BROCKTON — The Brockton Public Schools overspending scandal is far from over. But the city’s top sharp-pencil guy says Brockton will be able to plug the budget gap using its own money.
“The reserves we’ve accumulated on the city side will address and extinguish the school deficit,” Brockton CFO Troy Clarkson told city leaders on Monday.
This means Brockton would keep control of its destiny instead of facing a financial takeover by the state.
That’s what happened during Brockton’s debt crisis of 1990, when a state board seized control of the city’s purse strings. For another example, look to Springfield. The state took over Springfield’s finances in 2004 after it ran deficits 18 years in a row.
One way or another, Brockton will have to make good on the $14.4 million deficit. It’s the law. “In Massachusetts, a municipality cannot legally end a year in a deficit,” Clarkson told the City Council’s finance committee on Monday. “If there are deficits, we are required to address those with whatever surpluses we have.”
Mayor Robert F. Sullivan, who also chairs the School Committee, said via email that he is “extremely proud and thankful of the collaborative efforts between the City and School Department in addressing the FY’23 deficit. The dedication and cooperation ensures that the needs of our students, faculty and staff are met.”
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What is ‘free cash’?
So how is Brockton going to cover the estimated $14.4 million in overspending run up by the city’s schools? Two words: free cash.
“Free cash” sounds like a scam. But it has a particular meaning in city finance. According to the state Department of Revenue, free cash is “remaining, unrestricted funds from operations of the previous fiscal year including unexpended free cash from the previous year, actual receipts in excess of revenue estimates shown on the tax recapitulation sheet and unspent amounts in the budget line items.”
Examples might include if the city did not make hires that it budgeted for. At the end of a fiscal year, those unspent dollars go into free cash.
Brockton aims to keep 3-5% of its general fund budget in free cash. For fiscal 2024, which began on July 1 of this year, the city budget keeps $19 million on hand in free cash, which is just under 4% of the $493,888,038 general fund. Clarkson said Monday free cash is tracking higher than expected, in the range of $23 million.
The city can’t use free cash to plug the budget gap until it gets approval from the state’s Department of Revenue. Clarkson said the city plans to ask for that approval earlier than usual this year.
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What happens next year?
While it’s arguably good news for Brockton residents that the city can get square without help from the state, using free cash means those reserves won’t be available for the next fiscal year.
“It’s a hit, definitely,” Ward 5 City Councilor Jeff Thompson said. “It looks like we’ll be able to absorb it. This is something we can never allow to happen again.”
Thompson said the city would need to continue to be conservative in its budgeting. “I’m also concerned about next year’s budget,” he said. “We routinely balance our budget with free cash. That’s going to mean potentially less we can do next year.”
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