A day after New London’s finance director announced a major depletion of the city’s fund balance, Mayor Daryl Finzio said the finding underscores the need to support the .
“If we cut any more, we don’t have a contingency fund. We don’t have a fund balance,” Finizio said at a budget forum tonight.
According to , Finance Director Jeff Smith said on Tuesday that the fund balance has decreased to an estimated $311,000. The depletion occurred in order to pay a $1.3 million deficit in the 2011 fiscal year and an anticipated $4.7 million deficit in the 2012 fiscal year.
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Finizio said the city has worked to avoid running a deficit since the determination in January that the city was facing a to cover deficits and replenish the general fund. He said actions since the passage of the $43.3 million municipal budget, including the and a , have been made with the intention of reducing costs in the 2013 fiscal year to avoid overspending.
“Without a general fund to back us up we absolutely have to operate with a balanced budget,” said Finizio.
2013 budget
On June 19, the City Council approved a for the 2013 fiscal year. The council also approved a 7.5 percent increase to the mill rate, or tax per $1,000 of assessed value, raising it from 25.31 to 27.22.
The budget for the after a special master to the district rejected an anticipated increase in state funds as well as a proposed assumption of some costs by the municipal budget. A petition effort gathered enough signatures to , and voters will decide whether the measures should stand in a Sept. 18 referendum.
Finizio and the Democratic Town Committee voted on Aug. 28 to . A post on the Republican Town Committee’s Facebook page the next day encouraged voters to reject the budget and tax rate, but the RTC will not officially take a position on the referendum until its Sept. 11 meeting.
Finizio said he has heard recommendations of between a zero tax increase and a five percent tax increase if the budget is rejected. He said would require a $1,265,000 cut and would have to focus on non-essential spending. Finizio said the cuts could include shutting down the , cutting the expenditure to the by $200,000, further layoffs, and scaled back trash removal services.
Finizio said he did not believe the city would be able to reduce the budget to below a five percent increase since it would begin to cut into legally mandated areas. He said 91 percent of the budget increase as approved covers revenue shortfalls while the remaining 9 percent covers mandated expenditures toward debt service.
Forensic audit
Smith said on Tuesday that he would support a targeted audit focused on overspending in certain departments as well as revenue shortfalls. He said this would look at three departments where overspending was the most prominent—the , , and —to determine the reason for the overages. He said that a forensic audit of the budget as a whole could take place if the targeted audit discovered any evidence of fraud or other malfeasance.
Smith has spoken against a forensic audit of the budget as a whole, saying it could cost over a million dollars to look at every municipal transaction in recent years.
“We can go to a forensic audit immediately, but it’s just so expensive,” he said.
Council President Michael Passero, who also chairs the council’s Finance Committee, said the committee will consider Smith’s proposal. He said it would not answer all of the questions that have been raised on the budget, but that he considered overspending and revenue shortfalls in the departments to be important areas to look at.
“I’d love to get the answers to those questions, which is what this study will give us,” he said.
