Providence facing court judgment that "could potentially devastate our City and residents," said Mayor Smiley

In court documents that came out last week, there was a letter from the Governor that said to an official at PPSD, “The State has a deficit. Go to the City of Providence to get the money.”

Providence Mayor Brett Smiley and Council President Rachel Miller held a press conference this morning to address the Rhode Island Superior Court’s ruling last week, which upheld the State’s decision to withhold millions in funding from the City of Providence. As soon as Wednesday, the court may force Providence to pay between $10 million and $85 million, forcing brutal cuts to City services and potential property tax increases.

The transcription is edited for clarity. Various reporters asked questions and are identified in the transcript as simply “Reporter.”

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See also:

• Providence students march on City Hall to demand full funding

• Community organizations call on the City of Providence to fully fund public schools

• To fight for robust public education, consider supporting the OurSchoolsPVD Alliance. The Alliance is “committed to fighting for Democracy, Dollars, and Dignity” in Providence Public Schools. It is made up of parents and students from PLEE (Parents Leading for Educational Equity), ARISE (The Alliance of Rhode Island Southeast Asians for Education), PrYSM (Providence Youth Student Movement), Providence Student Union (PSU), Young Voices, Youth in Action, the Rhode Island Center for Justice, and the Center for Youth and Community Leadership in Education (CYCLE).

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Mayor Smiley: It’s important to show the residents, families, and children of Providence that their City leaders stand together on this topic. At this very stressful time, we are here to talk about the very disappointing decision from the court last week regarding our ongoing litigation with the school department and the Department of Education. It is critical for taxpayers, residents, families, business owners, and every member of the Providence community to know that there are going to be real consequences as a result of this ruling and depending on the outcome of the final judgment that could come as early as tomorrow, we are going to have no choice but to have harmful cuts and potentially new taxes that are going to impact the very same children and families that the school department says they’re trying to help.

I want to say clearly at the outset, along with my colleagues from the City Council, that the students and families of Providence are our top priority. We are trying to balance the interests of these families -understanding that it’s not just what happens during the school day but throughout the day and throughout the year that affects their health, happiness, and well-being. The court’s decision puts the City’s finances at risk, and we will have to make very difficult decisions in the days ahead. Effective this morning, Providence has implemented a hiring freeze, and we are pausing all discretionary spending on City departments. Over the last couple of days, we have examined what programs, initiatives, and investments need to be paused, considered cut, or canceled. As most folks know, we passed our budget in June, and the budget year starts in July.

Most of our budget is contractually bound, whether people or contracts. There is very little discretionary spending. My administration and the City Council have proven themselves time and time again as responsible fiscal stewards. We know how to balance tough budgets, and then we manage them. Unexpected expenses like this in the middle of the fiscal year are not easy to absorb. As a result, the eligible things that are on the table for cutting the things that can be cut in November as opposed to things that could have been accommodated in a budget and are now on the table - including eliminating all grant programs for critical services like our libraries, our investments in non-violence training, our housing support programs, and the programming in our parks. These are all not currently contractual and might very well be cut depending on the range of possible outcomes tomorrow.

Summer learning, summer employment, and our water parks are all on the table to be cut for this upcoming summer. These are the same children and families that the School Department claims to prioritize. In addition to the hiring freeze, there is real potential for additional layoffs across the City of Providence. To achieve the amount of money that might be awarded by the courts, we are looking at reducing City services by things like furlough days, which could be as much as one day a week for the rest of the fiscal year. We save about $200,000 a day for a furlough, meaning everyone who works for City Providence stays home and is not paid. That family takes a pay cut. That family has financial risk. The City saves only about $200,000. We would need to furlough staff for the rest of the year.

We are not contractually bound to fulfill multiple public safety initiatives. For example, we provide additional police coverage for high-use commercial areas such as Broad Street. We pay for that with overtime, which would be cut. We provide additional police patrol and our downtown parks, including our amazing pedestrian bridge, which would be cut. There are community events that we do not have to do, such as PVD Fest, 4th of July, and New Year’s Eve. We will look at cutting or pausing all large capital construction projects, including school construction.

Next year, we will spend $5 million on debt service for school construction. That all will have to stop if the worst outcomes come to fruition tomorrow. The only other way to pay for this judgment is through a tax increase, which is also on the table. We will seek permission from the Rhode Island General Assembly for a midyear tax increase to help pay for this judgment, depending on the balance between cuts and new taxes, which is hundreds of extra dollars per year for Providence Property taxpayers.

