Answers sought in schools' deficit

Grasmick tells lawmakers inquiry set on $58 million fiscal crash in Baltimore

`Looking at personal conduct'

January 23, 2004|By Tanika White | Tanika White,SUN STAFF

State Schools Superintendent Nancy S. Grasmick told state legislators yesterday she will form an "inquiry team" to investigate whether anyone did anything illegal or benefited personally from the collapse of the Baltimore school system's finances.

"I think the public demands to know the answer to that," she said.

Grasmick, sitting alongside city schools chief Bonnie S. Copeland, spoke yesterday to two legislative panels. It was the first time the two top officials were given an opportunity to explain to state leaders how the schools accumulated a $58 million deficit and what is being done to reverse years of overspending and fiscal mismanagement.

In an interview after the hearings, Grasmick said that former schools Chief Executive Carmen V. Russo and Mark Smolarz, who handled the system's finances under Russo, could be targets of the investigation. Russo declined to comment last night and Smolarz could not be reached to comment.

Grasmick said she would select professionals in the private sector to investigate, and she did not elaborate.

"This would be different from the ... audits [currently being conducted of the school system's finances]," Grasmick said. "They're looking at systems. We're looking at personal conduct."

Grasmick said she doesn't suspect wrongdoing, necessarily, but added that all avenues need to be explored when uncovering what happened to the city schools' finances.

Throughout the afternoon, a recurring theme among senators and delegates seemed to be, "What went wrong?"

Sen. Patrick J. Hogan, a Montgomery County Democrat who is vice chairman of the Budget and Taxation Committee, said many aspects of the school system's financial collapse reminded him of the Enron scandal.

"Yes, you're right," Grasmick said. "The right hand didn't know what the left hand was doing."

"And then our hand is left holding the bag to pay for it," Hogan said.

Copeland, Grasmick -- and Mayor Martin O'Malley, who joined them at the witness table later in the day -- indicated that a number of management problems might have contributed to the deficit.

Copeland said budgets were built around too many "false assumptions," including unusually high enrollment projections and overly optimistic predictions about revenue sources.

O'Malley said Russo was so focused on improving test scores that she overlooked the system's business operations, even when he pressed her for information about the budget or human resources.

O'Malley called the period of Russo's leadership the "North Avenue freeze-out." The school system's headquarters is on North Avenue.

"I've had very frustrating moments the last few years just trying to get basic numbers out of my school system," he said.

Those problems are now being addressed, school officials said. O'Malley said Copeland's administration is more accessible.

To prevent future problems, Grasmick said she would insist that the city school system no longer be allowed to carry a deficit of more than 1.5 percent of its budget without facing the possibility of having state funding withheld. And she said top city school officials will meet monthly with her and other state school administrators, in addition to reporting to the state school board every month.

Most of the conversations with legislators centered on how the city school system planned to use an infusion of money from the Bridge to Excellence Act, generally referred to as the Thornton initiative. The city stands to gain between $40 million and $60 million from the legislation, if approved.

Some legislators said they worried that the funding might be used to pay down the deficit and not to improve school programs or add initiatives.

But former state Sen. Robert R. Neall, who has been advising the school system on financial issues, said that school officials were determined to pay down the deficit by July next year and use the Thornton money for academic improvement.

To that end, Copeland has laid off 700 workers, decreasing her central office by almost half. She is planning to lay off about 50 more central office employees by Feb. 1, Neall said. In addition, Copeland will announce within the next 10 days whether she will impose salary cuts or furloughs on the system's staff to save about $16 million this year.

"I'm not sure that we're down to the bottom of our troubles," Neall told members of the Appropriations committee. "I think we've got our arms around most of it, but given the history, there could be something else that pops out."

Sen. Ulysses Currie, a Prince George's County Democrat, and chairman of the Budget and Tax committee, said the hearing was useful.

"I think we have a pretty good sense of where they are and where they're going in terms of solving the problems with the deficit," Currie said. "I think we need to hear more in terms of `How did we get here?' and how do we prevent this from happening again."

Neall may stay on as an adviser to Copeland indefinitely. Grasmick and Copeland plan to look for private funding to reimburse Johns Hopkins Medical Systems, where he works as a senior fiscal analyst.

School officials said he has been invaluable in helping to solve financial problems. And his many years in the legislature give him added authority.

"He brings the credibility for having served in the legislature for so long," Copeland said.

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