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

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.