I understand that students and families are frustrated. I understand that more kids are going to be here protesting later today. It breaks my heart to see these kids stressed out and scared, and I share their frustration with the fear instilled in them by their school leaders. They shouldn’t have to do that. Credit to the Providence City Council and my administration. We have offered the money to save their sports and bus passes, but that offer has not been accepted.

All of this is in the context of continued irresponsible spending from the school department. We all know that there was going to be a fiscal cliff when the federal Covid aid expired, and they did nothing to plan for it other than to send us the bill and expect Providence taxpayers to pay it. As a reminder, the Providence City budget is approximately $600 million. $135 million was directly spent on the school department, the largest expenditure in our budget. Also, as a reminder, the State runs our schools. The State has a $14 billion budget and total control of our schools, and why this is being presented as exclusively a City problem remains outrageous to me and, I think, to my colleagues as well. We would instill fiscal discipline. We would instill oversight, crack down on wasteful spending, and solve these problems together.

When the previous Mayor and the previous Council agreed to this takeover, there was a belief that this would be cooperative and that we would work together instead. The Commissioner views her ability to run our schools as one without checks and balances. Cooperation is a one-way street with her. I’ve heard from community members who share that frustration and feel there is no transparency. So I want to say loud and clear today that if, in tomorrow’s court hearing, the Department of Education is going to force us to raise taxes, cut critical funding, and send yet another blank check to the Providence Public Schools, then it is time for us to get our schools back, now. Enough is enough. I have a long history of knowing how to manage and balance tough budgets. This Council has shown itself to be able to manage difficult finances, finances, and have fiscal responsibility.

I’m confident that we can provide the appropriate fiscal oversight—in conjunction with a brand new school board starting in—so that we can cut down on wasteful spending, prioritize the things that impact students and families the most, and finally end the madness. Depending on the outcome, Providence residents need to know that there will be dire consequences and that it’s time to end the takeover. We need to add some fiscal discipline so we do not continue sending blank checks.

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Here’s the full video of the press conference:

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Council President Rachel Miller: Look, as the legislative branch of government, our most fundamental obligation is to ensure transparent spending of public money. For many, many months now, both publicly and privately, I have asked PPSD officials for a full accounting of the gaps in the PPSD budget so that the City Council could work to allocate funding to stop harmful cuts to student-facing programs. The City Council has made its commitment clear. With Mayor Smiley, we are committed to our schools and students and to addressing the underfunding of public education that goes back decades. This commitment has been well demonstrated by a historic appropriation allocation to the school’s budget earlier this year in response to the District’s threats to cut certain programs like sports and bus passes. We immediately sprung into action, identifying money to avoid those painful cuts and promising to work to find more.

We did this with the promise and hope of true partnership in solving the deep-seated issues plaguing the District, asking the PPSD and RIDE to come to the table in good faith. Instead of information about budget issues and student and community needs, we are facing a court-required dollar amount based on an outdated Crowley Act. We may be forced into spending that no municipality could reasonably absorb in a year. Our students, families, and teachers have repeatedly called on us to come together, but RIDE has chosen an adversarial role. Instead of collaboration, we’re being met with court action, and it’s the same students and their families, City residents, and taxpayers who pay that price. Providence families are already stretched thin. We are in the midst of a devastating housing crisis. The cost of living continues to rise. For RIDE to reach into the City’s pockets to finance budget missteps at the expense of our Capital City’s residence is shortsighted and frankly appalling.

RIDE has put our City in an impossible position - Providence students and families will suffer, whether in the form of cuts to crucial community programs and public safety or higher taxes - at an already difficult time. Our community members will deeply feel the effects of this decision. The City Council will vet any proposed cuts to City services and programs. We will work with Mayor Smiley to ensure that these cuts do the least harm. But we are talking about a potentially astronomical and devastating amount of money in an already lean City budget. If RIDE had the best interest of students and their families at heart, they would work with us to enumerate the exact amounts that students need to stop cuts to student-facing programming. They would not be threatening the financial stability of the City in which those same students and families live. We can’t continue to allocate City funds to a state-controlled system that is not transparent, not accountable to the people of Providence, and consistently fails to deliver.

