I am reaching out to everyone in the Melrose community to address the issues that came up during the School Committee on September 27. Those issues will be discussed at tonight’s special meeting of the City Council. I hope this message begins to answer some for your questions as we move forward. I urge you to watch tonight’s meeting.

The FY22 budget shortfall that totaled over $2 million is deeply troubling. Everyone in the City is understandably upset and concerned. There are reasonable questions still to be answered about how this situation will impact our students, what the ramifications are for our finances, and what is being done to prevent something like this happening again. I also recognize that people may have wanted to hear about this situation sooner; particularly given the transition to a new Director of Finance and Administration in the School Department, it took a significant amount of time to gain an understanding of the amount and nature of the shortfall, and even now there are outstanding questions and concerns. I share these concerns and I am committed to ensuring that this situation is fully and publicly explained, corrected, and never repeated.

I want to set forth some very important points:

There was a set of unprecedented and dramatically expanded costs that could not be adequately forecast at the beginning of the fiscal year. These were legitimate costs of providing important programs and services.

The School Department identified department resources to reduce the deficit to approximately $775,000. After consulting with our Auditor/CFO, I authorized the use of ARPA funds to close the remaining gap. In many ways, this is the purpose for which ARPA funds are available, and I am grateful we were able to draw on them.

Our City finances are sound. Our bond rating is excellent, we maintain healthy balances in our stabilization accounts, and our non-exempt debt service is currently 2.98% of our budget. I am not suggesting what happened is acceptable, far from it. But we are not in a deficit and have closed the books on FY22.

Together, the City and schools finance teams worked throughout the summer with an outside auditing firm to ascertain the School Department’s actual financial situation, and by late August, the Department had a clearer picture of the size of the FY22 shortfall. At that time, I wrote to the School Committee and Superintendent to let them know that I would use ARPA funds as a necessary and prudent measure to allow our books to be closed without a deficit. By using these relief funds to defray the cost of expenses related to the COVID-19 pandemic and to make up for revenue shortfall, we were able to close the gap and ensure financial stability for the City. I saw no other viable way for the City to meet its already-incurred obligations.

This release of approximately $775,000 of ARPA funds was conditioned upon certain requirements described in my memorandum to the Superintendent and the School Committee of August 29, 2022, chief among which was the stipulation that the School Finance Department work with our City CFO and our financial consultant from CliftonLarsonAllen to strengthen internal controls in the School Finance Department and provide financial monitoring of the School Department budget throughout FY23. I asked for detailed answers regarding the causes of the shortfall, why the shortfall was not detected earlier, and a concrete plan of action for moving forward.

Even as we must continue to look back on the mistakes made last year and get clarity on what happened and why, we need to look at the present and to the future. Having closed the books on FY22, our School Department leadership must now turn to FY23 and avert a repeat of this unsustainable and unacceptable outcome. At the same time, we need to begin building the FY24 budget and scrutinize every assumption and every forecast upon which the School Department budget will be based to ensure that these are realistic and conservative.

Above all, the School Department must work to rebuild trust: trust in how their budget is built, and how the School Department’s finances are managed. At the School Committee meeting on September 27, School Committee Finance and Facilities Chair Margaret Driscoll laid out a plan to review and enhance existing School Committee policies related to school finances to ensure frequent, reliable, and consistent oversight of the School Department finances. This is absolutely the necessary and imperative step for the School Committee to take. That work will start immediately and will be informed by our consultant and the community.  I have also tasked the City’s CFO, Patrick Dello Russo, to lend his financial expertise in support of the School Department’s business office to align their budget practices with City standards.

After tonight’s meeting, our financial consultant will be present at the next School Committee meeting on October 18 to provide the community with an update into her review of the budget and budgeting practices. This meeting will be a crucial next step in understanding how the budget shortfall went undetected and getting a clearer picture of any impacts on our current and future budget moving forward.

As Melrosians, we are all deeply invested in our community. It is especially frustrating and upsetting to learn about this during a when we all hoping to begin the transition back to a new post-COVID normal. This process will be challenging as we grapple with what occurred, identify the impacts moving forward, and create appropriate safeguards to prevent this from happening again. I urge everyone to consider patience as we work through what happened.

Paul Brodeur
Mayor of Melrose