Introduction
At Smithfield RI budget and Financial Review Board meeting on Tuesday, April 7, the Smithfield Public School Department provided a presentation on their FY2027 budget.
As an educator, I am committed to delivering a quality education to my students. Just ask them!! Haha. Education has changed my life and career.
Here are the thoughts that I compiled during the presentation about the current budget process, both Town and School Department:
Discussion #1
I asked how many people were Smithfield residents. Many in the room raised their hands.
- Why? Budget includes a $1.2m “withdrawal” to fund the budget.
- How many people have read and reviewed the 5-year analysis of the financial situation for the Town of Smithfield? And the issues that were defined?
- There are many components of Smithfield's fiscal health which have been analyzed and provided in the report.
- The council was provided with the report in January. The BFRB was provided with the report in February. The public version was posted on March 6.
- Two reports have been provided on this website: 1) Full Report, 2) Executive Summary. You can read the blog article by clicking here. Both reports can be downloaded. If you are unfamiliar with government fiscal details, read the executive summary first.
Discussion #2
The discussion about the Fund Balance fiscal component was interesting.
- Why? Budget includes a $1.2m “withdrawal” to fund the budget.
- That is analogous to a household budget that must take out cash from their savings.
- The accounting term is “structural estimate”.
What is the effect of the fund balance?
- There was approximately $4.5m reduction since FY2020.
- A 49.8% decrease in the balance from FY2020 – FY2024.
- That does not include FY2025 or anticipated FY2026 surpluses or losses
- Effects ... i) Fund balance, GFOA guidelines for the fund balance, Bond rating, Maybe the bond rating will affect our borrowing currently and future and adding to our expenditures. Generally, the fund balance for municipalities must be at LEAST 16.7% of either revenue or expenditures. That equates to 2 months of revenue/expenditures.
- Ultimately, it is the same as a person's savings about ... the "rainy day fund".
Purchase of the Overbrook Property
- I have continued to say that the purchase of Overbrook was important and correct. To place the property in the Town's control for development and re-purposing. Absolutely!
- The operating costs of owning the buildings are NOT budgeted for FY2026.
- The costs of interest to borrow the funds for the purchase are NOT budgeted for FY2026.
- At the meeting, it was discussed that the loan is interest only and not a traditional mortgage amortized loan. Since the meeting, I have since learned that it is a hybrid of interest only as well as "fixed" principal payments to the loan. I will find out more details.
This blog post is continued in Part II. You can view this by clicking here.
Thank you for reading!