Our City is not a bank for a state-controlled experiment. After four years, it has become abundantly clear that the State takeover is not working to promote the collaboration and the transparent decision-making that our students need. Given the choices RIDE is forcing on the City and its residents, I am not confident that the takeover will have the best and highest interest at heart. I think it is time to return our schools to local control. As we await a final number from the court that could potentially devastate our City and its residents, we still have time to be grown-ups. Our young people desperately need us to reach an outcome that doesn’t place essential City services or student programs on the chopping block. But given what we are facing tomorrow and the likely outcome of that, I’ll be working closely with my colleagues on the City Council and with the Mayor to chart a path forward that returns the schools to local control and that holds the best interest of every resident of the City to heart.

Reporter: The City of Providence reached new heights with municipal bond ratings just last week. Does this type of chaos potentially unravel some of that progress?

Mayor Smiley: It does, depending on what actions would be taken. It has the potential to affect the long-term stability of the City. The suggestions have been made - I don’t know if they’re serious or flippant - but the school department has said things like, “Just use the rainy day fund” or “Use the medical reserve account,” which only underscores their level of financial irresponsibility. The rainy day fund is for the entire City to cover true catastrophes like a pandemic or a recession. It’s not something that you dip into regularly. The medical reserve account includes their employees, teachers, and classroom helpers. If we have a high-cost claim, someone with cancer, God forbid, or a premature baby that was born, that’s what that account is there for.

That account is not there to fill in the gaps when there’s mismanagement and cost overruns. The rating agencies would note if we start taking actions as they recommend. We are a financially responsible organization as a body and a City, so the proposals I’m telling you today are about difficult choices. This is what fiscally responsible people do. Even though none of us here want to raise taxes or cut vital expenses, that’s what we will do because that’s what we have to do.

Reporter: Two questions. If you were to take back the school system, would you still owe the money based on the decision? Two, are you going to appeal the decision of the Supreme Court?

Mayor Smiley: Were we to be in control of the school department today, and this is something that we’ve said multiple times, particularly over the last couple of weeks as this has boiled to the top, is other tough choices could be made that do not hurt children and families. For example, they’ve mismanaged nearly a million dollars in utility costs. That doesn’t hurt a single kid. We know we can help them do better. It is frustrating to us, and if you can tell we’re emotional today, it’s because we know we could do better, and two, it is just wrong what they’re doing to our kids.

I have little kids coming up to me saying, “Mayor, don’t cut my sports.” And that is intentional. It is intentional that they put sports and bus passes at the top of the list. What’s not on the list? High-cost administrators and multimillion-dollar consulting contracts. So yes, if we were in charge of the schools today, we would also have to make cuts. I don’t deny that. But the cuts we would prioritize would not be the ones that are freaking out middle school kids in our City.

Reporter: But would you still owe the Money?

Mayor Smiley: The court case concerns the obligation under the Crowley Act, which only pertains to districts under State control. The legal obligation would change if we were no longer under the Crowley Act. There may be some questions about historical years, but that obligation will change. More importantly, the bigger issue is the partnership the previous Mayor and council aspired to. I think it’s fair to say that my colleagues and I weren’t always on the same page. We have come to the same point today. I held back and said maybe we should try to let the takeover work. It’s not working, and the reason it’s not working is because the potential for collaboration is non-existent, and collaboration includes solving difficult financial problems together. That’s not happening.

Reporter: And the appeal?

Mayor Smiley: The outcome of the case will determine an appeal. The potential range of an award is quite large.

Reporter: Is it as low as virtually nothing to 30 million? Is that the range?

Mayor Smiley: We believe the potential range is $10 million to $85 million. But the mechanics of this are important, regardless of appeal. The other related issue is the commissioner’s ability to divert other State aid, so there were eight and a half million dollars due to the City of Providence from the State for car tax reimbursement having nothing to do with the City with the schools. They succeeded in that, so eight and a half million dollars are in escrow. They’re about to be in possession of that eight and a half million dollars. Even if we appeal, we now have an eight-and-a-half million dollar hole in our budget, and the City cannot absorb an eight-and-a-half million dollar reduction in anticipated revenue in the middle of the year with no changes. We must make other cuts or budget choices to absorb that cut, even pending appeal.

Reporter: Have the teacher unions and related unions weighed in on this? Are they willing to offer concessions, furloughs, cuts, or cost savings?

