Who's to blame for CCSD's $60 million budget shortfall? District, state, lawmakers all pointing fingers
Painful and frustrating.
That’s how the Clark County School District’s Board of Trustees described an initial round of budget cuts totaling roughly $43 million. More will follow.
As the large, urban school district digs itself out of a ballooning deficit that could trigger an $80 million chop to its budget, staff are bracing for layoffs and program eliminations that are just around the corner. Superintendent Pat Skorkowsky and newly-minted CFO Jason Goudie issued a four-page memo to staff Wednesday announcing a hiring freeze for nonessential employees and a “reduction in force” in October that likely will affect every department.
It included this warning in bold letters: “We anticipate that we will need to make additional budget cuts even after this first round. The Finance Department is continuing to close out the budget for the 2016-2017 school year.”
District officials have blamed the deficit mostly on lower-than-expected state revenue and costs tied to arbitration, but that explanation hasn’t satisfied some community members and the state’s head of education.
The situation has escalated the war of words among state education officials, school district leaders and lawmakers who can’t seem to agree on what’s to blame — lackluster state funding or mismanagement of money?
Financial woes and finger pointing
The first sign of trouble came in late May.
An arbitrator ruled in a favor of the union representing administrators and principals, saddling the school district with a sudden $19.5 million expense for retroactive pay increases and other benefits.
A few days later, the Legislature approved SB544, the state’s education funding bill, which granted the Clark County School District a basic support guarantee of $5,700 per student for the current academic year. The allocation was $26 less than what the district expected and below the state average of $5,897 (rural school districts typically require more state funds to make up for less in local tax support).
Assembly Republican leader Paul Anderson, who’s served on the legislative budget committee during the last three legislative sessions, said the per-pupil funding shouldn’t have come as a surprise because it largely follows the established funding formula for school districts used by the state since the 1960’s.
“There’s no mystery there. It’s not make believe as to what you’re going to get versus what you don’t,” he said. “By early on in the session, you know what your basic student support is going to be, and it’s not going to vary much beyond that.”
Unlike the Washoe County School District, which received the lowest per-pupil allocation from the state’s Distributive School Account (DSA) and received $5 million in emergency “bridge funding” to make up a last-minute budget deficit, Clark officials didn’t immediately sound an alarm over the projected funding (Lawmakers, however, did award Clark County $17 million to upgrade its human resources computer system). A district spokeswoman said leaders were “still analyzing” the budget impact in early June.
But the tune changed just after the Fourth of July.
Administrators unveiled a budget crisis they pegged at $34.4 million. The projected shortfall continued to grow by double digits, ultimately reaching an estimate of $60 million by Aug. 24. But district officials now say $80 million worth of cuts may be necessary to account for money already spent this fiscal year on positions and services.
So what’s causing the shortfall? In addition to evergreen complaints of underfunding, district officials blame lower-than-expected revenues from the state in terms of both full-day kindergarten funding and a denied request for reserve special education funding for the previous and current school year.
“It was unfortunately the perfect storm,” School Board President Deanna Wright said.
The state’s special education contingency account was created in 2013 to help reimburse schools for expenses and related services that go “above and beyond” normal special education costs at public schools.
The account was given a base funding of $5 million in each year of the state’s two-year budget, but the account has rarely been tapped by school districts. The district applied for $3.5 million in the funds but that request was largely rejected by the state in July, adding to the current budget crunch.
State Superintendent Steve Canavero blamed the district for including contingency funds as a given in their proposed budget, saying the budget account was intended for true contingencies such as a student needing a daily nurse or catheter change every few hours and not for expected special education care costs proposed by the district.
“It was concluded that legislative intent behind a contingency account was indeed a contingency, it is not to fund normal and typical services,” he said, noting the district receives more than $400 million for standard special education costs from the state already.
In both the special education contingency funding and in the district’s other identified area of lacking state support — funding for full-day kindergarten in the current school year — Canavero said the district was budgeting based on an assumed percentage basis rather than on what the district was eligible for, which he called a “misapplication of the funds.”
Even if the district was correct in those areas, Canavero said that it would only add up to about $21 million over both fiscal years — a far cry from the $80 million hole currently facing the district.
“The notion that somehow the state is responsible for their budget deficit that doesn’t even add up to their (total) budget deficit, the whole thing doesn’t add up,” he said.
The teachers’ union, which is engaged in a bitter arbitration battle with the district, released a scathing statement Thursday, questioning the district’s budgeting prowess and calling for a financial audit.
“It’s unacceptable for CCSD to scare the public and educators with such a cavalier approach to budgeting,” Clark County Education Association officials said in a statement issued Thursday.
Canavero echoed the union’s assertions — faulting the school district rather than state funding levels.
“This isn’t a revenue problem, but a management problem,” he said. “And for the district to blame the state, like I said, it’s disingenuous or insincere at best. If they want to play politics, that’s fine, but don’t blame the state along the way here.”
