Chmiel
On June 17, Girard at Large published a story regarding claims made by the Manchester School District that state budget legislation would deprive the city of some $10.2 million in funds. While Superintendent Jennifer Chmiel and committeemen Bob Baines (Ward 9) and Sean Parr (Ward 2), decried the cuts, announcing they would devastate funding, no mention of how much money the city would receive was made. It was all about “the cut.”
An article published by the Union Leader following the BOSC’s June 9 meeting provided additional information, saying the city’s funding would be cut from $127.8 million to $117.6 million. Similar to the discussion at the school board meeting, no date was conveyed regarding when the cut would be made. Moreover, the numbers did not line up with the $108.1 million in state adequacy aid included in the school board’s budget, which were included in Mayor Jay Ruais’ budget proposal and adopted by the Board of Mayor and Aldermen (BMA).
For these reasons, Girard at Large concluded that, if Manchester was to receive $117.6 million in the coming fiscal year (FY’26), it would receive $9.5 million MORE than budgeted. Today, we obtained documents that showed the city would, in fact, receive $127.8 million in FY ’26 and that that number included the roughly $20 million raised in the city by the Statewide Education Property Tax (SWEPT). That $20 million, $19.6 million to be exact, is accounted for in a different line item in the city budget than the per pupil adequate education grant provided by the state.
Baines
In FY ’27, total state education aid to the city, including the proceeds of the SWEPT, is projected to decrease to $115.2 million, a reduction of $12.6 million, not $10.2 million. While this number expects there to be fewer students in that fiscal year, the primary reason for the decrease is a cap placed on additional aid which is given by the state on a per pupil basis above the basic adequacy grant for students who are enrolled in the federal free and reduced hot lunch program, for whom English is a second language, need special education services or aren’t reading on grade level in the 3rd grade. Changes to that formula led to Manchester receiving over $35 million in new state aid for FY ’24, an increase of more than 50% over the prior fiscal year. Critics of the changes said that spike in Manchester’s funding deprived smaller, property poor communities across the state of funding and that the cap is designed to restore equity to those communities.
We regret that the conclusions we drew based on the information available at the time were incorrect and apologize to our readers for the error. We also apologize to city and school officials for not seeking greater clarity before publishing. We have remove the prior article from our site. We also note that, while hardly ideal, had we not published that story, we likely would not have gained the clarity we now have and we correct the record without hesitation.
With that all said, we come to a school funding issue that the city of Manchester is all too familiar with. While one legislator we spoke with correctly pointed out that Manchester was going to get $10 million more in the next two years than it did in the last two years, it doesn’t solve the school board’s tax cap problem; a problem it has been making worse over the past three budget cycles by cheating the tax cap. In short, the district has raided its emergency reserve accounts to the tune of $21.3 million in the past 3 years to avoid spending cuts required by the city’s tax cap.
In FY’24, the district used $3 million in “one time revenue,” taken from the Health Insurance Expendable Trust (HIET), to avoid the $1.6 million spending cut required by the tax cap.
Parr: Does he know the numbers?
In FY’25, the city used $1.2 million in “one time revenue” from the HIET and $7.8 million in “surplus” left over from the unexpected post-budget increase in spending that came after the city received that $35 million windfall in extraordinary needs aid. Had the schools not used those bogus revenues to offset the loss of state aid that resulted from declining enrollments in the schools and the free and reduced hot lunch program, the tax cap would have required about a $10 million cut in spending. (Note, Ruais and the BMA appropriated another $6.5 million after the budget was adopted because the district received an “unexpected” $6.5 million in state aid after almost 500 more kids were found to be enrolled in the free and reduced hot lunch program than originally projected.)
For FY’26, which starts on July 1, 2025, the BMA arguably approved the use of $4.5 million in “one time revenues” from various expendable trusts to avoid spending cuts required by the tax cap. After receiving a $3.5 million increase in it’s budget over FY’25, school officials drew another $4.8 million from those reserves, claiming their $3.5 million was an $8 million “cut” and to avoid “devastating cuts” they needed more money from their “rainy day funds.”
Total reserves used to prop up school spending over 3 budget years: $21.3 million.
Here’s what you need to know.
Craig: Precedent setter
First, the tax cap says that, before spending can be increased, any loss in non-property tax revenue must be replaced by the increase in taxes allowed by the cap. So, if the school district loses $10 million in state aid and the increase in taxes is limited to $5 million under the cap, then the district must cut spending by $5 million. To avoid these cuts, the district has been raiding its emergency reserves (which I’ll explain in a minute) to pretend it has the revenues needed to avoid spending cuts. This is like taking money out of your savings account and making pretend you got a pay raise so you could increase spending. It’s wrong and destructive.
Second, the district’s expendable trusts are not “rainy day funds.” They are aligned with specific line items in the budget and are only allowed to be used if those line items have deficits at year’s end. So, if the district’s health insurance expenses exceed the budgeted amount, then the school board can vote to take money from the HIET. However, if the school board wants to use the money for anything other than the intended purpose, then ten of the city’s fourteen aldermen must vote in favor of them doing it.
Normally, that vote is a stand alone vote, meaning a motion is specifically made to allow it. That hasn’t happened in the last three years.
When the school board first wanted to use $3 million from the Health Insurance Expendable Trust, it included the revenue in its budget, as did then Mayor Joyce Craig. After the BMA adopted the school budget, the school board’s position was that the expendable trust money had been approved because it was in the budget and the budget passed with the required 10 votes.
When the school board wanted to use $9 million from the HIET and the retained surplus, it included the revenue in its budget, as did Mayor Ruais. Unlike the prior year, though, the school budget didn’t pass with 10 votes. They used the money anyway, despite the clear language in the trust documents.
Ruais: Precedent follower
This year, according to City Clerk Matthew Normand, the school budget adopted by the BMA contained $4.5 million in “one time funds” from the expendable trusts. It passed by 10 votes so that money can be used. However, in reworking the line items to account for receiving $8 million less than requested (though $3.5 million more than FY’25) the school board voted to use another $4.8 million from the expendable trusts. This wasn’t voted on by the BMA. Therefore, the money can’t be used.
Now that the state funding cut has been clarified, it’s clear that school officials are worried about the FY’27 budget, not the coming budget (FY’26). If state aid decreases as projected, the school board will likely have to cut spending under the tax cap, though that remains to be seen given their penchant for using emergency savings as “one time revenues” to cheat the tax cap. With every dodge of the tax cap, the lost revenue liability has only grown. Had Ruais and the BMA not appropriated the “unexpected” windfall of $6.5 million in state revenues, there would be $6.5 million LESS to cut from FY ’26 which means that instead of removing $9.3 million from the emergency reserves, the district would be looking at no more than $2.8 million. Because that didn’t happen, spending grew by that much so any future cuts will have to take that into account.