Mayor Smiley: Excellent question. I’ve not heard of that, but the City Council and the School Board are not at the table with the PTU [Providence Teacher’s Union]. This is to my point that we are being asked, as the Council President says, to be a bank, but we are not, in fact, in any position of responsibility. The School Department, PPSD, and RIDE are negotiating a new contract with PTU. We are not at that table. We don’t know the nature of those conversations. You would have to ask them.

Reporter: Two-part question. You indicated that the high end of the range is upwards of $85 million. Do you anticipate this could come to you all in one budget year? And with all the cuts and program reductions you’ve outlined, is that even close to matching that figure?

Mayor Smiley: We don’t know what the nature of the schedule of payments would be, but for context, a cut of $85 million, even half of that, couldn’t be absorbed in a current budget year without extraordinary measures like eliminating the entire Department of Recreation, sending the whole City workforce to a four-day work week until June 30th, a tax increase, and shutting down our libraries, which we fund. This is at a scale that we cannot absorb. We should all be proud to have funded a hundred percent of our pension obligation for many years now. We are under a court judgment whereby we must fund at least 95%, and we’re playing catch up. Regarding your question about how this impacts our bond rating, we could fund 95% instead of a hundred. That saves us four and a half million dollars. The scale of this award is so huge that it is incomprehensible to think about all of the things we would need to do at the high end of that range.

Reporter: And should it come to a tax increase or a request for a tax increase, how do you determine what that figure would be?

Mayor Smiley: As folks may know, all communities in Rhode Island are subject to a property tax cap, which is to say that taxes can go up 4% yearly. A 4% increase in Providence generates about $15 million of new revenue. Again, for context, if this award were $30 million, you’re talking about two maximum tax increases. If we needed to raise $30 million in new taxes, owner-occupants would pay $330 a year, and non-owner occupants would pay $580 per year in new taxes. Most of those are apartments; we know the tax increase will be passed on to renters.

Reporter: Is bankruptcy on the table?

Mayor Smiley: Bankruptcy is only available when the City cannot pay its bills. We don’t want to raise taxes and cut expenses - these things will hurt the same children and families. This is someone’s parent who may already be working three jobs and will have an even harder time paying the rent. This working family relies on summer programming for the enrichment and education of their kids, but also for the kids to have something to do while they’re at work. So we’re hurting the same families. It is so reckless, and all in the midst of it, there have been offers of collaboration and new money that have not been accepted, as well as a willingness to partner to find cuts that don’t hurt kids.

Reporter: Council President, I know that there’s a lot of ARPA money up for discussion tonight at the Council of Finance meeting. Would any of this ARPA money even make a dent, and how much is left for the school to potentially take?

Council President Miller: Given the circumstances, it is wise for us to hold that ARPA conversation until we fully understand what’s happening in court and then address it with the other Council members and committee.

Reporter: Ahead of tomorrow’s court hearing, the judge asked both parties to come together and discuss the dollar amount in play here. Has that happened? Have you been able to narrow it down even a little bit?

Mayor Smiley: We’re prepared to present our brief tomorrow in court about what we think that number should be. We’re putting the final touches on that now. I assume the other party is doing the same.

Reporter: This will potentially be a recurring expense, not just a one-time fiscal expense for 2024-2025, correct?

Mayor Smiley: That’s an excellent question. We understand that this additional funding would not just come into effect for this budget year but would be added to what we refer to as the base, the appropriation amount that we would need to spend next year, the year after that, and the year after that. And so this is not a one-time expense. The ramifications will be long-term.

Steve Ahlquist: We’re talking about RIDE here, but what about where the Governor plays into this? RIDE ultimately answers him. They’re a department of the State.

Mayor Smiley: Absolutely. They are a department of the State. The State runs our schools. The State is responsible for 71% of the Providence Public School budget, and the State, as I have requested on multiple occasions, should be part of the solution. They are currently offering no additional monies. In court documents that came out last week, there was a letter from the Governor that said to an official at PPSD, “The State has a deficit. Go to the City of Providence to get the money.”

Reporter: The appropriate number is $135 million right now. What is the appropriate number that Providence should be giving the School District?

