Corda’s compromise essentially suggested that the BET approve the budget as is, but that the BOE would spend as if the budget they requested were approved. Corda said, a special appropriation could be made to cover the shortfall if any. From The Hour:

Corda asked the Board of Estimate and Taxation to approve the operating budget as it now stands, giving the Board of Education $141.5 million — a 3.8-percent increase — but stand ready to approve an up-to-$3.2 million special appropriation from the city’s rainy day fund, if the school board runs out of money before June 30, 2008.

On Thursday afternoon, Hamilton completed his analysis of the proposal. The analysis anticipates that the school board would “be back for a special appropriation of $3.2 million” before that date. “With all due respect, Dr. Corda’s proposal is fundamentally flawed,” wrote Hamilton in a five-page memorandum e-mailed to Corda, Mayor Richard A. Moccia, members of the Board of Estimate, and the Common Council. “If this proposal is accepted, and all of our available fund balance is drawn down in one year to support the FY 2007-08 budget, it will be virtually impossible to craft a FY budget that anyone will find acceptable.”

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Hamiltons’s actual response is here:

use-of-fund-balance-fy-2007-08.pdf

As an alternative, Hamilton suggested that the Board of Estimate and Common Council look to Hartford and consider a special appropriation to the school board if state aid to Norwalk “exceeds our budgetary estimates.” Indications may come before the end of the legislative session in June, he wrote.

BOE member Tom Vetter understood the reason why Hamilton was against Corda’s proposal. He said, according to The Hour, “If we run out of money and the city won’t give us money, what then do we do? You have a problem. We can’t start programs that won’t have funding.”

In Today’s Hour, BOE member Brice Kimmel criticizes Hamilton’s concerns. With no public financing background, Kimmel begins:

Norwalk’s Finance Director, Tom Hamilton, believes the proposal put forward by Superintendent Salvatore Corda to resolve the budget crisis is “fundamentally flawed.” I disagree with Hamilton’s conclusion. The finance director’s analysis, in my opinion, is based on a very questionable premise — that the city of Norwalk requires an undesignated fund balance projection of roughly 7 percent for the end of the 2009-2010 fiscal year.

Kimmel skips right past the issue at hand, on whether the BOE can spend as if it has a higher budget than it really has. This is a fundamental issue to glibly gloss over perhaps suggests why there is such a lack of financial oversight by the BOE. Kimmel continues:

I also agree with Hamilton’s decision to base his analysis on the possibility that the BOE might require an appropriation as high as $3.2 million. Considering Hamilton’s responsibilities as finance director, he should indeed work from a worst-case scenario. However, I would suggest that the BOE and the BET agree to a hard number, perhaps as little as $954,000, depending on the latest information from Hartford. Whatever the amount, I believe it should come, as Corda suggests, from the fund balance.
And this is where I disagree with the finance director (and implicitly with Mayor Moccia). The key question for Hamilton is the size of the fund balance in 2009-2010. His entire analysis is based on being able to project a fund balance (or rainy day fund) that is at least 7 percent of total revenues for the 2009-2010 bud-get. The question is why?

Why? Maybe that’s because that’s what Hamilton’s job is.

Here’s the History of the Undesignated Fund Balance from Tom Hamilton.

use-of-fund-balance-fy-2007-08.pdf

And Kimmel contends:

Norwalk could dip below 7 percent and the rating agencies would not be overly concerned, although they would consider Corda’s proposal a questionable precedent that should not be repeated.

Kimmel has now made him an authority on the mindset of Bond rating agencies. It seems imprudent to keep following this spend and spend policy that the BOE keeps recommending.

On that subject, the BET weighed in last night and said no.

After the meeting, Wilms said he wanted the school district to seek savings first in “non-classroom” areas, such as administration, as it works to accommodate the smaller-than-requested budget hike.

Before the vote, Democratic BET member Stuart Wells said he thought next year’s spending cap - set by the Common Council - should be increased to allow for more funding for the school system.

However, with the preliminary cap, Wells said he was pleased with the tentative budget.

BET members rejected a last-ditch effort made by Superintendent of Schools Salvatore Corda at a public hearing last week to avoid student program cuts.

Corda proposed the city leave the education budget increase at 3.8 percent but allow the district to proceed with the programs it proposed, promising to minimize expenses and provide the city with monthly spending updates. Meanwhile, the city would promise to take up to $3.3 million from its fund balance of reserve cash, if necessary, to cover a shortfall.

The day after Corda made his proposal, city Finance Director Thomas Hamilton issued a memo strongly recommending against it. Hamilton said the city already plans to use several million dollars from the fund balance during the next two fiscal years to offset the rising cost of repaying debt incurred by borrowing for capital projects.

“I agree with (Hamilton’s) recommendation in its entirety,” Wilms said after the meeting. “It’s not good financial policy to draw down on the rainy-day fund for what Dr. Corda proposed. It may not even be legal.”

Two months ago, Hamilton proposed a $264.6 million city budget for next fiscal year that included a 4.5 percent hike in education spending. However, the Common Council approved a preliminary spending cap of $262.6 million, leaving the BET to cut allocations.

source: The Hour, Finance chief opposes Corda’s plan to close gap, By ROBERT KOCH March 29, 2007

source: The Hour, School budget crisis solution within city’s grasp, By Bruce Kimmel, April 3, 2007

source: The Advocate, Budget plan is approved at $262.5M, By Matt Breslow, April 3, 2007