Newberg-Dundee Public Schools are in dire financial straits. The question on the minds of administrators and school patrons alike is, how did we get here?
Over the past several weeks the school board, in concert with its budget committee, has repeatedly gathered to answer that question and plot a course toward financial solvency for the district.
The path toward understanding began on May 20 when Jackie Olson, executive director of the Oregon Association of School Business Officials, was called in to address the board at the behest of the district and Heather Bixby, the district’s finance director.
Olson’s message was onerous: At the time of the meeting, the district anticipated a negative fund balance topping $3.77 million and was expected to grow if action wasn’t taken soon.
“I think that it’s important to understand that there are things that you can do, but there is a critical timeline,” she said after examining the district’s books for more than 10 hours. “You are at May 20 and your fiscal year ends June 30.”
Olson pointed to a number of factors that have contributed to the budget shortfall, particularly declines in student enrollment and state funding and increases in transportation costs.
Is staffing to blame?
Enrollment, Olson found in her research, has consistently declined over the past dozen years, but the number of licensed staff has not decreased at the same rate.
More staff were hired during the pandemic via funds provided by the state and federal governments, even as the student population declined, she said.
“At some point we should see these kind of going in the same direction at the same rate,” she said, pointing toward a graph assembled for the board.
She added that staff levels (which includes all district employees, not just teachers) are significantly larger that it has been in the past two fiscal years, in some cases nearly double.
A member of the budget committee asked Bixby how many more full-time employees had been hired this school year compared to last and wondered if a process has been put in place to ensure that this overspending doesn’t happen again in the future.
Bixby responded that in the few years since her hiring there hasn’t been a person responsible for “position control,” a staff member charged with determining how many people are being hired or fired and how many staff members the district has the authority to hire.
“It was not in place when I started here,” Bixby said. “It was not being used.”
Reducing revenues...
Board member Sol Allen said that while he understood that the district “has more teachers than students” he added, “I guess I’m more curious about how we got here with the numbers we’ve been having compared to all of a sudden … this. I’m just … I’m confused. I think I’m not alone. I don’t know if there are answers or if this is the time or place, but this is bad. It’s really not good.”
Olson said it appeared that a series of events, with reduced revenue as the key driver and expenditures not budgeted for properly led to the shortfall.
She further explained that the district’s general fund balance is comprised of cash received from the State School Fund Grant; local sources like property taxes; federal sources; intermediate funds, such as those derived from the Willamette Education Service District; other state sources; and the district’s own beginning fund balance, which is savings from prior years.
While local and intermediate sources of funding have increased somewhat over the past handful of years, state funding has diminished and is expected to drop precipitously this year.
The bulk of the general fund expenditures (83%) are for employee salaries and benefits, Olson said, adding that contracted services make up 13.5% and supplies, materials, debt service, transfers and contingency make up the difference. The contracted services fund is made up primarily by transportation, substitute instructors and utilities.
As far as state school funding, board members pointed out, there appears to be a disconnect between what has been budgeted and what the district has received. Funds received from the State School Fund this school year are $28.99 million, while the district budgeted $32.93 million, making for a shortfall of $3.94 million.
Overall, revenue received by the district is down more than $4.89 million, the largest chunk due to decreases in state funding.
... And increasing costs
In concert with the decrease in funding are large increases in expenditures, Bixby said, adding that five accounts are over budget this year.
“We are overextended in the budgeted funds in multiple areas,” she said, adding that at the top of list is $1.36 million for programs for students with severe disabilities, $871,000 for instruction and $2.1 million for support services, which includes everything from staff development to vehicle maintenance.
The growth in the cost of transportation services has impacted the district more than $1.5 million this year over last. Bixby explained that the increase came in part due to a wrong assumption on her part that didn’t account for the $1.3 million necessary to pay for the last two months of service.
“I shouldn’t have made that assumption,” she said during a special session held May 20. “I should have doublechecked that it was encumbered for the entire year.”
Olson added that the district will be reviewing invoices to try to determine why transportation costs are significantly larger than what was anticipated in the contract the company signed with the district.
Recommendations considered
Olson offered a number of recommendations the board can consider to try to right the ship, including taking out a short-term loan, implementing a hiring/spending freeze for the remainder of the school year, reducing general fund expenditures this fiscal year by $2 million and working with the community to make reductions to the 2024-25 budget of up to $10.7 million, which would include paying off the short-term loan.
Other options include implementing furlough days for district employees; reducing full-time employee numbers, including for licensed, classified and administrative staff; review nonstaffing expenditures and decreasing the cash required for contingency and unappropriated fund balances.
Board member Jeremy Hayden queried Olson if there were any alternatives to the district taking out a short-term loan. Olson responded that there are not, considering the short duration of the loan.
Olson added that Newberg-Dundee Public Schools is not the only district that finds itself in financial calamity.
“I will say that your district is not the only district in this situation right now across the state,” she said. “I do know of a handful of others that have already applied for a short-term loan. There are a few others that are currently looking at it.”
Legal battles could exacerbate district’s budget woes
School board member Deb Bridges asked administrators if a particular account includes the district’s legal fees and whether the lawsuits against the district and DeHart and the three former members of the board could further strain the district’s finances.
“So, that’s our cost of litigation and any investigations that we’ve had to conduct or ….,” she said.
“Also any settlements,” Bixby said, finishing her sentence.
The school district and the former board have been targeted with a number of lawsuits, including one filed by seven members of the citizenry calling for the defendants to reimburse the district for legal fees incurred when the former board hired outside legal counsel, a move that was found later to be in violation of the state’s public meetings laws. A recent filing by the plaintiffs’ counsel seeks to recover more than $370,000 in legal fees in that case.
What’s the next step?
At the May 20 board meeting, Bixby recommended that Olson provide a more complete study of the district’s financial status and, once complete, the district convene another special board meeting to review her findings and make recommendations on the path forward.
“I understand it’s difficult to receive this information at this time,” she said. “I know that time is of the essence and I want to make sure that I provide you with the best information possible.”
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