By GARRY RAYNO, InDepthNH.org
CONCORD — While some lawmakers urged quick action to help Claremont schools stay open as the district struggles with a $5 million deficit, others were cautious not wanting to create a precedent as other school districts face similar calamities.
Lawmakers attending a joint meeting of the Senate and House education committees Tuesday discussed a proposed amendment that would allow the Claremont School District to borrow up to 75 percent of its $18 million state adequacy aid the district receives annually in four payments and pay it back from future adequacy grants plus interest which was estimated to be about 2 percent.
Although the Senate Education Committee was expected to make a recommendation on the proposed amendment establishing the revolving loan fund from Chair Sen. Ruth Ward, R-Stoddard Tuesday, they did not with Ward saying they needed more time to consider the proposal after a two-and-a-half hour public hearing.
A number of House Education Committee members objected to the plan and sought more time to craft the legislation and some wanted greater restraints on the district and greater accountability for the school administrators who oversaw the district’s finances.
Rep. Jim Kofault, R-Wilton, was concerned there could be other school districts facing deficits, maybe not as bad as Claremont’s, coming to the state seeking help.
He suggested they take more time “as good legislation rarely emerges from a rushed process,” and Claremont does not have an immediate cash flow crunch.
“With local control comes local responsibility and accountability for the local school board,” Kofalt said. If you “come to the state to ask for an extraordinary measure, the state should have some guardrails and requirements school districts adhere to.”
He said accountability was largely missing in the proposed plan.
But Rep. David Luneau, D-Hopkinton, said Claremont schools are in a financial crisis.
“We as legislators need to act right now. The kids in Claremont deserve a high quality education just as all the kids in New Hampshire deserve,” he said. “We cannot turn a blind eye to fiduciary, but what is proposed today is the least the state can do to mitigate the damage so the district can recover and meet the educational needs of their community.”
Attorney James O’Shaughnessy of the Manchester firm Drummond Woodsum, who has been hired by the school district to help resolve its financial crisis created by the $5.1 million deficit, said the problems only became apparent to the district’s school board in August when auditors alerted the panel to financial irregularities in the School Administrative Unit 6’s accounting and bookkeeping practices.
O’Shaughnessy explained the school district’s situation, the actions it has taken to address the shortfall, and what it intends to do going forward.
The Claremont Savings Bank approved a revenue anticipation note of $4 million that is due April 17, 2026, that has provided the district with the needed cash flow to pay its bills and keep schools open, O’Shaughnessy said, but after that is paid off additional money will be needed to meet the district’s ongoing obligations and to prepare for the next school year beginning in the fall of 2026.
“April to Sept. 1 will be a very difficult time for cashflow,” he said. “We could run into a situation like we were in last fall — if we could open school — that is why the revolving loan fund is so important.”
Under the plan the Claremont School Board, the Department of Education Commissioner and the State Treasurer would need to sign off for the money to be released by the state.
O’Shaughnessy said school officials are concerned they may not be able to secure another revenue anticipation note from the bank with deficits striking other school districts as well. Potential deficits have been projected for the Concord, Manchester and Goffstown school districts along with others resulting from the School Care midterm reassessment of health insurance premiums.
O’Shaughnessy said it is necessary to start school on time next year so there is some stability for students, parents, community, vendors, special education providers and contract schools, so they will know the district is solvent into the foreseeable future.
The district wants to avoid the stress and anxiety experienced this fall, he said.
Under the plan the district would have until the end of June in either 2029 or 2030 to repay the money fronted by the state, which O’Shaughnessy said would give the district flexibility and a safety net to get back on its feet, although the plan is to erase the deficit by the end of the next school year.
“If there were alternatives,” he said, “we would not be here.”
Matt Angel, interim district business manager, said he had hoped to clear the deficit by the end of this school year, but when the district received its adjusted assessment from School Care, that was no longer possible.
“The district does not have other options,” Angel said. “Without this, the district is really at risk and that is not good for the community or the state of New Hampshire.”
The Claremont School District had a deficit for the 2022 fiscal year, but that was cleared, O’Shaughnessy said, and ended that year with a small surplus. The financial issues the school district faces have occurred since that time, he said.
Audits have not been completed, bills have not been paid including to the state retirement system and for health insurance, revenues and expenditures not reconciled and an ongoing ledger of the district’s finances not kept.
Angel said he often receives year-old bills of $50,000 or more that have not been paid with no purchase order authorizing the expenditure.
Records were adequate to allow the district to spend down federal funds, or not used for their intended purchases which caused the state to withhold the federal money, former employees were continuing to receive health insurance and mistakes were made on employees’ withholding for their share of insurance premiums, lawmakers were told.
One lawmaker asked if the issue was professional incompetence or criminal neglect, but O’Shaughnessy said that is what a forensic audit will hopefully determine once the initial crisis passes.
Other lawmakers questioned the oversight of the Claremont School Board, noting some financial issues were raised before this summer and members knew there were problems with administrative accounting practices.
O’Shaughnessy said past administrators did not not regularly inform the board of the district’s financial situation and did not indicate the extent of the problems.
He noted the board has obligations to oversee what the SAU is doing, “but to some degree, they did not know what they did not know.”
To reduce the deficit, the Claremont School Board voted not to approve 19 educator contracts it had made prior to the opening of school, and cut paraprofessional, secretarial and custodial staff along with a significant administrative staff turnover with a total of 40 positions eliminated saving approximately $4 million.
The board also voted to close one elementary school and moved classes to the other two elementary schools and unfunded all sports teams and all other extracurricular activities and sought donations to continue the programs.
They also made changes to the health insurance program to reflect current staffing, instituted a hiring freeze so there are no substitute teachers and made other administrative changes.
Angel estimated the district would have a $1.9 million deficit at the end of this school year and he hopes to eliminate any deficit next school year.
Rep. Rick Ladd, R-Haverhill, proposed changes to Ward’s amendment that would have the district make monthly reports on its deficit, cashflow and audits and would have the state Treasurer withhold any advances if the reports are not made on time, and he proposed ending the revolving loan program by June 30, 2029 not 2030.
Rep. John Cloutier, D-Claremont, noted his community has had a couple of rough months, but said the school system is very good and it is a shame what it has gone through with significant budget cuts and tough decisions that had to be made.
He urged the committee to pass the amendment, noting “this is not a grant or a giveaway, but would help us get through next year and keep the schools open and hopefully open next fall.”
National Education Association NH president Megan Tuttle also urged lawmakers to pass the amendment.
“This is an investment in students, they bear the brunt of your actions,” she said. “We may need more discussion going forward, but we are here today for Claremont.”
David Trumble of Weare noted if the state adheres to the recent ConVal education funding decision, Claremont would be receiving almost $5 million more in state education funding aid.
“The state bears some responsibility for the financial problems in Claremont.” he said, noting the “state’s (education) funding system makes that almost inevitable.”Trumble said other districts will face the same problems because New Hampshire pays 20 percent of the cost of public education when the rest of the country pays 50 percent.
“You must look in the mirror,” he said, “you bear some responsibility.”
The committee will meet again to decide what to do with Ward’s amendment.
Garry Rayno may be reached at garry.rayno@yahoo.com.