RCSD deficit worse than projected, NY auditors warn district could run out of money

Brian Sharp

Democrat & Chronicle

Jan 23, 2020

A damning state review of Rochester City School District finances released Thursday raises the projected year-end deficit to $40.5 million.

That is far more than the $27.1 million Superintendent Terry Dade had projected.

The district is likely to run out of money before the end of the fiscal year, June 30, according to auditors with the New York state Comptroller's Office. This, after accounting for roughly 155 mid-year layoffs, most of them teachers, and other cost-cutting measures.

Under-budgeting, and over-spending landed the district in this spot. The fallout continued Friday, as Standard & Poor's Global Ratings placed the city on what it called "creditwatch with negative implications" for the next 90 days, citing RCSD's financial distress. The city levies taxes and borrows money on RCSD's behalf, and the city's credit rating influences the interest rate. Moody's previously downgraded the city's credit rating, also blaming RCSD.

"The city's finances are fundamentally and inextricably linked, and obviously that has real consequences for our taxpayers," said city spokesman Justin Roj.

S&P raised particular concern about the district's ability to repay a $50 million revenue anticipation note due at the end of May.

The district made false representations to the city and Moody's when pursuing the advance last year, records show.

The comptroller's report argues that the district continues to miss the mark on its finances by underestimating charter school tuition (under-counting students enrolled, and using an out-dated rate), and over-estimating state transportation aid. The proposed reductions Dade offered up also over-estimated the resulting savings, auditors said. That includes the layoffs, which by not accounting for unemployment costs, overstated the savings by $1 million.