people work on Wednesday, how about Saturday, better yet following a wind storm at the very least every day until people have had a chance to get there. I was told by a very nice lady that I could speak with Ms. Burns or Mr. Alvord, thinking that would only waste more time, I declined. I wonder if the two supervisors live in Norwalk, and if not were the transfer stations in their towns open, as they decided to close ours. I get it, saving money is good, but there was a wind storm for goodness sake. Sorry about going off subject.
    @Bryan,
    Those recommendations are just that ,recommendations. Have any of them been implemented thus far? Sure would like to know.

  14. Lisa Thomson

    As a parent and taxpayer I never understood the concept of a loan…since the money all comes out of the same taxpayer pot.  I figured the $4 m or whatever accounting error would be gradually absorbed over time in the budget so as not to ‘wreck’ the school system over future budgeting years. What I find strange is the abrupt nature of the city telling Elio not to include it this year, regardless of the amount.

    At issue for me is getting an accurate handle on our TOTAL education expenses and post retirement liabilities and determining how much of our tax dollars end up Norwalk’s classrooms. Out of a proposed $164m budget ONLY 63m will go into classroom teacher salaries.  That’s 38% for what I consider traditional education. The rest is for everything else.  The ‘everything else’ is taking a bigger and bigger chunk out of the 3Rs and not just in Norwalk.  But since CT funds education at the municipal level, we must get to the bottom of it.

    As this is an election year, no politician wants parents demonstrating but we must  get a real handle on expenses and staffing models.  In the case of NPS, the last superintendent brought in new blood in the HR and Finance positions and was trying to clean things up.  She was run out of town or at best left hanging in the breeze by the status quo that cuts across both political parties in Norwalk.

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