For Immediate Release - January 29, 2008

Patrick-Murray Administration Files Legislation to Help Salem, Prevent School Layoffs

Patrick-Murray Administration Files Legislation to Help Salem, Prevent School Layoffs

BOSTON-Monday, January 28, 2008-Governor Deval Patrick today filed legislation that will prevent the city of Salem from laying off dozens of school employees midway through the school year, as the city grapples to close an unexpected $4.5 million budget deficit.

The bill filed in partnership with local legislators and city officials would grant the city the ability to borrow up to $1 million to close the budget gap or spread the deficit over seven years. Under current law municipalities are prohibited from borrowing in times of deficits.

"The effort by the city and its residents to address this difficult challenge has been tremendous. While the city has had to make some tough choices, its residents have stepped up and engaged in their community, donating their own money to help keep personnel in the schools, and that is tremendous," said Governor Patrick. "Our administration is committed to being a real partner with cities and towns and I am so glad that we can give Salem the tools its needs to get back on its feet and moving forward once again."

City officials discovered the shortfall last fall after the departure of the school business manager. Since then, city officials have closed roughly $3.5 million of the budget gap through a combination of cuts, layoffs and new revenues, and are in the middle of a highly successful campaign to raise private money, collecting $300,000 so far, which has prevented the layoff of 14 teachers. The remaining gap can only be filled by personnel layoffs or through borrowing.

Under one alternative in the proposed legislation, the bonds or notes to be borrowed would be for a term no longer than seven years and would be backed by the full faith and credit of the City. Funds borrowed would be placed in a special City of Salem Financial Stability Fund, with the City able to withdraw from the fund.

"The city of Salem and its school children have been grossly misled," said Senator Frederick E. Berry (D-Peabody). "This Special Act eases the impact of the fate they were dealt. I am grateful that all levels of state government, most notably Governor Patrick, Lt. Governor Murray, Senate President Murray and Speaker DiMasi quickly came together to return the focus to delivering quality public education."

As an alternative to borrowing, the legislation allows the City could instead choose to deficit spend up to $1 million by the end of the current fiscal year and then pay it back starting in FY09 over a term not to exceed seven years. This alternative would save interest and debt issuance costs.

"It's remarkable to see what has happened in just the last seven days," said Rep. John Keenan (D-Salem). "I am so appreciative to see the Administration acting so swiftly to help us out. The civic support and engagement of the community has been there throughout this difficult time and for the Governor to give us the ability to match that means so much."

The bill also supports Mayor Driscoll's plan to consolidate the administrative functions, including the finances, between the City and the schools.

"I thank Governor Patrick for his willingness to give us the extra help we need to maintain stability in our schools," said Salem Mayor Kim Driscoll. "Everyone in our community has stepped up to find the money we need to keep from losing our teachers and we are all grateful for the partnership the Patrick-Murray Administration has demonstrated."