Fitch Ratings has downgraded Woonsocket's bond status as school department finances have raised the spectre of municipal bankruptcy, and Moody's is expected to follow suit on Wednesday, according to city Finance Director Thomas Bruce.
Fitch dropped the city's rating to "BB" from "BBB," a move that "reflects Fitch's concerns over Woonsocket's ability to successfully, and in a timely manner, address the school's cash flow issues and longer-term financial operations," according to a release from the company. Fitch blamed "deficiencies in internal fiscal controls" for the ratings drop, which makes it more difficult and expensive for the city to borrow money.
Bruce, who plans to meet with Moody's on Wednesday, said the administration is "hoping to put it in as positive a light as possible," but expects Woonsocket's fiscal troubles will result in another downgrade. He joined Fitch in laying much of the blame at the school department's feet.
"I know there's been a funding problem, but there has also been a financial management problem in the school department," Bruce said. "There has been no control or planning for the budget. There is an inability to ascertain financial statements or have budgeting control. The management performance is inadequate."
Specifically, Bruce said the school department has not balanced its checkbook since last July. The school department has also failed to conduct a required audit, he said, has had no accounting of revenue streams, and has failed to eliminate deficit spending, violating a Superior Court order imposed when the city issued $11 million in bonds two years ago to balance its books.
"It's pretty serious ... legal action could be pursued," Bruce said.
Superintendent Giovanna Donoyan did not return calls seeking comment.
The bond downgrades — not to mention possible bankruptcy — eliminates the city's ability to issue bonds, limiting Woonsocket's options to dig out of a $10 million school department deficit. The School Committee has asked the Woonsocket Teacher's Guild to renegotiate its contract, according to union President Jeffrey Partington, but the union is waiting to see the committee's entire plan before agreeing to reopen the contract.
"There is really no waste in the contract," Partington said. "We would be the lowest paid teachers in the state (if a suggested 10 percent salary reduction was imposed)."
The School Committee is asking the state to immediately disburse education aid due the city in June, but there has been no response yet from the state. The committee is also considering closing schools on April 5, ending the school year more than two months early. The committee is expected to consider the measure — which would require state approval due to state law requiring public school children to receive 180 days of education a year — during a special meeting Wednesday at 7 p.m. at Woonsocket Middle School at Hamlet. Check back with Patch Thursday morning for full coverage.