The $464,485 accounting error in the Groton-Dunstable Regional School District’s 2014 budget, revealed last month, was bad news for the district. Yesterday, the news got worse.
Wednesday afternoon, district officials and administrators dropped more financial woes on town leaders. The 2014 deficit of $464,485 has ballooned into a projected deficit of about $2.5M in the pending 2015 budget, leaving the district potentially underfunded by almost $3M for the rest of this school year and the next school year.
Making up the two years’ deficits will involve cutting programs in the schools and may require tax increases, but details are still being worked out.
In a joint meeting Wednesday afternoon with Board of Selectmen and Finance Committee members from both Groton and Dunstable, Groton Town Manager Mark Haddad, and State Representative Shelia Harrington, the G-DRSD School Committee and district administrators outlined the situation and tried to answer questions from town officials about the deficits and how the district may address them.
Jim Frey, Chair of the School Committee Budget and Finance Committee, said that the district’s new Director of Business and Finance Jared Stanton, found budget irregularities in the 2013 budget when he began working for the District in July, 2013. That budget, and the 2014 budget, had been prepared by the previous Director of Business and Finance, Jerry Martin, working under former superintendent Joe Mastrocola. Because the original errors appeared in the 2013 budget and were not detected, they were carried forward in the subsequent budgets for FY2014 and FY2015.
The state Department of Revenue recently certified and closed the FY13 budget, and allowed the district to partially make up a deficit of $163,159 using funds from its Excess & Deficiency account. With that budget closed, the district now has about five weeks to fund a $464,000 deficit in the current fiscal year. At the same time, the committee must find a way to meet the projected $2.5 million shortfall for FY15.
When the school district announced the initial problem in December, it laid off about a dozen nonteaching employees and froze hiring and discretionary purchasing in an effort to mitigate the immediate budget problem.
Frey said, “There is a structural deficit between $4-500k in the FY14 budget and we are continuing to focus on how to close that gap, which is driven by a structural under-budgeting problem. That issue is causing those costs to cascade forward and it’s influencing the FY15 budget process.” He added that there will be many more meetings in coming weeks to fully address the budget issues.
The FY15 budget corrects the 2013 and 2014 budget accounting errors that led to the cascading deficits. The $2.5M deficit is about eight percent of the district’s anticipated 2015 total budget of more than $36M. But even with a flat budget for 2015, the looming $2.5M deficit means the district could be forced to make draconian cuts that will affect every student. Frey said that “We’ve tried to hold off on cutting things that affect the classrooms but we are at a point where we will need to do that.”
Interim Superintendent Tony Bent said, “We will be cutting programs — big things that will affect everybody.” School Committee Chair Alison Manugian confirmed that major programs are on the table, including eliminating language programs, athletics, art, and music. She anticipated that whatever cuts are made now will stand for FY15 but hopes that the FY15 budget will not include additional program cuts.
After the committee presentations, many town officials were still unclear on the circumstances leading up the deficits and asked for further clarification. School Committee member Jon Sjoberg explained that, before a 2013 accounting software change in the Business Office, the District had built its budget using the wrong salary schedule for three years running. The actual payroll expenditures, which were administered by an outside vendor followed the correct schedule, so the employees were being paid at the proper higher rate but the budget continued to reflect the lower incorrect rate.
Stanton noted that when the new accounting software was installed in 2013, some of the old incorrect data was loaded into the new system, so the problem was masked until the District brought payrolls services back into the district.
Bent added that once the second audit done by the District’s own auditors, Melanson and Heath, is issued in February, the District will exactly know where it stands and will finalize its implementation of proper checks and balances to assure that nothing like this happens again.
State Representative Sheila Harrington asked if the person or persons who made the errors had been identified and whether they still work for the district.
Manugian replied that, “We have some human error and process error but no evidence of missing funds or malfeasance,” and the school committee as a whole expressed confidence in the current Business Office staff’s ability to bring and keep the situation under control.
Members of the school committee pointedly avoided mentioning the names of former employees Martin and Mastrocola, and were equally adamant about not saying whether any current employees may have been involved in the mistakes.
Groton Finance Committee member Jay Prager said he wants a clearer breakdown of what happened to the three budgets, and requested that the Committee provide a spreadsheet that demonstrates the slope of the accounting changes in major areas over the relevant fiscal years.
Regarding FY15, Frey emphasized that the $2.5M deficit figure is, at this point, a projected number that may change. It is earmarked to fund $1M in salaries, $600k in out-of-district tuitions, $400k in transportation costs, and $500k to offset the loss of this E & D as a revenue source.
Over the course of the meeting, a number of possible revenue streams were explored, such as increasing school choice and forcing larger class sizes, as well as possible savings on existing services such as transportation.
Special education costs were a significant factor in the budget overrun but Bent and School Committee member John Giger pointed out that these costs are among the least predictable because the services are state-mandated and the process that determines outplacement of students is complicated. Placing a student in a private setting is expensive, but litigating to keep students in-district can be expensive, too.
Officials from both towns were concerned about the size and description of the $2.5 million figure. Groton Selectman Josh Degen asked if it includes contingency for other financial emergencies and Frey responded “yes.” Degen noted that previous school district override proposals lost credibility with the towns because the amount and line items were constantly revised. “You need a firm, credible, and defendable number,” he advised.
There were discussions about the process of requesting funds from towns to cover both the FY14 and FY15 gaps, which included what kind of increased support the two towns might provide through special funding or a Proposition 2 ½ override.
In the coming weeks, as the official audit figures come through and the budget process moves forward, the towns and the school committee will continue to meet to determine the best way to fund the schools and what cuts will need to be made to reach the funding goals.
Continuing weekly meetings between school committee members and both town’s selectmen and finance committee members are planned for at least a month, when the 2015 budget is set, by February 12. After that point, the budget proposal may be reduced, but not increased. The budget must be approved at Spring Town Meeting in both Groton and Dunstable; the Groton Spring Town Meeting is usually held on the last Monday in April.