State Auditor declares East Cleveland in state of fiscal emergency

The office of Ohio Auditor Dave Yost issued the following press release yesterday:

East Cleveland Placed in Fiscal Emergency

Columbus – The City of East Cleveland’s failure to present a feasible financial recovery plan prompted Auditor of State Dave Yost today to declare the city in a state of fiscal emergency.

“Deficits don’t go away by themselves,” Auditor Yost said.  “East Cleveland will be forced to make some difficult decisions, but the city’s fiscal health should be their first priority, and my office stands ready to provide the technical assistance to help make that happen.”

On January 5, 2012, Auditor Yost placed the City of East Cleveland in a state of fiscal caution after a review at November 30, 2011 found deficit fund balances of $5,872,222, which exceeds two percent of the funds’ annual revenue.  The city was placed in a state of fiscal watch on May 23, 2012 after the city failed to provide an acceptable plan for correcting the deficits.

Under the Ohio Revised Code, after a declaration of fiscal watch, the entity has 120 days to submit a financial recovery plan that identifies the action that will be taken to eliminate the conditions that prompted the fiscal watch declaration.  The plan must include approximate dates for beginning and completing the actions, as well as a five-year forecast reflecting the effects of these actions.  The Auditor of State’s office reviewed the plan that the city submitted, and it was deemed not feasible to correct the deficit fund balances.

A Financial Planning and Supervision Commission will now be formed to review and make suggestions to the city to correct the deficit fund balances.  The commission includes the Treasurer of State (or office designee), the Director of Office of Budget and Management (or office designee), the mayor, the presiding officer of the city’s legislative authority, as well as three members chosen out of five names provided to the Governor by the city.  Within 120 days of the commission’s first meeting, a financial recovery plan must be submitted to the commission by the mayor.

A full copy of this fiscal emergency declaration may be accessed online at www.ohioauditor.gov.

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The auditor's letter to East Cleveland mayor Gary Norton can be found here.