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RCSD deficit reaches $117 million, CFO urges board to increase fund balance

Oct 21, 2020

Credit Rochester City School District / Provided

The total known deficit for the Rochester City School District is $117 million but during Tuesday’s Board of Education meeting, Chief Financial Officer Carleen Piece said the number could be much higher.

Pierce said the bulk of that debt includes the money borrowed on the district’s behalf by the city of Rochester as it waits for funding from grants, the city, the state and others.

She said costs for health insurance, workmen’s compensation, transportation and other areas are concerning. She also said other payments may come due shortly. Pierce said the district was overpaid roughly $12 million for a quality school bond, they’ll have to pay that back.

“The 117 million can be claimed as real,” said Pierce. “The $199 million includes all the numbers in red to give everyone the big picture, the worst case scenario.”

In the worst case scenario, Pierce said nearly $70 million would be needed to comply with the district’s savings account requirements known as a fund balance.

Pierce encouraged saving between 11% and 15% this upcoming school year. She used a graph to compare the district’s fund balance from 2019 to similar large districts and said “we’re barely even showing on the graph.”

A graph comparing savings accounts for large school districts across the state
Credit Rochester City School District / Provided

She said districts are expected to save between 5% and 15% of their revenue yearly. Pierce said the average among large school districts is 14.5%. In comparison to other large districts, Buffalo saved 25%, Greece saved about 18%, and Syracuse is just over 15%. 

Pierce’s projections also revealed the district will owe more money than it has in February, March and May. Piece said the district will likely rebound as more funding comes in later in the school year. 

Board of Education President Van White said these lean times happen because revenue sources - like money from the city of Rochester and New York state - gets paid out at odd times. 

They’re on a different time frame than we are,” said White. “so sometimes, we get the money in advance because the people who are supposed to give us the money are not synchronized with us. That happens a lot.”

Since the district does not raise its own funds, the city of Rochester routinely borrows money on its behalf from the bond market. It's called a RAN or revenue anticipation note. This year’s note is $86 million plus interest, which Commissioner Beatriz Lebron said is the largest in the district’s history. 

The money is used to fund district operations while it waits for more revenue. But Pierce said the district shouldn’t operate that way.

“If we followed our budget and stuck to our budget,” said Pierce. “the parameters that have been given to us, we wouldn’t need a RAN.”

And Piece said the timing for these budget issues isn’t good. She said the district is anticipating a reduction or deferment of anywhere between 10% and 20% of state aid, largely because the state budget deficit is expected to reach $30 billion over the next two years.

Pierce said Rochester is more dependent on state aid than similar school districts around the state in part because of its lack of savings. That means when state funding is cut or deferred, the district has less flexibility in preparing the budget. 

“So other districts, they’ll say we’ll go with 10%, we’ll go with 5%, we’ll go with 1%, they have reserves to fall back on, we do not,” said Pierce.

Pierce said she’s seeking advice from the state education department and consultants and plans to keep estimates of how much aid the district will receive conservative.

Finance Committee Meeting 1... by WXXI News