Worcester expects $9M surplus, more than projected earlier

By Nick Kotsopoulos
Telegram & Gazette Staff

Posted Sep 5, 2017 at 11:06 PM  

Updated Sep 5, 2017 at 11:06 PM

WORCESTER - The city is looking at the prospects of carrying over into this fiscal year at least $9 million in surplus funds from the previous year.

That is roughly 2½ times more than what had been projected as recently as two months ago.
The so-called “free cash” - unspent budget funds and surplus revenue from the previous fiscal year - will enable the city to further bolster its financial reserves while still leaving it with a significant amount of money that can be added to this year’s municipal operating budget.

The city’s policy is to appropriate 50 percent of free cash to its bond stabilization fund, which is used to strengthen its financial reserves, and apply 30 percent to the long-term liability for retiree health insurance, known as Other Post-Employment Benefits.

That leaves 20 percent available for appropriation for programs and services. That money can also be used to lower the tax rates.

In this instance, if the $9 million figure holds true, it would mean that $1.8 million would be available for appropriation before the City Council sets the tax rates late in the fall for this fiscal year.

City Auditor Robert V. Stearns had projected in June that free cash for the fiscal year that ended June 30 would come in at about $3.7 million. He said that was based on a projected year-end budget surplus of $2 million.


But the actual year-end surplus was $6.9 million and far exceeded the previous conservative revenue and expenditure projections.

As a result, Mr. Stearns informed the City Council Tuesday night that he has revised the free cash estimate to $9 million.

He said that amount could be even higher, depending on the timeliness of accrued grant receipts received by the city.

Mr. Stearns emphasized that the state Department of Revenue has yet to certify the city’s free cash figure.

Once free cash is certified by the state, usually in October, it would then be available for appropriation, he said.

“The initial project of local receipts was conservative and most revenue line items outperformed the projection,” the auditor wrote in his report to the City Council.

In addition to the year-end budget surplus of $6.9 million, Mr. Stearns said, local receipts were higher than projected for the month of May by $2.9 million, while fringe benefit expenditures were lower than projected by $1 million and legal settlements paid out by the city were lower than projected by $500,000.

Given the city’s potential free cash picture, Mayor Joseph M. Petty encouraged City Manager Edward M. Augustus Jr. to discuss with School Superintendent Maureen Binienda the possibility of using free cash as an additional appropriation to the School Department budget.

He acknowledged there are several other areas where the surplus funds can be used as well.

“There’s going to be a lot of demands on the city manager as to where this free cash goes,” Mr. Petty said.

Councilor-at-Large Khrystian E. King said he hopes that special consideration will be given to using some of the free cash to fund middle school sports programs and increase the number of social workers in the schools.

But Councilor-at-Large Konstantina B. Lukes said some consideration should also be given to the taxpayers, by using a portion of the free cash to lower the city’s tax rates.

“I’m concerned that our taxpayers are not getting enough tax relief out of this,” she said.