WS/FCS is facing a major deficit. How did the district get here, and what's being done to fix it?

Winston-Salem/Forsyth County Schools is facing a major deficit this year after a series of budgeting errors and declining state funding. In a matter of a few months, the shortfall ballooned, the state got involved and both the Chief Financial Officer and Superintendent retired. The turmoil has caused anxiety and distrust in the community, leaving many wanting answers. 

WFDD’s Amy Diaz sat down with reporter April Laissle to break down how this happened and what’s being done to fix it. 

Interview Highlights

On how the numbers have changed over time:

This all came out toward the end of March. At a school board meeting, officials basically went over a financial audit that found that they had overspent their budget last year by about $16 million. The previous chief financial officer, Tommy Kranz, took responsibility for this and said his department's revenue projections were inaccurate. He also took responsibility for spending the district's fund balance without getting school board approval, which is not the proper protocol.

So with all of those findings, the district initially said they needed to save $8 million for this year and $16 million next year in order to avoid a deficit and start replenishing that fund balance. But as time went on, more was discovered, and those numbers got higher and higher. The latest projection for this year's deficit is $42 million. They're also working on saving $45 million for next year to avoid another deficit, which would occur if they kept spending at the rate that they've been spending.

On how officials overspent so much:

There were a lot of budgeting mistakes that were made. One of the big ones is that the chief financial officer never adjusted the budget to accurately reflect how much money they got from the county. They had requested $20 million from county commissioners, and only got $7 million of that, but the CFO never went back and redid the budget to reflect that they did not get that full amount.

Another issue that officials have talked about is that they just did not have line items for all of their services in the budget. A major example of that is their contract for substitutes that cost them $12 million last year. There was no line item for that in the budget.

The other big problem is that the district filled a lot of vacancies this school year. The CFO assumed that the district was going to have vacancies like they had in previous years. But because the district filled those vacancies, that's 100 extra salaries, 100 extra benefits that the CFO did not account for in the budget.

Interim Superintendent Catty Moore talked about some of these mistakes at a recent school board meeting.

"I think that it is important as we move forward that whoever is hired as our new chief financial officer has a good understanding of protocol and practice," Moore said. "Not just best practice, but required practices."

On where the money went: 

The good news is officials are saying all of the money went directly to providing services for students. There's no indication that the money was stolen or anything like that. Basically, the district had more employees than it could afford, although officials have repeatedly said it's not like they were overstaffed. They just don't have the funding between the state and the county to support all of these people. 

The state provides allotments of positions to the district every year based on enrollment. Enrollment has been declining, so that means allotments from the state are declining. But because the district hasn’t changed their staffing levels to stay in line with what the state is allotting, they’re having to figure out how to fund all those positions the state is no longer covering. Last year, that cost them $158 million.

But officials say they don’t need fewer positions just because there are fewer total students. They’ve pointed out that the number of students who have special needs, are economically disadvantaged, or require multilingual services has gone up by thousands. So even though enrollment is down, they say the student population has greater needs and requires more resources. 

On how the district is reconciling the deficit: 

For this year, the district was able to identify some revenues to help bring down the deficit. They're owed some money from the Downtown School that they're working on recouping. They're also working on getting reimbursements for Medicaid, grants and unemployment. The school board also recently approved borrowing $6 million from the Child Nutrition Department savings account, which they will pay back.

That still leaves $28 million, though, and a big chunk of that is for vendors that have not been paid yet. The big three are for contracted substitutes, custodial services and school resource officers. The interim superintendent says she's working on negotiating a payment plan with those vendors right now, but their reactions have been, in her words, "lukewarm."

She's meeting with county and state officials, and they're all kind of putting their heads together to try to find solutions to this problem. But as of the last meeting, the only other real proposal she had was asking the county commissioners for an $18 million loan. School board members were a bit hesitant to do that, considering they very recently asked the county for $32 million and that was rejected.

It's also important to note another thing that came up at the last meeting. The interim superintendent said that the shortfall might actually be higher than projected. She said that it's possible the district owes the IRS federal withholding payments. Officials are investigating that issue, and we will know more soon. 

On savings for next year:

The district has found about $45 million in savings for next year, and they are making cuts anywhere they can. So they've eliminated take-home cars and phones for staff. They're also moving to a three-day work week over the summer so they don't have to use air conditioning in the buildings and pay for those energy costs. They've even stopped color printing to save money.

Moore decided to eliminate transportation for students to choice schools. This was a bit controversial, but choice transportation, she says, is just too expensive, too inefficient, and it's not something other districts offer for those reasons.

They've also eliminated more than 200 positions already, and they're asking now for principals to make more reductions ahead of the next school year, to better align with allotments that are given by the state. So they estimate that's going to impact another 200 people.

But reducing positions doesn't necessarily mean firing people. Their goal is that these people will move into other roles in the district or fill vacancies. But it's just not a perfect system. So a testing coordinator might need to become a teacher assistant, a teacher might have to move into another area that they're licensed in but they don't prefer. 

On the community impact: 

I think it's caused a lot of distrust. There's so much talk about this on social media, from people who work for the district and from parents who are worried about what school is going to look like next year with all of these cuts.

And for teachers and staff, there's just so much uncertainty about what their jobs are going to be next year, if they're going to have to change positions or move to a different school. And even those that retain their current job, they're going to have to make do with fewer resources, maybe they're going to lose a program that they had previously relied on.

And actually, the interim superintendent at the last meeting started her budget presentation off with an apology to the community for all of the chaos and the broken trust, and said it was something the district was going to have to work really hard to rebuild.