School Board's $1 Million Deficit Could Take Years to Resolve

The budget committee learned today that the deficit is real and not just an accounting error.


The deficit is more than $1 million, money the school district must find somewhere and return to the budget, possibly in a repayment plan spread out over 10 years.

The board’s budget committee heard a report today from the committee’s chairman, Theodore V. Raczka, who met recently with city officials and auditors to discuss the budget problems. Raczka said he learned in that meeting that the board’s deficit is $1,059,000.

The meeting also appears to have solidified the question of whether the deficit is simply an accounting discrepancy or a real loss of funds. Raczka said the majority of the deficit, $857,000, resulted when city officials, over two years, took special education grant money earmarked for the school board and used it in the city’s budget.

“They thought they had control over our funds, period. It’s why we went to court. We thought we had resolved that with the settlement that said no one is supposed to move board of ed money without board of ed approval.”

The board sued the city in 2010 after city finance officials took the so-called excess cost grant intended for the school district. Under a court-negotiated agreement, the city agreed not to take funds intended for the school district, but did so again the next year, Nancy Haynes, the school district’s business manager, told the budget committee.

That court battle was part of a bigger political dispute that waged for years between the school board and the administration of former Republican Mayor Sebastian Giuliano.  But since the election last year of Democrat Daniel Drew to the mayor’s job relations between the two sides have begun to warm.

Raczka said his meeting with Drew and other city officials last week was “incredible.”

“It was a pretty forthright meeting, I found it to be an incredible meeting. We sort of bared our souls.”

He said both sides agreed that regular communication between the two sides is needed to avoid the kind of conflict, particularly over financial issues, that marked the board’s relationship with Giuliano.  He said the two sides also agreed not to cast blame about who was in the wrong over the $857,000 and would instead focus on resolving the issue.

However, neither side came to an agreement on who should pay back the $857,000 the city spent. Raczka said city officials believe the issue of whether the city was entitled to use the funds was a “gray area.” He said the school board might have to spend the next 10 years paying the money back into its budget.

That troubled some committee members who said they’re not sure it’s appropriate for the school board to take full responsibility for the deficit.

“Sounds like the meeting was all nice but no one came out and said ‘Okay, we’ll take care of it.’ That concerns me,” said committee member Ed McKeon.

Raczka said it doesn’t make much sense at this point to try to force the city to pay for the shortfall since the Common Council could simply slash the school board’s budget request in retaliation.

“Our goal is not to win a very small issue just to lose a very big issue,” he said.

Other committee members questioned whether the deficit would cause taxpayers to view school officials as being “poor stewards” of the public's money.

School Superintendent Michael Frechette said the deficit was not caused by the administration but by the city’s handling of the excess cost grant.

“Our books were balanced, we think it was pretty clear cut,” Frechette said.

Besides the $857,000, the rest of the more than $1 million deficit represents a $67,000 shortfall in the cafeteria account and a $131,000 deficit because of an unexpected increase in the number of students who take classes outside the district, such as those who attend magnet schools.

Both of those account deficits, Haynes said, are expected to “work themselves out.”

The $67,000 shortfall in the cafeteria account, Raczka said, resulted from the district improving its lunch menus to include healthier food items.  Doing so has proven more costly than anticipated.

“It’s much more expensive to shop in the produce aisle than in the Twinkie aisle,” he said.

Haynes said one way to avoid such a shortfall in the future might be to increase school lunch prices.

David Sauer February 14, 2012 at 03:43 PM
The state reimburses local school districts for certain extraordinary special education expenses ("excess cost grant"). Originally the state reimbursed districts for expenses in excess of 4.5 times the average per pupil expense. When the state ran short of money they capped the money available and now districts are only reimbursed for about 70% percent of their excess costs. Since the state is reimbursing the district for money they have already spent there is no restriction on how the state's money is spent. The city took the position that the reimbursement was their money and spent it. The BOE took the position that the reimbursement was their money and spent it. As a result $857,000 was spent twice. This problem appears to have gone on for two years, so I am curious how these reimbursements were handled before that. Did the excess cost reimbursement go to the city budget or the BOE? These reimbursements have been going on for over ten years, so what changed in the way that they were handled?
Darrell Lucas February 14, 2012 at 04:46 PM
What changed was the city (former mayor) and the boe started giving each other the "silent treatment ". This symbolic deranged couple, using a shared debt card, went about their own business spending money without talking to each other or checking their bank statements. Now that they have made up both partners realize they over drew their accounts. Symbolism aside the special education grant money was earmarked for just that.. Education. The city is responsible for this deficit. This article states both sides don't want to point blame. In reality BOTH are to blame. Just take funds from the general fund where the city expenses should have come from in the first place. Agreed? Disagree? Let me know.
jane February 14, 2012 at 04:49 PM
I agree. I further wonder if this is another root cause of the problems we are experiencing regarding delivery if services to our children. I am also frustrated that it feels like citizens need a ph.d in financing, educational law, special educational law and politics just to understand what is going on.
jean connelly February 14, 2012 at 07:03 PM
If they can't figure out where $1 million dollars went they should have no business being on the school board. I'm outraged to say the least, maybe they should spend some quality time in the scream rooms figuring out where that million went and when they come up with the answer then someone will unlock the door and let them out. It's a joke too that they actually thing that this city is going to let them pay it back. Get rid of all of them from the superintendent down and ask them to empty their pockets on their way out the door!! This town pays them!! Their high salary and they sit their and ABUSE elementary school children and get away with that. It is a CRIME and so is stealing/larceny. Hopefully soon enough the city will finally ALL stand up together DEMAND THEIR RESIGNATIONS and face child abuse charges and larceny charges and let this city take their city back and give their children a safe environment to learn and a safe place for their teachers to teach and get rid of these scum sucking law breaking child abusers!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!ONCE AND FOR ALL!!!!! WHAT ever happened to the good ole days of the sit in's bring it back!!!! Stand up !!! We are paying for thier clothes, their food, their houses, their cars, their vacations, their children's college tuition. What about ours!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Jean Connelly
jane February 14, 2012 at 08:13 PM
And btw- that Twinkie comment is condescending to all of us in town. Really? So you're saying the meals are expensive? I watched my daughter eat a meatball grinder- a small bag of carrots and a milk. So this is $67k worth??? Twinkles? Im getting ticked- the only twinkles I see are people lying to parents- spending special Ed money god knows where- and making closets into timeout rooms with open circuit breaker boxes. Twinkles?????? Really???


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