School District Continues to be Plagued by Past Misdeeds

Anyone who remembers just how bad things seemed financially at the Manatee County School District in early September of 2012, might find it hard to believe that they have become even worse. Or to be more precise, back then they were much worse than had been publicly revealed, and as the new administration continues to try and get the district on solid fiscal ground, they are uncovering a slew of additional challenges to offset some of their early progress.

It's one thing to tell a community and its school board (like former Superintendent Tim McGonegal did in 2012) that instead of around $5 million in surplus funds reported in the budget, there is a $3.4 million deficit. But it's another to follow behind such a train wreck, only to tell them that such figures were just the tip of the iceberg. In taking over the quagmire that was MCSD, new superintendent Rick Mills and his team have had the unenviable job of doing just that.

It didn't take long, even during the interim administrations of 2012-13, to see that the holes were much bigger than originally reported. Yet as auditors continue to plume the wreckage (while accessing hundreds of thousands, and perhaps ultimately millions of dollars in additional fines for their findings), here we are in early November learning that even while millions of dollars in cuts have helped put the district back on track, millions more in newly discovered costs have mitigated some of the impact.

Mills and his team must feel as though each time someone takes them out into a field to show them where a body is buried, three or four more are found in the hole. Last month, they had to tell the school board that they'd uncovered as much as $4 million in additional costs not factored into the approved budget. Specifics were presented at a workshop last week, and though CFO Mike Boyer and Deputy Superintendent of Operations Don Hall were able to detail measures to recover more than 75 percent of it, it goes without saying that no one was happy to hear the news.

Members of the budget team who were involved in district budgeting through the crisis have now confirmed that the previous administration was aware of massive budget shortfalls as early as the middle of the 2010-11 school year, though they were not reported to the board or otherwise made public at that time. As the team worked on the 2011-12 budget, they also operated only with the assumption that all employees would be taking a proposed, across-the-board pay cut – a pay cut which ultimately never materialized.

The district hired additional teachers in the fall of 2011 – despite the fact that the October FTE count (which would tell them how many they actually needed) was not yet in – even as then-Assistant Superintendent of Finance Jim Drake warned that the district was going to be “in the red huge,” as one employee recalled it. We now know that Drake was asked to leave in December of 2011, though he did not submit his actual resignation until February of 2012. The district then inexplicably waited two months to even post the position that would replace him, suggesting they were not interested in bringing someone else in on the mess (or reporting it to the board) until other schemes could be hatched.  

The new hires made that year would prove instrumental, as not only did the district fail to account for their costs in the budget (one of the major factors in the budget's adjustment), but they also proved unnecessary, as the district found itself overstaffed to boot. One employee who worked on the budget, but did not want their name used for fear of reprisals, told me that when an estimate report in May of 2012 showed that the budget was going to be somewhere around $11 million in the red, McGonegal told those present, “this conversation stays in here and goes no place else.”

That employee went on to say that when the budget team informed McGonegal that they could not possibly make up the shortfall, he told them they would “move things around,” including “adjusting” funds in workers comp and the self-insured health plan and moving teachers aids expenses over to food services. The employee said that McGonegal was told that the adjustments would likely lead to findings from state auditors, but that he shrugged off such warnings. The prediction of course proved true, and the fines have only compounded the problem.

The “final number” that was finally given to the board and public when the books were closed out in August of last year was more than $8 million dollars from what had been previously reported in the budget. That amount was probably big enough for most people to assume it was the whole truth, though clearly even that number, which put the district at a deficit of around $3.4 million, proved to be smoke and mirrors. In addition to the money that had been shell-gamed, the “recovery plan” included calculations based on assumptions in areas like attrition and retirements which were wholly unsupported, and also didn't account for putting back monies in those other aformentioned areas.

McGonegal announced his retirement that same month, then accelerated his departure to September 10, taking a $161,063 payout as well as a monthly pension of $7,411 when he left. The district then went through nearly an entire school year with a series of interim superintendents, while the financial mess only got worse. Rather than a district-wide spending freeze, the bleeding continued. Meanwhile, student performance fell from 47th of 67 districts in the state, to 55th based on that year's scores.

A national search finally resulted in Mills being hired and then agreeing to come on early, March 20 of this year. Over the course of the summer, the new superintendent replaced the top tier of the administration, dealt with multiple internal scandals and finally put a budget director in place (The district had somehow operated without an administrative employee directly accountable for the budget, even though a school district budget – especially of MCSD's size – is one of the most complex accounting enterprises one can imagine).

Before the new budget for 2013-14 could be created, an actual budget process needed to be put in place. From May through July, the new administration tried to put together an entire new budget in just two and a half months. During that time, significant problems in areas like Exceptional Student Education added even more costs, were the district to become compliant. The district also had to come up with $1.6 million to add an hour to the school day at five low-performing schools, as directed by the state.

We now know that the district overspent $38 million since 2009-10, including nearly $8 million in the last budget. We know that the practice of over-hiring teachers at the beginning of the year, rather than using substitutes until the final FTE count could determine how many are needed to be class-size amendment compliant, was a costly practice that has had a major role in the district's financial woes. We know that the district simply could not afford not to get the across-the-board pay cuts of 2011, though we don't know whether they may have materialized, had the previous administration sounded the alarm by being honest about the district's financial mess at the time.

Meanwhile, the new administration has successfully paid back around seven and a half million dollars that the district owed for last year, while building a $9 million fund balance – an amazing turnaround of over $16 million in just one year. Even with the $3.9 million in expenses recently uncovered, all but $950,000 has been offset in a realistic recovery plan.

Mills and his team say they are confident that they can make up the difference, much of it through the sale of several vacant properties that the board has approved putting on the market. That would put MCSD at a $9.35 million surplus – less than a million short of the reserve fund balance the state has asked them to get to, but nonetheless an impressive cushion all things considered.

Mills and Deputy Superintendent Hall have been clear that even more costs could be discovered and fines levied for items that occurred in previous years, but maintained that no matter what, the administration would continue to be transparent and honest with the board and the community – a welcome change for both to be sure.

Cost controls are finally in place and many district expenses that were once left to accumulate as they came in – such as substitute teachers – have now been put into the budgets of individual schools who were given enough money in external funds to cover each of 10 sick and personal days for each employee. Many of the expenses in making areas like ESE compliant will also reduce expenses via the absence of future fines and/or lawsuits.

Perhaps most amazing, the $16 million dollar swing that has the district sitting at its first true surplus in years, has been achieved with no discernible impact to the classroom. At the most recent count, only two clusters in the entire district are over class-size requirements and each by an average of less than one student.

The financial house is getting in order, which will better position the district to address the bigger problem – that 55th place ranking I mentioned. For the sake of our students, I hope this administration has an equally impressive plan up its sleeve on that front. The manner in which they have addressed the budget crisis so far bodes well for that being the case.

To be sure, there's a long way to go before Manatee Schools is where parents, students, teachers and community stakeholders would like to see it, and getting there won't happen overnight. However, the forward progress we're continuing to see is certainly encouraging.