Audit: Town in good standing, schools saw deficit

The latest audit presentation from Clifton Larson Allen showed the town of Johnston in solid financial standing, while the school district is projected to run a significant deficit approaching $1 million.

District 5 Councilman Robert Civetti said that, when the two sides met during the budget session, the council was told the school deficit would be between $400,000 and $500,000. Superintendent of Schools Bernard DiLullo said that over the summer the district saw significant increases in pension and healthcare costs.

DiLullo said the district received about $610,000 in COVID-19 relief money from the state, but also saw its annual aid figure reduced by almost as much. The superintendent said the district had to “justify what we were purchasing” with the relief funds, and they weren’t permitted to use it to backfill state aid losses.

Ron Nossek, who presented the audit, told the council that on the town side the firm did not find any “significant deficiencies or material weaknesses” during the course of its work. Nossek said there were no compliance violations, either. The town saw a $5 million hike in the general fund, and unassigned percentages – which Finance Director Joseph Chiodo said are not restricted to any specific purposes – are “extremely strong and relatively high” compared to other municipalities.

However, the other post-employment benefits, or OPEB, liability jumped $21.5 million. Nossek said most that is attributed to “actuarial assumptions,” which accounted for about $16.5 million.

“As long as [OPEB liabilities] are still hanging there, while they are actuarial estimates, and not every single nickel perhaps is going to be paid out at some point in time, that is the best mathematical science we have to calculate that liability so I feel confident that in the end, when I’ll no longer be here, but when that runs out from where we are at this point in time you can count on that being at least that if not more. The funded portion of that OPEB plan is pretty low.”

Nossek said police and fire pensions are funded both at a 29 percent rate, while OPEB is only 8.46 percent. He said that “big gap” won’t get closed until “funding increases significant or something changes relative to contract negotiations with the beneficiaries on the other side of that liability.”

Civetti told Nossek the town has established a funding improvement plan, or FIP, to assuage some of the OPEB liability, but asked if it would be smart to set aside more money “when they account for those items.”

“That is a managerial decision,” Nossek said. “It certainly seems to be a prudent course of action … it’s not going to reduce that liability on the government-wide statement because it’s not in the trust, but nonetheless you could clearly be going down a path where you’re planning on providing assets and setting them aside to deal with that liability.”

Finance Director Joseph Chiodo stopped by the Zoom chat to offer his insight on the town’s financial standing. He said there is a $10 million internal service fund, split about evenly between the town and schools. Chiodo added that, with 600 people each between both sides, “with a group our size it makes more sense to be self-insured, too.”

“Your point is well taken on the OPEB trust and health care,” Chiodo said, before referencing future savings on the water fund after the town’s sale to Providence Water. “We still have the streetlight savings and we will have some money when the water fund is all done … I wasn’t on negotiations of the water fund, but we didn’t want the $3.6 million sitting out there, I wanted that only to be the town’s money, and the decision of the town to list down and decide what to do with that $3.6 million. I know we’ll have small losses this year, might whittle down to $2.5 million. My logic was really what’s in the best interest of the town financially.”