Clark County Superintendent Pat Skorkowsky flatly denied any notion of financial mismanagement. He said the district’s springtime budgeting process relies heavily on revenue estimates, partially because the biennial legislative session doesn’t end until early June.
“It’s often a difficult situation,” he said. “We are not playing the blame game here. We had estimates, based on information we received, that anticipated dollar amounts to be higher.”
Other sources have added to the district’s financial load, including a higher starting salary for teachers and an increase in the maximum salary for the district’s nearly 18,000 teachers.
Anderson, who nonetheless criticized the district’s overall financial practices, said syncing budget cycles so school officials aren’t creating tentative budgets while lawmakers are still developing the state’s two year budget should be a priority going forward.
“The budget cycles are on and off with each other and don’t coincide or sync,” he said. “That creates a lot of our angst.”
More calls for funding reform
The Clark County School District received a larger chunk of money from state coffers following the 2017 legislative session, and has seen its basic per-pupil spending from the state increase 4 percent between the last two budget cycles, from $5,527 and $5,512 in 2015 and 2016 to a planned $5,700 in 2017 and $5,779 in 2018.
According to an analysis from the nonprofit Guinn Center, total public funding, including revenue sources such as property taxes, per Clark County student increased from $6,578 to $6,628 in the 2016-2017 school year, with $6,783 budgeted for the 2017-2018 school year — a 0.7 percent and 3 percent increase in each subsequent year.
Clark County's total funding from the state's Distributive School Account (the primary K-12 education budget) decreased from $618 million in the 2016-2017 school year to roughly $593 million this academic year. It will rise to $674 million for the 2018-2019 school year, per the two-year budget lawmakers approved this year.
But state funding through the DSA is just one slice of the total funding pie, and is directly tied to how well other local sources of income — property taxes, governmental service taxes and others — are doing. Despite the seeming reduction in state funds, the district expects to take in $30 million more in combined state and local tax revenue during the 2016-17 school year, and a budgeted $154 million more in the following school year.
Funding issues aren’t unique to Clark County, Guinn Center executive director Nancy Brune said. Nevada ranks 46th of all states when it comes to per-pupil funding, and basic student supporting funding has increased by only 5 percent since 2015 compared to a 10 percent jump in enrollment.
“I think there’s a case to be made for just increasing the overall size of the pie,” she said. “I would argue that we’re simply not funding enough to keep pace with enrollment growth.”
Skorkowsky explained the funding predicament this way: If the district were to give employees cost-of-living adjustments, step-pay increases and $1 extra toward their health care, it would need $159.14 more per-pupil funding from the DSA. But the district only received a $126 per-pupil increase for this school year.
“We have to balance taking care of our employees with putting more money in the classroom, and with our current level of funding through the DSA, it is impossible to give more money to the classroom,” he said.
While the Legislature has pumped more money to Clark County in the form of categorical funding — dollars earmarked to help students living in poverty or learning English, for instance — local education officials insist it’s not enough because it doesn’t cover every student in need.
The Nevada Plan, created in 1967, is the formula used to determine the basic, guaranteed funding for each school district and charter school. It’s based on factors such as demographics, transportation costs and a district’s ability to generate other revenue.
“I think the DSA is fundamentally thin,” said Sylvia Lazos, policy director for Educate Nevada Now, a nonpartisan organization that focuses on equity in public education. “We haven’t really taken a look at it in the last 60 years.”
Lazos said the plan doesn’t reflect the needs of the urban district, which has a high number of students learning English, living in poverty and moving frequently, or account for more rigorous testing standards.
What Skorkowsky and other education leaders want to see in the future: state funding that covers the actual cost of educating students at all need levels.
Lawmakers moved closer in that direction this session, approving SB178, a bill that put $36 million each year of the current two-year budget cycle toward underperforming or higher-need students. Full implementation of the so-called weighted funding formula, however, hasn’t been realized given the estimated $1.2 billion price tag.
Canavero said that $34 million of the $36 million allocated as part of that bill has flown into Clark County, and that the approximate $1,200 for students in low-performing schools was an appropriate use of state funds. He said the state Department of Education was currently working on soliciting a bid for another study on how best to implement “weighted” per-student funding during the interim period between legislative sessions.
“That is money follows the need,” he said. “That is where the need is.”
Weathering the storm
District officials don’t expect any magical funding solutions anytime soon. After all, state lawmakers likely won’t meet again before the next legislative session in 2019.
“We call special sessions for big companies, but we never call a special session to fix anything that has to do with education,” Wright said.
And so begins the countdown to the next education battle in Carson City. But some lawmakers are hopeful that the district’s current budget woes in the face of a generally strong economic picture will force another discussion of raising education spending during the next legislative session.
“Do we need to fund them at a higher level?” Democratic state Sen. Mo Denis said. “Yeah. We’re fortunate that we haven’t been sued yet.”