PROVIDENCE, R.I. (WPRI) – The Elorza administration has told the state that Providence is facing a $3.6-million shortfall for the current fiscal year, but it believes the city still has time to balance the budget.
The city informed the state Department of Revenue of the potential deficit on Jan. 26, according to a report obtained by WPRI.com. State law requires municipalities to submit quarterly reports to the Department of Revenue detailing the status of their budgets. When a shortfall is identified, a city must submit a corrective action plan.
“The Elorza administration is taking proactive steps to address the projected deficit from the previous administration, and to identify budget vulnerabilities for the coming fiscal year and beyond,” Evan England, a spokesman for Mayor Jorge Elorza, said in a statement.
- Read: The city’s corrective action plan
- More: Why Providence is projecting a big budget gap for next year
- Follow: Providence politics on Facebook
The potential deficit identified by Finance Director Lawrence Mancini is for the city’s $678-million budget that started July 1, 2014 and ends June 30, 2015. It is separate from the projected shortfall of between $10.5 million and $23.1 million for the 2015-16 fiscal year, which doesn’t begin until July 1, 2015.
As of Dec. 31, the city said it faced a $4.1-million deficit in its municipal budget and a $473,000 surplus for the school budget for the current fiscal year. The city traditionally transfers surpluses on the school side back to its municipal budget, which is why Mancini told the state the shortfall is $3.6 million.
Mancini told the state that the projected deficit is due to “potential revenue shortfalls, unrealized expenditure-savings, higher than budgeted public safety call-back and overtime costs, and higher than budgeted medical expenditures due to claims utilizations.”
The report showed the police department projecting a $1.9-million deficit and the fire department projecting a $1.3-million shortfall. The city projects its medical expenses for city employees will run $2.7 million over budget. About $800,000 in savings from a proposed teachers’ union contract that is still in mediation have also not been realized.
The city also expects to see about $2.25 million less than it expected from a lease extension for Triggs Memorial Golf Course and the naming rights for the downtown skating center. The current budget assumed the 10-year extension at Triggs would bring in $2 million, but the city has not agreed to the terms of the deal. The city thought it would get $500,000 for the naming rights to the skating rink, but Alex and Ani agreed to pay $250,000 up front.
Nevertheless, Mancini said he expects that the city will balance its budget “through a combination of revenue enhancements and continued expenditure reductions.” He said Providence is expecting “better than budgeted” tax collections and departmental revenues from fees associated with building permits.
Potential expenditure reductions include actual health care costs coming in lower than projections, decreases in personnel expenses and non-essential spending, cuts to public safety overtime and call-back, refunding of bond portfolio opportunities, and savings on energy expenditures, such as fuel and utility costs.
“It is expected through a combination of these efforts that the city of Providence will be able to eliminate the projected deficit,” Mancini wrote.
Providence ended the 2013-14 fiscal year with a $1.1-million surplus, but it still faced an $8.67-million cumulative deficit – the combined amount it owes from deficits incurred during the 2011 and 2012 fiscal years – according to an outside audit. That cumulative deficit is projected to be paid off by June 30, 2017, according to a spokeswoman for the city.
Mancini is expected to brief the City Council Finance Committee on the status of the budget next week.