A Nevada Department of Taxation committee has appointed a subcommittee to work with the Clark County School District (CCSD) to decide whether to recommend placing the district under fiscal watch — a heightened state of government monitoring.

The move Wednesday by the Committee on Local Government Finance follows news of the district’s potential budget deficits, including a $10.8 million shortfall at the district level. 

The subcommittee members are Tom Ciesynski, business manager for the Nevada Association of School Boards and former chief financial officer for the Washoe County School District; Jim McIntosh, the City of Henderson’s assistant city manager and chief finance director and a former CCSD chief financial officer; and Paul Johnson, chief financial officer for the White Pine School District. 

It’s the latest state action since the district’s budget issues came to light last month and were identified during its regularly scheduled year-end close-out accounting process, prompting the firing of its chief financial officer. The district’s interim superintendent, Brenda Larsen-Mitchell, has attributed the $10.8 million district-level budget hole due to unanticipated expenses for litigation and cybersecurity. 

Under state statute, the department’s Committee on Local Government Finance may recommend fiscal watch if it determines a severe financial emergency exists. It would declare an emergency for a local government entity if one or more of the 27 conditions outlined in the statute is present. 

Those conditions include whether the local government entity has expended money inappropriately, whether money restricted for a specific use has been expended for something else or whether an audit report shows funds with deficits. Another qualifying condition is whether the entity’s general fund ending balance has declined for the past two years or “is less than 4 percent of the actual expenditures from the general fund of the local government for the immediately preceding fiscal year.”

CCSD’s interim Chief Financial Officer Diane Bartholomew noted that the district was placed under fiscal watch in 2018 after three years of decline in its general ending fund balance. The district was required to share monthly cash-flow statements with the department and provide periodic reports to the committee as part of that monitoring mechanism. 

She argued that this time around, the district doesn’t meet any of the conditions that trigger a fiscal watch. 

The district’s problems have attracted the attention of high-ranking state leaders. Wednesday’s meeting came a day after Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) and Assembly Speaker Steve Yeager (D-Las Vegas) announced a Dec. 16 legislative subcommittee hearing on the budget shortfall in response to Republican Gov. Joe Lombardo’s calls for state audits. 

The school district has also faced scrutiny from State Superintendent of Public Instruction Jhone Ebert, who has done her own probing into the situation, which includes issues with budget allocations schools were told about in January to help them plan for this school year. 

Those inaccuracies, caught last month, included under-projecting the average salary cost of licensed educator positions by about $5,700 and using the wrong figures to calculate additional funding for students considered to be “at-risk” for not graduating. 

“Schools were not under-allocated $5,693.64 per licensed employee, as allocations are

determined independent of principals’ staffing decisions,” Larsen-Mitchell wrote in a letter responding to follow-up questions by Ebert. “Rather, the cost of licensed employees was higher than principals were initially informed in January 2024.” 

Larsen-Mitchell said the errors that caused the budget issues at individual school sites weren’t foreseeable because they were caused by mistakes, although she acknowledged that “the mistakes were preventable.”

“In my opinion, the mistakes were a result of insufficient process documentation and communication and organizational and process silos,” Larsen-Mitchell wrote. “The mistakes were not acceptable and should not have occurred.”

In her response, Larsen-Mitchell said the district didn’t have processes or procedures to notify school leaders about new information that was received after their budget forecasts — which must go out by Jan. 15 — but is working to develop and implement those. 

At a Oct. 10 school board meeting, district officials proposed plugging the hole in the district-level budget with some of the district’s more than $150 million in unassigned funds, which they said would leave their new unassigned ending fund balance above 4 percent of its general fund revenue, more than its 2 percent target.  

The district approved additional funding for 31 of the 32 schools that submitted requests and were “severely impacted” by the budgeting errors. Those schools include Robert L. Taylor Elementary in Henderson, which requested the highest amount, $720,000, and Kathy L. Batterman Elementary School in Las Vegas, which requested the lowest amount, $50,000. 

To make up for the deficits in their budgets many schools resorted to eliminating vacant or filled staff positions, district officials said at the school board meeting. 

Other schools, such as Hickey Elementary School, were able to resolve their budget issues without cutting any teaching and support staff positions by dipping into carryover funds — unspent funds that are rolled into future budget years. 

CCSD schools have a total of $363 million in unspent funds that are, in part, due to staffing vacancies, Bartholomew said at the last board meeting. 

In 2023, lawmakers passed a bill, SB282, that requires schools with a carryover balance of more than 5 percent of their actual expenditures to spend down their excess on programs such as tutoring, social and emotional learning and extracurricular activities.

If a school fails to spend the money within two years after the end of the school year, the bill requires schools to transfer the excess funds to the state Education Stabilization Account. 

The bill prohibits CCSD from requiring schools to use their excess funds to “supplant any duty, responsibility or funding owed” by the school district to any school. 

The Clark County School Board is set to discuss the budget at its Thursday meeting.