(Karen Gray/NPRI) – Given the Great Recession pummeling Nevada, is the Clark County school board being fiscally prudent?
Last November, the Clark County School District announced that “Debt service costs are projected to exceed underlying revenues by $138 million in FY 2011.” Despite that projected revenue shortfall, however, the Clark County school board has twice revised its capital improvement plan to start new projects and spend some of the $106 million it found in reserves — $36 million it “found in the couch” and $70 million it had banked in a “savings account.”
In December, the school board and its appointed Bond Oversight Committee met to decide what to do with $36 million left over in the district’s new-construction contingencies fund from the 1998 bond.
Staff suggested taking $31.5 million of the $36 million to finance new buildings for the Southeast Career and Technical Academy (SECTA). One of the SECTA buildings had been deemed unsafe in August, and programs and students had been moved into portables.
Terri Janison, the then-school board president, asked if the school would shut down if the board didn’t vote for the project.
CCSD Chief Financial Officer Jeff Weiler responded that the school “was working” and things would “stay as it is today.” No program cuts or decrease in student capacity would stem from the move to portables, board members were told.
Weiler told trustees, however, “We’re trying to spend the money we have. There are some risks in not spending the money right now, as you can imagine.” Also weighing in, Associate Superintendent Haldeman cautioned trustees about any “delay in making a decision on how this money [the contingency balance] is going to be spent. Are we gonna lose it?”
The trustees also discussed the idea — suggested by the Bond Oversight Committee — of using dollars from the bond’s land-acquisition fund instead. According to CCSD reports, that account has contained an unencumbered fund balance of over $70 million since at least March 2009.
However, said Weiler, the remaining fund-balances were needed to cover possible bond-revenue shortfalls.
“Right now,” he acknowledged, “the mortgage [debt service obligations] exceeds our underlying revenues.”
Weiler said two potential shortfalls — in the room tax and the real-property-transfer tax — “have to be made up for within existing fund balance and/or the debt service reserve.
“That’s all prescribed. So, the idea that ‘Oh, there’s money there to be taken,’ well, right now, we really need as much as what we have … just to meet future bond commitments.”
Trustee Chris Garvey, describing the land-acquisition fund as a “savings account,” said she preferred to use the new-construction contingency dollars. Those funds, Garvey opined, were “basically found in the couch.”
The board concurred, voting to reallocate $31.5 million from the new-construction fund to the new SECTA project.
In March, trustees once again pumped up their spending plans. Although Gov. Brian Sandoval had announced the state would take CCSD debt-service reserves to balance the state budget, trustees decided to spend $50 million from the land acquisition “savings account” for two more new projects.
In doing so, they ignored Weiler’s December warning that the bond-fund balances had to remain high enough to cover any potential bond-revenue shortfalls.
“As you are aware, um, there’s a lot of scrutiny on our capital funds,” Weiler reminded the board. Nevertheless, he said, he and other staffers were “working to facilitate this change [to] get this work under way as soon as possible.”
The “change” referred to by Weiler was spending $50 million of the unencumbered land-acquisition funds to replace two special-needs schools.
“Um, as you’re aware, again, that capital funds seem to get a lot of attention right now,” Weiler reiterated. “We wanted to make sure that we were, um, using them as quickly as possible, and as expeditiously on the, uh, top priority projects …. We’re actually recommending reducing the budget for land by $50 million and allocating that.”
Thus, despite the estimated $138 million debt-service payment deficit looming over the district this year — and despite the governor’s plan to use district debt-service reserves to balance the state budget — CCSD trustees are spending additional $81 million (out of the $106 million “found in the couch”) through two revisions of the district’s capital improvement plan.
And to think, school board President Carolyn Edwards recently accused the state of imprudent fiscal policy.