LYNN — City officials are projecting a $5 million budget gap for next year after exhausting a $14 million loan to balance the budget for the previous two years.
In addition to not having the safety net of the loan, which was given to the city through legislation, officials will begin to have to pay back that $14 million starting next year as part of its Fiscal Year 2020 budget.
The legislation, or home rule petition, was approved earlier this year by the City Council, state legislature and signed off on by Gov. Charlie Baker. Officials had to borrow $9.5 million to balance the FY18 budget and another $4.5 million for FY19.
In FY20 and annually for 10 years, the city will have to pay back $1.25 million on the loan, which will also accrue interest, according to Michael Bertino, the city’s chief financial officer.
“We have a lot of work to do,” Bertino said. “We’re committed to doing it, but it’s not going to be something that’s going to happen overnight. The problems with the city started a while ago and it’s going to take some time to fix them.”
Bertino said the gap was projected based on assuming if the FY19 budget was photocopied, officials would start off with the same $4.5 million deficit. Knowing that fixed costs, such as Chapter 70 or state aid to the Lynn Public Schools, pensions, health insurance and net school spending, will increase, the gap would be more than $5 million.
Bertino said Mayor Thomas M. McGee has committed to funding net school spending at 110 percent. The city has struggled to meet its net school spending requirement for years, one of the factors officials have blamed for its current poor financial state. This past year, Lynn was able to meet its requirement.
A major increase in expenses could be collective bargaining agreements, which were not funded in FY19.
Bertino has said the city was given an opportunity to take on a state receiver to dig itself out of its financial hole, but refused. He told the School Committee last week that a balanced budget was possible through changing how the city does things. Department heads were told to level fund their budgets, except for contractual increases.
Strategies floated in the past for the city to explore have included looking at its options on health insurance, staffing levels, current service delivery models, and fee structures.
School Committee member Brian Castellanos said it was important to have financial transparency and appreciated the commitment to meet net school funding. Committee members said in the past, there’s been a lack of communication or shared approach on budgeting between the school and city financial departments.
“I think we’ve been kept in the dark for too long on how long things are going on the city side,” said John Ford, a member of the School Committee.
