New Orleans school officials plan to dip into the district’s savings to start closing its $50 million deficit while city funding is in limbo.
“We have to move forward,” the district’s interim superintendent, Fataema Fulmore, said in an interview. “I had to bring forth a solution and resolve it with what’s at our disposal.”
Fulmore’s solution, which she’ll present to board members on Tuesday, would use $18 million in district savings and $7 million from its budget to make sure schools get the monthly payments they’ve planned for through the end of the school year.
The option uses almost all of the district’s operating dollars and $18 million of the $48 million it has in available savings, based on numbers shared.
Fulmore says finding a way to cover the remaining $25 million in deferred revenue schools were expecting will be harder.
“You only have so many sources of income to pull from,” Fulmore said, adding the district may have to pull from its system-wide needs fund.
City backs out
District leaders said they first noticed revenue had been overestimated in early October.
They began discussing options but hit the brakes in November when city officials said they would send them $20 million by April to settle an unrelated lawsuit.
The deal included another $7 million a year for the next decade for specific programs and the city agreed to stop collecting a 2% fee on tax revenue for schools, the issue at the heart of the suit.
The city missed the deadline to send the first payment. Then, after weeks of silence, the Cantrell administration said in February it had never agreed to the deal, even though its chief administrative officer had signed off.
In response, the school board and city council, which helped negotiate and still backs the deal, filed a lawsuit to force the administration to pay out. A judge is expected to rule on the case later this month.
The Cantrell administration has said the city wants to renegotiate and can’t afford the deal, though council members disagree.
Explaining the drop
For weeks after the gap was first acknowledged, district officials said they were still working to figure out how big it was and skirted questions on the causes.
Olin Parker, chair of the school board’s finance committee, said last month the confusion was never on their end but with the city.
“We didn’t have accurate numbers from the institution that is supposed to be collecting our taxes,” he said and called on the state’s legislative auditor to investigate the city.
Officials now say they believe the inflated estimate was caused by several factors. First, property tax collection rates dropped by roughly 4%, the city says, due to job losses and a general economic downturn. Additionally, the city incorrectly classified nearly $4 million in cash receipts.
On the district’s part, they used a calculator aligned to the calendar year and not the school system’s fiscal year, which also contributed to the overestimation.
Preparing for the worst
Once the first half of the gap is filled, Fulmore said she’ll turn her attention to addressing the second $25 million.
That number, and the amount of money the district actually has to plug the hole, won’t be confirmed until after an annual audit is complete, she said. That should be the end of this month but could be extended again.
In the meantime, Fulmore said her team is keeping school leaders up to date so they know what to expect. Options could include pulling from the district’s remaining $30 million in available savings or pulling from its system-wide needs fund.
With less cushion, Fulmore said her team is looking at its budget, not just for next year, but the next three years, to make sure it's saving money wherever it can.
Meanwhile, Fulmore said her team is preparing for a “new normal” with less money if the property tax collection rate remains lower.
But she’s hoping for the best.
“I’m an optimistic,” she said. “I have to have that positive outlook.”
