Melrose Schools Address Major Budget Shortfall

MELROSE, MA — A series of driving factors resulted in $2.2 million school budget shortfall discovered in mid-July, Melrose Public Schools Superintendent Julie Kukenberger announced on Tuesday night.

The district has since wrestled the shortfall down to roughly $775,000 and is now eyeing a possible American Rescue Plan Act allocation to bridge the remaining gap, according to Kukenberger.

In the meantime, though, the district is facing questions on how it ended up in this situation in addition to discussions about how to avoid similar issues in the future.

Kukenberger spoke during a School Committee meeting this week. She said she first heard concerns about the shortfall on July 12 and detailed the district's responses in the weeks since.

“Ultimately, as the superintendent, the budget is my responsibility,” Kukenberger said, adding that she takes “full ownership of the current fiscal reality.”

Kukenberger said the shortfall is the result of multiple factors. Among them, she said a long-term budget practice of counting certain grants as part of the district’s operating budget saw grants counted as both district offsets and essential funds within the budget. That practice led to $1.26 million in shortfall dollars.

Transportation costs amid widespread transportation challenges then exceeded the district’s projections by $679,766.

COVID-19 physical distancing requirements forced the district to open fewer seats at Melrose's Early Childhood Center. The center’s operations, which usually draw revenue into the school district through the center’s tuition structure, generated less revenue as a result. Roughly 4,000 teacher absences due to COVID-19 also racked up extra costs for substitute coverage.

Where some of these factors had been hitting Melrose for many months through the 2021-2022 school year, Kukenberger said there had been no indication about a risk for a significant shortfall before July 12.

The district was undergoing a transition in its finance director position over the summer. As part of that, Kukenberger said she convened a meeting on July 8 to discuss final steps in closing out the 2022 fiscal year budget.

Kukenberger said the incoming finance director, the outgoing director and herself were all at the July 8 meeting, where there was still no discussion of a significant shortfall.

By the following week, that changed, with school district officials soon realizing the extent of the district's budget issues.

Kukenberger said on Tuesday that she has not seen evidence of intentional underreporting related to the sudden shortfall discovery this summer.

Nevertheless, she said the city had to draw on money from the federal Elementary and Secondary School Emergency Relief Fund as part of efforts reduce the initial $2.2 million shortfall.

As the district is now working with a financial consultant, Kukenberger said Mayor Paul Brodeur may move to allocate additional American Rescue Plan Act money to address the remaining shortfall.

School Committee members responded to Kukenberger’s presentation on Tuesday, with members calling the revelations “stunning” and “heartbreaking.”

“The big question for me as a member of this School Committee is ‘How could we not have known this?’” Committee Member Ed O’Connell said.

Committee Vice Chair Jennifer Razi-Thomas called the process of dealing with this shortfall “gut wrenching.”

She then discussed the path ahead.

“It’s going to take us a while to explain it,” Razi-Thomas said. “It’s going to take us a while to figure out the solution. And it’s going to take a while to rebuild trust with our community, with ourselves and with the process.”

As Melrose looks ahead, Kukenberger said changes will include new accounting measures in how the school district handles grants to avoid confusion that led to this shortfall.

The district will look to curtail spending in the 2023 fiscal year, when possible, while adding new checks and balances as well as new financial reporting to the School Committee.

“We’re still looking at any discretionary accounts and ways that we can be as fiscally conservative as possible while also meeting the needs of our students,” Kukenberger said.

Brodeur spoke after Kukenberger's comments this week.

"We overspent by over $2 million," he said.

He said the spending that led to this shortfall went toward the school system and serving students. It was not frivolous, he said.

“It doesn't make it ok,” he continued, though.

Looking to future discussions, Brodeur said the district will need to ensure transparency and an understanding of the impacts of this sudden shortfall.

“The transparency and the candor is going to be what gives us the credibility that we're going to need,” he said.

Kukenberger said she and her team are still working with their contracted financial consultant. They’re expecting guidance at a meeting with the consultant on Oct. 4 to address lingering shortfall issues.

Kukenberger said she will then be back before the School Committee later in October to present an additional update on the shortfall, the financial status of the Melrose Public Schools and possible impacts of this situation on 2023 and 2024 budgets.