Cranston's general fund is running a $9.3 million deficit through the end of the fiscal year, and one of the city's two bond rating agencies has already downgraded its credit, according to a line-by-line review of the June financial report at the Finance Committee meeting held Monday, August 3.
The review, captured on the Cranston Audit, Claims, Safety Services & Licenses Committees and Finance Committee's published meeting recording, walked page by page through the monthly report the administration files with the council. It is the clearest public accounting so far of how the city closed out a budget year that officials themselves described from the dais as a financial crisis.
What the June report shows
The $9.3 million general fund deficit breaks into two pieces. Expenses came in roughly $8.4 million over budget, and revenues came in about $900,000 short.
The school department is carrying a separate $2.1 million deficit, with expenditures over by about $1.5 million and revenues down by roughly $568,000. Combined, the two figures put the total change in fund balance at about $11.4 million.
Local sponsorAffordable photography lessons in Newport, Jamestown, or your town.E.L. Photo RIFund balance is the city's accumulated savings — the reserve that covers emergencies and that rating agencies scrutinize when the city borrows. The report puts the rainy day balance at $4.6 million, a figure that includes both the city and school sides.
The finance director told the committee that the school figure may not hold. He said the school department expects Medicare reimbursement money that has not yet been allocated or posted, and that the school official who briefed him is hoping the department ends closer to a small surplus. If that money arrives, roughly $2 million of the deficit would come off the books.
That is a projection, not a settled number. Nothing in the recording indicates the reimbursement has been received or booked.
On the city side, the director said the 60-day rule — the accounting window in which revenue received after June 30 can still be credited to the closed fiscal year — is not complete. He estimated the city has been collecting about $300,000 per month and said the final general fund figure will likely come in slightly under $9.3 million.
Where the money went
Three line items drew the most questioning.
Investment income came in about $2.435 million short. The director gave two reasons: the budget assumed a higher interest rate than the city actually earned, and the city had less cash to invest because it was running a deficit. He said the fiscal 2027 budget adjusts that assumption to what he called a more realistic figure.
Interest on debt was over by $3.3 million. The director said this was a budgeting error rather than a spending decision — one component of interest, covering notes the city is now rolling into a general obligation bond, was left out of the fiscal 2026 calculation entirely. The city had to pay it anyway. He said the 2027 budget accounts for it correctly.
Severance was budgeted at $200,000 and came in at $736,000, a variance of about $536,000. Under questioning, the director said the figure covers roughly 24 employees who left the city with severance and buyout packages. It excludes police and fire severance, which are charged to other lines, and excludes anyone in the school department.
A council member who has questioned the buyouts since April asked for a breakdown separating the incentive payments from the payouts of accrued sick and vacation time. The director agreed to provide it. He said the departures were deliberately concentrated in fiscal 2026 — "we knew '26 was not a good year," he told the committee — and that none of the cost carries into 2027.
Another committee member pressed the corresponding question: if 24 positions are gone, what does the city save going forward? The director said those positions are not reflected in the new budget and have already been eliminated, and agreed to bring the projected salary savings to a future budget discussion.
Smaller variances also came up. Crossing guards ran $111,873 over. The director said the purchasing director is negotiating with the vendor and reviewing whether some posts are unnecessary, while stressing that no reduction would be made where safety requires coverage. A highway revenue line was short about $56,000; the director said the 2026 budget figure was overstated and has been reduced from roughly $220,000 to about $150,000.
The ratings
The council president asked the director to state the new bond ratings publicly.
S&P kept Cranston at A+ but assigned a negative outlook, citing two consecutive deficit years — fiscal 2025 and the projection for 2026. Moody's downgraded the city from A2 to A1 while keeping a stable outlook.
Asked what that means when Cranston next goes to the bond market, the director said he does not believe the new ratings will be an issue. He then delivered the warning that framed the rest of the discussion: if the city posts a third consecutive deficit in fiscal 2027, "that'll definitely affect our rating."
An administration official told the committee that several city officials joined calls with the rating agencies, and that the agencies credited Cranston with a stable tax base, a demonstrated willingness to raise taxes, and evidence that the city identified its problem and is working on it. He said those factors held the ratings changes from being more dramatic.
That is the administration's characterization of private calls. The plain facts on the record are the downgrade and the negative outlook.
Refinancing approved
Before the financial review, the committee approved three bond resolutions by roll-call vote, each passing unanimously among members present.
The first refunds a school bond issued through a state education building authority, refinancing $4.565 million down to $2.695 million. Because it is a school bond subject to a roughly 53% state share, the director said total savings of about $200,000 would return roughly $100,000 to the city over 10 years.
The second refunds 2015 and 2016 general obligation bonds — $8.73 million reduced to $4.635 million over 10 years, and $7.84 million reduced to $1.875 million over three years — for about $190,000 in savings, or roughly $19,000 a year.
The third concerns $22,560 in outstanding general obligation notes that will be returned to the general fund when the city moves its school notes into a 25-year general obligation bond, a transaction the director said would qualify for 74% state reimbursement.
Asked to explain the mechanism in plain terms, the director compared it to refinancing a home. Pressed on whether the refunding would offset the $3.3 million interest overage, he was blunt: over 10 years, "there's not going to be a big swing."
What happens next
The city also has a pending proposal to sell two elementary school buildings. The director described an unsigned agreement that would direct a portion of the proceeds to the school department for capital work, with the remainder going to fund balance. He said the sale would be a one-time influx, not a structural fix, and probably not enough on its own to move the bond rating.
That agreement has not come before the City Council. The council president noted from the dais that the council has not yet seen it.
The committee also approved real estate tax abatements by roll-call vote and forwarded a tentative police union contract covering 2026 through 2029 to the full City Council with a recommendation of approval, following an executive session on collective bargaining.
The Audit Committee, meeting earlier the same evening, certified that the proposed tax levy is sufficient to meet the assumptions in the adopted budget — the ordinance step that is supposed to precede the printing of tax bills. It happened after the bills went out this year. The council attorney told the committee the ordinance is directory rather than mandatory, carries no penalty, and that state certification of the levy is not due until August 15. The tax assessor's certified levy documents were entered into the record.
The Audit Committee's next quarterly meeting is scheduled for October.