Mayor: 'Bankruptcy Is On The Table'

The Woonsocket Education Department is facing a $7.3 million budget shortfall, and the city could run out of cash to pay vendors and employees in a few weeks’ time, Mayor Leo Fontaine announced Monday night.

"I cannot overstate the dire circumstances we face here," he told the City Council. "Obviously this number is devastating ... Bankruptcy certainly is on the table at this point."

The red ink means the state may have to take over running Woonsocket, as happened in Central Falls last year, according to Fontaine. He noted the city is actually looking at a larger deficit than $7.3 million, because the city is also stuck with $2.7 million from last year's school department shortfall. "We're looking at a $10 million hole," he said. “There are questions as to whether the state is going to have to come in and take over."

The numbers also raise the likelihood of deep cuts to city services, as well as a property tax increase. "The people of this city are already taxed dramatically," Fontaine said. "Everyone cringes when they hear the words 'supplemental tax,' but they cringe more when they hear 'bankruptcy.' "

Among those hearing the mayor's message: Gov. Lincoln Chafee, who arrived at the meeting with a state police escort and took a seat in the back of the room. He took the floor only briefly to assure city officials he would work to help minimize the financial impact on local taxpayers.

"We want to avoid more property taxes on your businesses and your people," the governor said.

Speaking with reporters in the hallway, Chafee pointed the finger at his predecessor, Gov. Donald Carcieri, who slashed state funds to municipalities and local school departments. "The previous administration cut $195 million to all the cities and towns in our state," Chafee said. "This is not just a Woonsocket problem. It's a Providence problem, a Pawtucket problem, a West Warwick problem."

Chafee labeled those cities "the Big Four," meaning all of them face the possibility of bankruptcy and state takeover. "We're looking at a real crisis here," he said. 

The governor also touted his proposed tax increase on restaurant meals — from 8 percent to 10 percent — as one way out of the problem. "Those funds would go to helping cities and towns," he said. "I've stepped up."

City officials and city residents have been known they would be facing yet another school department deficit this year, but until now they had no idea how big it would be. For much of 2011, school department business manager Stacy Busby as well as the former school superintendent claimed there would be no shortfall this year, and that there might even be a small surplus. Those rosy forecasts ended in December, when auditors presented a report showing another spending deficit loomed.

Shortly after that the city appointed Dina DuTremble, a retired business manager, to determine how big this year's deficit would be. She has been assisted by Tom Bruce, the city finance director, new Superintendent of Schools Giovanna Donoyan, and finance professionals from the state. They presented their findings publicly last night.

A schools deficit caused a city budget nightmare last year, too. In March Woonsocket borrowed $11.5 million to cover the shortfall, and Moody's Investors Service and Fitch Ratings both downgraded the city's bond rating. Fontaine avoided bankruptcy last year by negotiating concessions from unions and drawing up a five-year plan to stabilize city finances.

At last night's meeting, there were vocal attacks on Busby, who is now on leave, and other school officials who failed to report that another deficit was coming.

"The person who should have made us aware is on leave right now, being paid with taxpayer dollars," said City Council member Roger Jalette. "I don't want to see anyone else taking time off for 'stress relief.' I want to see some heads roll."

"How in the world did we get this far behind, with no one aware of it," Fontaine added.

"Mr. Jalette, I agree with you," responded School Committee chair Anita McGuire Forcier. "But we are part-time. We have to rely on the numbers we're given."

McGuire Forcier also charged the state shares responsibility for the shortfall because of cuts in funding to local schools. "With another $8 million a year, we would not be in this mess," she said. "We've cut music. We've cut sports. We've taken so much away from our children. They need to fund our schools properly. The state may not like us because we're poor, but we have a right to exist."

Before the meeting ended, several citizens rose to express their concerns.

"For the last couple of years we've been worried, and tonight those worries became fears," said Sharon Gevins. "All I can ask is, consider the taxpayers."

"When you hired these people, did they just crawl out of a Dumpster and say they'd like a job?" asked Charles Souders, referring to Busby and other school department employees.

Susan Tawlina urged city officials to embrace bankruptcy as a way to avoid slashing the school budget. "We need to tell the state to take over, like they did in Central Falls," she said. "They didn't lose sports programs. They didn't lose music programs."