Tomorrow, I will be asked to vote on a proposal to assist the City of Lawrence.
Lawrence faces a current year financial deficit of approximately $20 million — something under ten percent of its budget. The city has exhausted its current financial reserves and needs a source of funds to be able to get through the current year.
The bill does NOT give any state money to the City of Lawrence and it does NOT position the state as guarantor of any debt of the City of Lawrence.
What it does do is allow the City to go to the credit markets and borrow to cover its current year gap. Additionally, it allows the City to participate in an existing program called the Qualified Bond Program under which the state will send the City’s local aid directly to the bondholders. Section 12 of the Qualified Bond act, G.L. Chapter 44A is clear, however, that the state is not actually guaranteeing any payments.
The act puts in place a financial overseer for the City who will have the authority to review the city’s financial condition and make recommendatiions to the city. If by January 31, 2011, the overseer finds that the City’s finances have not fully stabilized, then, without further legislative action, a control board will be appointed to take over the City’s finances.
In my view, the approach in this bill is reasonable. It does not put the state on the hook for any additional payments to the City. It does give the newly elected mayor (and the new majority of the City council) some time to put the affairs of the City in order. It does put in place a hard deadline to get everything under control.
The real risk to the state in the proposal is that nothing changes over the next ten months in the City and the City opens up a larger budget gap, which in some political sense the state will ultimately be obliged to cover. We have not been presented with a real review of the city’s finances, but the most likely squeeze on the City would come from unreasonable labor contracts. However, all of the City’s contracts will be up for renegotiation in June. This will allow the mayor and the financial overseer (who will be carrying the threat of a control board being put in place) to force significant change as necessary. Additionally, the overseer has the unique power to force the City to move its employees into the Group Insurance Commission health care plan if that would save money. That move would occur this fiscal year — health care care changes are usually the greatest savings opportunities available.
Lastly, it is worth noting that the Mayor has resigned as a member of the legislature and the controversy about his dual paychecks has abated.
As of now, I am planning to vote for the bill, but I am still listening — it is a close call. Your thoughts are appreciated.