City, School Look to Solve $8.5 Million Funding Crunch: State Auditors Catch Reporting Error That Led to Funding Gap

As students citywide headed into the February winter school vacation week, city and school officials were conferring with the state to identify a solution to a funding gap that was apparently caused by an error in the way the city calculates its spending on local public education.

For the past several years, city and school accounting officials have been counting the amount of money the city spends on health insurance for its retired school teachers as part of its net school spending requirement.

Net school spending is the amount of funding the state requires a municipality to spend on its public schools. The amount varies from community to community based on a complicated state formula. Retiree health care costs are often counted as part of a municipality’s net school spending.

However, due to a decision that appears to have been made in 1994, the city of Lynn never asked the state to allow it to count retiree health benefits as part of its net school spending. Therefore Lynn is one of a small number of municipalities that cannot count those costs.

The Massachusetts Department of Elementary and Secondary Education (DESE) became aware of the discrepancy following a state audit.

The error has resulted in the city spending $8.5 million less on school spending than the DESE requires.

Mayor Judith Flanagan Kennedy’s office reported last week that the mayor and school administrators are working with the DESE and the city’s legislative delegation to come up with a solution, but was unable to release details of the plan at this time. It also is not clear what impact this revelation will have on the school and city budgets in 2015, now that development of the fiscal 2015 budget is underway.

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