by Thomas Breen The New Haven independent
Even though the city’s $681.5 million general fund last fiscal year ended with a roughly $56,000 surplus, the Elicker administration has proposed moving around more than $27 million to plug a variety of holes.
Some of those moves are part of a typical end-of-year shuffle of monies from departments that had surpluses to departments that had deficits.
Some are due to federal changes to how the city must account for pandemic-relief funds.
And some are due to a lingering $4.9 million Board of Education deficit that the city plans to cover with $3 million in rainy day funds and nearly $2 million in money unspent by other departments.
Those end-of-year-transfer numbers are included in a proposed ordinance amendment that the city submitted to the Board of Alders as a communication on Monday. Mayor Justin Elicker and city Budget Director Shannon McCue provided further details on the budget-closeout proposal, as well as on the city’s overall fiscal health, during a City Hall press conference on Tuesday.
Elicker and McCue said that the the city’s Fiscal Year 2024-25 (FY 25) — which ran from July 1, 2024 to June 30, 2025 — ended with a general fund surplus of $56,560.
That means that, when taking into account all of the city’s expenditures and revenues for its general operations, New Haven’s $679.1 million FY25 general fund operating budget ended the year in the black.
However, overages in the city’s litigation, medical, and workers compensation funds led to a cumulative deficit of $511,910 across the various city accounts, thereby eating up the city’s small general fund surplus. (The city’s litigation, medical, and workers compensation funds are separate from its general fund.)
On top of that, the city has already committed $3 million of its general fund balance — also known as its rainy day fund — to help the public school district close out its own FY25 deficit.
That means the Elicker administration intends to draw down a total of $3,511,910 from the general fund balance, which currently stands at $58,806,837. If the $3.5 million drawdown goes through, the city would be left with a fund balance of $55,294,896.
Elicker and McCue touted this number as indicative of improving fiscal health, especially given that the city had a negative fund balance as recently as 2018. Elicker pointed to a recent upgrade by the rating agency Fitch as recognition that New Haven’s finances are heading in the right direction. He also heralded revenue increases from the state and Yale in recent years, as well as increased pension fund contributions to match more realistic estimated rates of return, as helping define a city budget that is “transparent, reliable, and stable” without any “gimmicks.”
“We still have a very significant buffer,” he said about the city’s $55 million-plus fund balance, even as fiscal challenges remain with the Board of Education and Washington, D.C.
The proposed ordinance amendment submitted to the Board of Alders on Monday, meanwhile, sheds further light on just how much money the city is looking to shuffle around in order to close last fiscal year’s budget to ensure that there are no “negative line-item balances.”
The largest proposed transfer would take place within the bounds of the general fund budget. It would see $16,049,846 moved from departments with surpluses to departments with deficits.
“The proposed ordinance includes a transfer of $16,049,846 from departments with a year-end surplus to cover the year-end deficits in other departments,” McCue emphasized in a follow-up email comment. “The transfers from are the surpluses and the transfers to are the deficits.”
Those proposed transfers (listed in full below) include moving $3.7 million from the police department, $1.6 million from public works, $1.2 million from the fire department, nearly $1.1 million from the Department of Community Resilience, and $1 million from the city’s transportation department.
“We had a lot of savings” amongst various departments, McCue said at Tuesday’s presser. “A lot of it was due to attrition,” thus the many “positive budgetary variances on the city side.”
In terms of where these surplus funds would be going, the proposed ordinance amendment calls for $4.7 million to go to the Board of Education, nearly $3.8 million to Central Utilities, nearly $2.5 million to Contract Reserve, $1.6 million to debt service, and nearly $1.3 million to pension funds. These are the parts of the general fund that ended with deficits.
The proposed ordinance amendment also asks the alders to transfer $3 million from the “assigned fund balance” to the Board of Education. The alders had previously set aside this $3 million portion of the city’s $58 million rainy day fund specifically for the school district, in case the Board of Ed needed help closing a deficit. (Alders took a similar vote Monday night, to set aside another $3 million in Board of Ed contingency funds for the current fiscal year. This fiscal year’s set-aside would come from unexpected boosts in state aid, however, and not from the city’s rainy day fund.)
The proposed ordinance amendment goes on to ask the alders to transfer $2.5 million in unused federal American Rescue Plan Act (ARPA) funds to police and fire overtime, and to transfer $5.8 million in ARPA interest to “offset a $6 million gap caused by Treasury Revenue Replacement Restrictions.”
“For context,” McCue wrote to alders in a Sept. 15 letter in support of the proposed transfer, “recently revised U.S. Treasury guidance on the use of American Rescue Plan Act (ARPA) funds required adjustments to the City’s budget, including the reallocation of certain ARPA revenue replacement funds. In response, the City reassigned funding to eligible capital projects, applied $5.8 million in ARPA interest earnings to address the resulting budget gap, and proposes to transfer up to $2.5 million to support Public Safety overtime. These adjustments ensure compliance with federal requirements while maintaining stability in the operating budget. In the absence of these transfers the City would have had a $11,824,699 million general fund deficit for the fiscal year ending June 30, 2025.”
If approved by the alders, the total amount of FY25 money that would be moved around to close out last fiscal year’s budget would be $27,349,846.
“At year-end, several departmental line items reflected negative balances requiring transfer,” McCue wrote. This proposal “provides the necessary accounting adjustment to eliminate those deficits within both City and Board of Education accounts. This action is strictly for year-end compliance and does not reflect the overall financial performance of City departments.”
The Board of Alders must review and vote on this transfer proposal before it can take effect.
What’s the right amount of money to have in the city’s fund balance, anyway? Given that New Haven has well over $50 million now, translating to roughly 8 percent of the city’s operating budget, does the city currently have too much cash stowed away in reserves — and should it instead spend that money to help, for example, lower taxes?
McCue said that rating agencies “like to see a lot of fund balance.” Ideally, the city would have a fund balance equivalent to two months of the operating budget. The city currently has around half of that. Nevertheless, the city’s current fund balance “is a nice, healthy number. … Would the rating agencies like to see that higher? Yes, they would, but we have to balance” that with other city priorities.
Elicker articulated a similar balancing act in his own response Tuesday.
“There’s a balance between wanting a good fiscal buffer” so that you have enough to help cover fiscal problems when they arise, he said. But the city doesn’t want to “put aside too much money we could be using to potentially lower taxes” or, say, purchase needed fire department vehicles. “We’re trying to balance those things.”
“Ideally, we have a slightly larger fund balance,” Elicker concluded, “but we have to be thoughtful about it.”