City school deficit alarms Md. officials

Lawmakers are `embarrassed' by $36 million shortfall

January 06, 2001|By Allison Klein | Allison Klein,SUN STAFF

State legislators said yesterday they are "alarmed and embarrassed" by the Baltimore school system's projected shortfall of nearly $36 million and warned that it might undermine efforts to obtain more state funds.

"People ought to be alarmed," said Del. Howard P. Rawlings, a Baltimore Democrat and chairman of the House Appropriations Committee. "I am alarmed, embarrassed and troubled. We invested substantial state funds - and we go back and ask for more - and we find out the school system can't manage the money it has."

Two months ago, officials reported the deficit from last year was $5 million. But an audit by the firm of Arthur Andersen increased that figure to $18.8 million, school officials disclosed Thursday.

Adding to last year's financial trouble is overspending this year, which would hit $16.7 million by the end of the fiscal year June 30 if no reductions are made.

About 60 percent of the school budget comes from the state and about 30 percent from the city, with federal funding contributing about 10 percent, Rawlings said.

"For those of us who represent the city, it makes our job harder," said Sen. Barbara A. Hoffman, a Baltimore Democrat who heads the Budget and Taxation Committee. "If we're sitting there with egg on our face, it doesn't make it easy to ask for more money."

She said the school system has been making strong academic strides, and children should not be punished for administrative setbacks.

Chief executive officer Carmen V. Russo, who took over shortly after the end of the last fiscal year, said she wants to review the numbers with legislators and auditors to determine how much can be written off and what can be done about the remaining shortfall.

"There are certain procedures that need to be done, things that need to be written off," said Russo, leader of a management team that succeeded former chief executive Robert Booker. "Before everyone gets hostile and crazy, it would be good to walk through it so there is clear understanding of what the numbers mean and how they will be rectified. No one wants any kind of a deficit."

While the projected shortfall appears relatively small in an $850 million budget, the school board has discretion over only about a quarter of the total budget. The rest goes to salaries, or is federal or state money designated for specific programs.

The reason last year's deficit is much larger than previously stated, school officials say, is that they recently discovered they are missing about $15 million City Hall owed but never paid in October 1999.

The city's finance director, Peggy J. Watson, said she is working closely with the school system to try to resolve the issue of how much might be owed. The city and the school system have agreed to hire an independent auditor.

Russo said cutting expenses by $20 million in one year - to make up for overspending this year - would require drastic measures and would hurt teaching.

She said she's unwilling to do that and believes the system will have to carry a deficit for several years and reduce it gradually.

But it is unclear whether the city school system can carry a budget deficit from year to year, said chief financial officer Mark Smolarz, who was hired in November.

State and city governments are not permitted to do so.

"We have our attorneys looking at that," Smolarz said. "The fact that we have a deficit isn't something we knew about until recently. It is concerning us a lot."

Russo said she has taken significant steps to reduce spending, and finance officials said they believe they can make up all but $20 million of the $36 million projected shortfall.

In addition to layoffs of temporary employees, Russo said she is eliminating six administrative positions, freezing more than 100 vacant positions, eliminating overtime and sifting through 60 to 70 suggestions to further cut spending.

In the next several weeks, she said, the school board will be forced to make some difficult but necessary decisions.

"We'll realize we're on solid ground," she said. "And people will regain their comfort level."

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