When Clark County School District officials heard about a chance to secure more state funding for special education, they didn’t hesitate to apply.

The state education department announced in July 2016 that $5 million was in the newly created Contingency Account for Special Education Services (CASE), which would reimburse school districts and charter schools for “extraordinary special education expenses” related to educating a student with significant disabilities.

It wasn’t necessarily guaranteed money. But a combination of confusion and false hope led Clark County education officials to budget receiving $3.5 million in back-to-back fiscal years. That money never materialized, contributing to the urban school district’s estimated $60 million budget deficit.

While the money represents a relatively small portion of the shortfall, the situation encapsulates the public debate over who’s responsible for the district’s money woes:

Critics say it’s an example of the district improperly handling finances.

School officials argue it underscores funding slights from the state.

What happened

The contingency account, which state officials say is akin to a “rainy day fund,” dates back to the 2015 legislative session. Senate Bill 508 created the account and tasked the state superintendent with administering it.

More than a year later, the state education department issued a call for applications. The multi-page request noted that $5 million was available but didn’t explicitly say the total amount would be awarded. It also stated that expenses eligible for reimbursement must be costs “not ordinarily present in the typical special education service and delivery system at a public school.”

Clark County education officials thought that definition applied to 176 of the roughly 40,000 special-education students in the school district who were more expensive to educate, said Carlos Morales, the district's assistant superintendent for the Student Services Division. Some need daily medical care, one-on-one supervision or a combination of extra services.

For instance, the district requested a $51,564 reimbursement for an 11-year-old student at Lake Elementary School whose medical conditions require daily gastronomy-tube feedings and a dedicated nurse. The child costs $63,834.94 to educate, but the district only receives $12,269.99 in federal, state and general funding for the student, according to the application.

Morales said the school district spent more than 400 man-hours assembling the 176 applications, which it submitted in April.

“The Clark County School District invested a lot of time to try to recoup some of these monies that we use to take care of children with disabilities,” he said. “It’s our understanding that those monies were available on behalf of the state.”

The funding, however, began to look dicey in mid-May. That’s when Rick Detisch, director of the district’s Personnel and Finance Office, emailed the education department asking for an update about the applications.

Will Jensen, who oversees the state Office of Special Education, responded the same day, advising the district to not budget or plan for the money.

“Because there is widespread misunderstanding regarding the intended purpose of these funds, I have requested an analysis of the legislative and committee record,” he wrote in the email. “I need to have a clear understanding of the intention of these monies before making funding recommendations to the Superintendent of Public Instruction.”

In late June, the district learned it wouldn’t receive a dime. The Nevada Department of Education determined that none of Clark County’s applications met the “narrow expectations” of the contingency funding.

“While services described were significant and necessary to each student, the aforementioned services are regularly present in the service delivery system in the Clark County School District, and fall outside the scope of the CASE program,” State Superintendent Steve Canavero wrote in a letter dated June 28 to the school district.

Of the 198 applications submitted, the state only approved three — one each from school districts in Washoe, Churchill and Douglas counties. The total amount awarded: $211,748.

The Washoe County School District’s application involved expenses for an adolescent student who needed placement in a residential treatment center, Jensen said. School officials in Churchill and Douglas counties, meanwhile, had requested reimbursements for transporting hearing-impaired students to other districts that could better provide education for them, he said.

The fallout

Morales said he was “disappointed” the state didn’t award Clark County any of the grant funding.

“We acted as good stewards and participated in good faith, hoping — if not expecting — that the state would do the same,” he said.

The situation transcended disappointment, though. There was a bigger problem: School officials had banked on securing $3.5 million reimbursements from the contingency account in fiscal years 2017 and 2018, so the denial plunged the district another $7 million into the red.

(Why $3.5 million each year? Morales said the district expected to receive a percentage of the $5 million that was roughly equivalent its size. Clark County educates about 75 percent of Nevada students.)

Jensen said he doesn’t blame Clark County for submitting a hefty amount of applications, but he questioned the district’s budgeting rationale.

“Counting on contingency funding is not wise,” he said.

It’s a sentiment echoed by Stephen Augspurger, who heads the union representing the district’s administrators and professional-technical employees. Augspurger has consistently blamed Superintendent Pat Skorkowsky for the district’s deficit, arguing that he mishandled finances and spent money that didn’t exist.

“The fact of the matter is I think it was unconscionable to budget and spend money you had no guarantee to have,” he said. “Unfortunately, it’s a common practice.”

School Board President Deanna Wright defended the budgeting decision, saying the state should have provided more guidance earlier in the process. There should have been a constant flow of communication, she said, not just a warning a month before the denial.

“I think it’s appropriate for the largest school district in the state to probably assume that we’re going to get a proportion of that money,” she said.

Special-education funding is, arguably, the most contentious money tug-of-war in education simply because of the high costs. Although Clark County receives the lion’s share of special-education funding from the state, the district still pulled roughly $350 million out of its general fund in fiscal year 2017 to cover costs.

For policy analysts pushing education funding reform, the existence of a contingency account for special education highlights why the state needs to revamp how it funds public schools.

“To me, this is just another demonstration of an irrational school-finance system,” said Sylvia Lazos, policy director of Educate Nevada Now. “It’s not based on kids’ needs. You’re working backwards on sums that are determined politically.”

Even so, work is underway to minimize confusion this year.

Jensen said he’s tweaking the application language to make it more clear what “extraordinary” special-education costs would be eligible for reimbursement.

“If there was misunderstanding based on the application itself, then I certainly own that,” he said. “But I was pretty transparent with the districts all along the way.”