Mayor Smiley: It’s hard for me to answer that question. We haven’t been in charge of the school’s finances long. We know that we are making progress in the purposeful expenditure. That is largely due to our collaborative effort to increase school funding last year by the largest amount in 17 years. As it pertains to other urban districts, we know Providence is in the middle of the pack in terms of how local funds are matched with State funds to make up school spending. We are in the ballpark for an appropriate level of funding, and one of the issues we’ve been disputing in the Crowley Act is how we calculate the City’s responsibility. By our calculation, we are almost at where we should be, and we have offered to reach the point where we should be by our calculation.

This gets a little complicated, but the Crowley Act, an antiquated law that has never been tested until now, is poorly written, and it says that when the State takes over a School District and increases funding, the local District should also increase funding. We get that. That’s the partnership piece. We understand that we should increase the funding at the level that the State increases the funding to Providence. The commissioner is insistent that it matches the increase in funding statewide. For example, last year, in fiscal 2024, State funding for education went up by 6.9%. The increase to Providence was only 1.8%. Why should the taxpayers of Providence have to increase its funding to compensate for increased school funding in Barrington and East Greenwich and wherever else?

This year, in fiscal 2025, the increase in State funding statewide was 6%. The increase to Providence was 4%. Again, they want us to pay for an increase that we’re not seeing that suburban and rural communities are seeing. I don’t begrudge those other communities getting more money, but the taxpayers of Providence shouldn’t have to pay for increases that are going somewhere else. So, it is hard to define the right number, but I look at these data points to determine if we’re close in terms of other urban communities. We’re in the middle of the pack in terms of per-pupil expenditure. We’re getting close to where we should be and making meaningful progress at a pace that our taxpayers can absorb. In terms of what’s fair under the Crowley Act, we are very close to meeting the definition. That is our understanding: as the increase to Providence increases, we increase at the same rate.

Reporter: You were part of the Raimondo Administration that led this takeover.

Mayor Smiley: Yes.

Reporter: In hindsight, do you regret it?

Mayor Smiley: As I said earlier, were we to be able to achieve a real partnership? I think it had real potential at the time. That was our belief. Whether it’s a change in leadership or that it turned out to be a false assumption, it’s irrelevant either way. It has turned out that partnership is not part of this turnaround effort.

Reporter: When did that become clear to you?

Mayor Smiley: It became clear over the summer that multiple attempts have been made to save this relationship. Since the beginning of the school year, it has been strained to almost non-existent.

Reporter: Isn’t the Commissioner more responsible for when Providence takes back the schools?

Mayor Smiley: I think there are two paths forward on this. One is the Commissioner and the Board of Education, to whom she reports. They could vote to wrap it up earlier; they’ve already voted once, but there’s nothing to say they couldn’t vote again. And it’s important to note that the vote they took back in September said up to three years; it didn’t say three years. I’m not entirely sure, but the legislature, through legislative action, could short-circuit that process and bring it to a close.

Reporter: Has the Providence delegation to the General Assembly weighed in on help, cooperation, or support?

Mayor Smiley: On Friday, we briefed members of the Providence delegation to ensure that they understood the ramifications of this ruling and the potential cuts—because these are their constituents also—and that we would be seeking their permission for a mid-year tax increase.

Reporter: To play devil’s advocate for a minute, when you talk about the Crowley Act, you’re talking about what you believe is fair, but what’s fair and what’s legal aren’t always the same thing. On Friday, the judge had some pretty strong words, saying he was deeply bothered that the City didn’t do a good job of prevailing on the merits. Is this something that maybe the City should have planned better?

Mayor Smiley: You’re absolutely right that there’s a question between what’s legal and what’s fair, and that’s why we continue to be so upset because it shouldn’t be what one judge’s interpretation of State law is. It should be what’s best for these kids and their families. Based upon RIDE’s insistence on one reading of this legislation, they will hurt their kids differently. If we put children and their families first, we could do what’s best for them. I’ve heard, and I’m sure my colleagues from the City Council have heard the same thing time and time again from teachers, classroom assistants, bus monitors, principals, and assistant principals about the struggles today more than ever of being about all of the other challenges that our students are facing, sometimes rooted outside of the classroom.

We will make those things so much worse by all these cuts. If we cared about kids and started the conversation there, we would come to an understanding that we have offered time and time again. Having no after-school and summer programming won’t help’ social and emotional needs. It’s not going to help the financial strain of families in our cities for their taxes to go up, summer school to get cut, the water parks to be closed, and the libraries to go down to two days a week. None of these things are going to help these families and these kids. One judge and one Commissioner interpret the law one way. We think that that’s wrong and unfair.