Editor's note: The total deficit figure comes from the $10 million cumulative deficit, combined with the $4.5 million the Budget Commission added to the School Department budget in 2012, Finance Director Thomas Bruce said, bringing it up to $66.9 million.
The City's $14.5 million deficit can be dispelled with union concessions, cost cutting and a "deficit reduction legislative package" including a smaller supplemental tax than proposed in 2012, said City Finance Director Thomas Bruce.
If most of those elements don't fall in place before June 30, the deadline for sending out tax bills, Woonsocket will find itself in the same boat as last year, when $12 million in state aid had to be advanced by the Budget Commission to keep the School Department afloat.
The Commission could do that, Bruce said, but it could also move the city straight into bankruptcy, robbing taxpayers, union leaders and elected officials of any control in the process. A receiver would get all the Budget Commission's work so far, he said, but would be under no obligation to follow their lead.
Of the tools in the Budget Commission's plan, the union negotiations have the power to make or break a solution, since they could account for more than half of the deficit. If negotiations don't deliver significant savings, "It's more likely that we will go into receivership," Bruce said.
Now, Bruce said a lesser supplemental tax (the exact amount of which relies on savings from other areas) is a less important part of the solution, one of four elements of a legislative deficit reduction package. The other three parts the city will send to the General Assembly are:
- A bill raising the 8 percent reimbursement on subsidized housing to 15 percent.
- Transfer of the municipal pension system into the state system.
- Stretching the amortization of the pension liability from 5 to 30 years.
Bruce said the deficit can be solved without a supplemental tax (which would be permanently added to the base), though it would be more difficult. The deficit cannot be solved without the union concessions, he said.
With the Woonsocket Budget Commission's baseline 5-year projection, a comprehensive Excel document accounting for every element of the budget, it's clear what cuts in pensions, staffing and health care will do to the deficit, Bruce said. The document can instantly show the results of altered line items. The trick is to come up with a combination of changes that, along with a supplemental tax, will wipe out the red ink.
During a Jan. 28 City Council Workshop, Council President and Commission member John Ward said there aren't many big areas to attack for savings. "The only big drivers here are health care, pension COLA (Cost Of Living Allowance), and staffing," Ward said, according to audio of the meeting posted at MyWoonsocket.com.
The city met with union leaders in the fall, but negotiations were put on hold while officials waited for the 5-year projection. With it, they have information that's reliable and accountable, clearly showing what union concessions will do to the city's financial situation. With that in hand, "Negotiation meetings can now continue," Bruce said.
One big item the city will need the unions' cooperation on is health care. To realize enough savings to fix the problem, Bruce said, the city will need to bring all its employees, including those represented by unions and retirees, under the same health care plan with Blue Cross.
That plan would include a deductible of $500 - $1,000 and a 20 percent co-pay. "That's very competitive to the private sector," Bruce said.
Getting everyone under one plan will be crucial. "Healthcare savings potentially could repair more than half of the budget gap," Bruce said.
But time is running out. "We cannot go on and on with negotiations," said Mayor Leo Fontaine, also a member of the Commission, during the Jan. 28 workshop. If the unions and the city can't work out a deal, "Then the commission is going to need to know that as soon as possible," to know whether to go into the "next step" - receivership.