Schools accept funding offer

Board of Estimates must approve plan for $42 million city loan

`Have to work out the details'

Agreement set for review by City Council today

March 16, 2004|By Tanika White | Tanika White,SUN STAFF

Baltimore school board members voted last night to accept "in principle" an agreement with Mayor Martin O'Malley that would provide enough funding to help the school system pay its bills through the end of this school year -- and give more oversight of its financial matters to the city.

The funding agreement gives the financially struggling schools a $42 million loan to ease a cash-flow problem that threatened to bankrupt the system.

The proposed loan -- and plan for repayment -- will be reviewed today by the City Council and would have to be approved by the city's Board of Estimates tomorrow.

If approved, the city would release the cash by Monday.

At a board meeting last night, school officials said details need to be worked out today before the plan is reviewed by city officials.

"There's some wording changes," school system Chief Executive Officer Bonnie S. Copeland said.

O'Malley's offer to bail out the school system, which is facing a $58 million accumulated deficit, replaced a state proposal to lend the schools money in exchange for more control over school system operations.

At first glance, however, details of the city's funding proposal appear to be similar to the plan Gov. Robert L. Ehrlich Jr. offered last month.

Like the governor, O'Malley wants a panel to temporarily oversee the school system's finances, at least until the $42 million loan is fully repaid in 2006. The Fiscal Operating Committee would not replace the current nine-member school board, however.

The oversight committee would consist of three members, each appointed by O'Malley. One would be a school board member; another would be the city's finance director.

State Superintendent of Schools Nancy S. Grasmick, or a representative of her choosing, may be considered an ex-officio member of the committee, the agreement says.

Steve Kearney, a spokesman for O'Malley, said placing Grasmick on the committee is "recognition that this is still a city/state partnership."

School board members said the oversight committee is something they would have to learn to live with until the system's fiscal house is in order.

Board Chairwoman Patricia L. Welch said the school board would continue to be the ultimate authority.

Also similar to the state's proposal, the funding agreement calls for a detailed fiscal recovery plan to be developed and implemented by the three-member oversight committee.

Among other things, that recovery plan calls for further budget reductions before June 30, the end of this fiscal year. School officials would not say whether that meant there would be more layoffs this school year.

But Kearney said the school system, in its current plans to reduce the deficit, already has called for layoffs of nonclassroom workers -- on top of the 800 layoffs that have taken place this school year.

Copeland seemed to disagree.

"I think that's one of the things that we still have to work out the details on," she said.

O'Malley also wants a plan for "further cost-saving measures that are to take place before and after the close of the present school year."

For example, the mayor is asking that the school system shrink its staff by not filling vacant positions.

"If desired attrition fails to materialize, a corresponding number of layoffs will be implemented" before the next school year begins, the agreement says.

And just as the state would have had a greater role in running the school system, O'Malley's plan makes way for more oversight by the city.

In addition to the fiscal oversight committee, O'Malley is calling for monthly close-out reports to be submitted to the city's finance director as well as the City Council. He said he wants to see quarterly meetings between the city's finance director and senior school officials.

O'Malley said he wants to see the entire deficit eliminated by July 1, 2006.

Unlike the state -- which would have given school officials at least a year to begin paying back the loan -- the city requires repayment of $34 million by August. The remaining $8 million would need to be paid back by June 30, 2006, at an interest rate of 1.5 percent.

Welch said the city's terms would be difficult to live up to. "It's going to be hard for us to adhere to," she said. "But it's very, very necessary."

Sun staff writer Lynn Anderson contributed to this article.

Proposal highlights

Main points of a proposed funding agreement between Baltimore City and school system officials:

A loan from the city of $42 million; the school system must repay $34 million of it by Aug. 2.

Creation of a fiscal operating committee consisting of three members, including the city finance director and a school board representative. All three members will be appointed by the mayor.

Creation of a financial recovery plan - to be approved by the city Board of Estimates - that will include unspecified budget reductions in the current fiscal year.

Regularly scheduled financial hearings before the City Council.

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