Schools to get state money, Ehrlich says

Governor offers loan, not bailout, to help solve city cash flow problems

Focus `on results, accountability'

System can't pay bills, faces $58 million deficit

February 17, 2004|By Tanika White and Liz Bowie | Tanika White and Liz Bowie,SUN STAFF

Gov. Robert L. Ehrlich Jr. said yesterday that his office will advance money to the Baltimore school system to deal with a crushing cash flow problem that could have shut the system down.

Ehrlich did not say how much would be advanced or when, but said the money would be contingent on receiving a plan of accountability from city school officials by the end of the week.

"They have a conceptual deal - it's not finalized," said Greg Massoni, a spokesman for the governor.

The money would have to be paid back next fiscal year, Ehrlich said.

"The governor asked for a comprehensive plan with the appropriate restructuring and accountability elements," said James C. "Chip" DiPaula Jr., Ehrlich's budget secretary. "If this plan meets his standards, he will move to provide the appropriate resources.

"The governor will consider all options to help them through their cash flow needs," DiPaula said. "One thing is for sure, the governor is focused on results and accountability, not a bailout."

The state money would be in addition to an $8 million loan from the city and an $8 million loan from the nonprofit Abell Foundation.

The possible advance of state funding comes as school officials have been searching desperately for ways to deal with the worsening financial crisis. The system is facing a $58 million deficit this year and recently uncovered a projected cash flow shortage in the tens of millions of dollars.

School board members declined to comment on the financial crisis yesterday. The nine-member board spent much of the day in meetings.

A call for resignations

As they met, a coalition of city parent groups and union leaders called for the resignation of the six longest-serving school board members, saying that they are ultimately responsible for the system's financial crisis.

"We cannot get around the importance of the role that they play," said Michael Carter, vice president of the school system's Parent Community Advisory Board, which is spearheading the effort. "We ask that they do the right thing, that they resign and that we move forward."

Ehrlich, after speaking with state, city and school officials by phone earlier in the day, said he expects the school system's plan to "address relief of the immediate cash flow crisis, fix the underlying structural problem, ensure effective management and provide accountability for the state's financial support."

In a separate call for accountability, the parent advisory board and other parent and community groups, such as the Baltimore Council of PTAs and ACORN, were joined yesterday by three of the system's largest employee unions in demanding board members' resignations.

Teachers, principals and administrators, and the system's bus drivers, custodians and food service workers, said school board Chairwoman Patricia L. Welch, Vice Chairman Sam Stringfield and members David Stone, Dorothy Siegel, Camay Murphy and Kenneth Jones should step down.

"We'll go one step further and say that those six board members should walk out of this building," said Glenard C. Middleton, president of AFSCME 44. "They should march down to the city jail and turn themselves in to be arrested."

Mayor Martin O'Malley said at a news conference yesterday that the school system's finances were in worse shape than previously understood.

Robert C. Embry Jr., director of the Abell Foundation, said he and O'Malley learned over the weekend that the school system is projecting a $52 million cash flow shortage for the current fiscal year, on top of the $58 million deficit.

School officials declined to comment yesterday on the cash flow issue and would not confirm that the shortfall could be as high as $52 million.

School officials met yesterday in private and largely maintained a public silence, answering only a few questions at an outdoor news conference, then retreating inside the system's North Avenue headquarters and locking the doors.

At the briefing, state schools Superintendent Nancy S. Grasmick said the state and city governments and the school system were working as partners to try to resolve the short- and long-term financial problems.

The short-term problem, Grasmick said, is $16 million needed to get through June 30, the end of the fiscal year. The loans pledged by the mayor and Abell Foundation would address that issue.

The foundation's loan would be repaid next fiscal year at a 1.5 percent annual interest rate. The city would be repaid in 2006 at the same rate.

The long-term issue is how to deal with the $58 million deficit that hangs over the city school system. Grasmick said the state is working on a plan to help solve the problem.

The deficit was accumulated over a number of years as the school system spent more money than it was receiving from the state, city and federal governments.

By last July, the system had spent $58 million more than it took in. That meant the system essentially started out this school year with $58 million less than it needed for expenses.

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