By GARRY RAYNO, InDepthNH.org

CONCORD — A revolving loan fund to aid Claremont School District address financial issues associated with a $5 million deficit barely passed the Senate Education Committee Tuesday.

The loan program would allow the school district to access state adequacy aid to allow the schools to remain open through this and next two school years, but would require the district to do extensive monthly reports, be subject to performance and fiscal audits by the Legislative Budget Assistant and allow students to access the state’s voucher program without counting toward the 10,000 student cap this school year for the Education Freedom Account program.

The amendment would also require the school district to put a warrant article to cap school district budgets at the meeting the district votes to approve the agreement and would charge the district 3.8 percent interest on the loaned money.

At the public hearing last month on the “fiscal stabilization loan” agreement worked out among the school district, the state treasurer and the Department of Education, several Republicans on the House Education Committee objected to the plan, sought more time to craft the legislation, wanted greater financial restraints on the district and greater accountability for the school administrators who oversaw the district’s finances leading to the deficit.

The new provisions approved by the Senate committee in a party line, 3-2 vote, were worked out with Rep. Jim Kofalt, R-Wilton, who serves on the House Education Funding Committee.

At the earlier public hearing, he said accountability was largely missing in the proposed plan.

“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.”

While the bill is aimed at helping Claremont recover from several years of fiscal mismanagement at the School Administrative Unit level, the committee was told the intent is to make the fiscal stabilization loans available to any other school district that finds itself in financial trouble.

Senate Education Committee Chair Ruth Ward, R-Stoddard, said the changes were a compromise allowing the House to concur with the Senate changes and send the bill to the governor so the money would be available to Claremont in the spring when it is needed to cover cash flow.

But Democrats on the committee objected to the high interest rate tied to the federal reserve’s prime rate and to allowing students to join the EFA program mid year, which could have financial implications for Claremont if they lose a fair number of students.

At the Senate meeting Tuesday, Sen. Suzanne Prentiss, D-West Lebanon, suggested the interest rate was too high as the community would be borrowing money early that it would receive eventually and noted other state revolving loan funds have interest rates of 2 percent. 

She suggested continuing to negotiate with the House to lower the rate before the Senate acts on the bill in January.

But Sen. Dan Innis, R-Bradford, said he had no problem with the interest rate.

“We do not want this to feel like an easy bailout,” he said. “We do not want to encourage this on a continual basis.”

Sen. Debra Altschiller, D-Stratham, noted allowing students to leave public school mid-year for the EFA program was not something that ever came up during the public hearing. 

She said the current proposal and the one presented earlier had numerous guidelines and reporting the school district has to follow to access its adequacy funds early and requires greater accountability.

And now the new amendment extends the 10,000 cap on EFA enrollment with an exception for the Claremont students and maybe other districts that allows students to exit public schools for a program that also draws on public funds “that has none of this kind of accountability,” Altschiller said. “I’m feeling a little taste in my mouth, a bit of a poison pill.”

She was told that Kofalt believes that faced with uncertainty is the reason to give parents a greater choice in finding the education that is best for their children.

Altschiller tried to have the EFA section removed from the bill, but was unsuccessful down the same 3-2 party line vote.

The bill approved by the committee would also add prohibitions on gross financial mismanagement, misappropriation of public funds, and failure to account for public funds to the state Education Code of Conduct, allowing the State Board of Education to suspend or revoke credentials for superintendents that mismanage public funds.

The bill 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.

The financial issues the school district faces have occurred over the last three school years, with audits not completed, bills not paid including to the state retirement system and health insurance, revenues and expenditures not reconciled and an ongoing ledger of the district’s finances not kept.

Records were not 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, according to those currently overseeing the district’s financials.

“When we first learned of the gross financial mismanagement that has put the Claremont School District in such peril, my top priority has been to ensure that all Claremont students would be able to finish the school year at the school of their choice. For most Claremont families, that means Stevens High School, Claremont Middle School, or their local elementary school,” Ward said after Tuesday’s meeting. “The changes we adopted today create the opportunity for Claremont to access state Adequacy Funds early, helping to alleviate the district’s severe cash flow challenges, while ensuring accountability and without any risk to New Hampshire taxpayers.”

Garry Rayno may be reached at garry.rayno@yahoo.com.