Community rallies when a Colorado school district faces a budget crisis

1/14/03 - Faced with a $13.8 million deficit caused by accounting errors, the St. Vrain Valley school district in Longmont, Colo., accepted a $9.8 million loan from the state Dec. 20.

The plan, proposed by Colorado Treasurer Mike Coffman, allowed the district to meet its December payroll for its 2,400 employees. But it comes with severe conditions, including a 35 percent budget cut, a 7.1 percent cut in all district salaries, and a hiring freeze through June 2004.

In addition, administrators, who used to pay $1 a month for family health insurance, now will pay the same rate as teachers: $1 for themselves and the regular premium for the rest of their families. This would be equivalent to a 13 percent pay cut for administrators.

In accepting the bailout, school board members told the media they felt they were pushed into a corner and had no other choice but to agree to Coffman's plan.

"We're dammed if we do and we're dammed if we don't," says school board Vice President Rick Samson. "If we don't sign this agreement, we can't pay our people. . . . If we do sign the agreement, we've been notified that we're going to be sued by the Colorado Association of School Executives for modification of contract, contrary to state law."

A few days later, district officials announced they would try to negotiate for a multimillion dollar loan from Wells Fargo Bank. School officials say Coffman's bailout proposal is too harsh, removes local control, and might not be interest-free as originally thought.

While a private, commercial loan will have interest costs of about $1.5 million, district officials say it would be less oppressive than the plan offered by the state. Coffman originally had offered no-interest loans worth a total of about $30 million to get the district through the next two years.

In addition to erasing the $13.8 million deficit, the private loan would remove about $20 million of interest-free loans given to the 22,000-student district by the state Treasury. In addition to the payroll loan, the district owes the state $12 million from loans made last year.

Coffman, who calls the district "mathematically challenged," says if the bailout plan were not tough and he did not maintain oversight of district finances, he would be breaching the fiduciary responsibility to the state.

In a written release, Coffman stated, St. Vrain's "bond rating has plummeted to the status of junk and the board's only focus seems to be on how to maneuver out from under my control so it can help administrators at the expense of the classroom."

The St. Vrain school board discovered the shortfall in November, just as voters approved a $212 million capital facilities bond and blames mismanagement for the financial crisis.

An independent audit showed Assistant Superintendent Ken Kirkland and Finance Director Walker Nielsen mismanaged the budget but did not commit fraud. Prosecutors are investigating. Kirkland has been suspended, and Nielsen resigned.

Meanwhile, state Sen. Ron Tupa asked Attorney General Ken Salazar to determine whether the deal struck between Coffman and the district for a loan violates the state's tax and spending-limitation amendment.

Tupa says he does not believe state law allows governments to carry over a deficit from one year to the next. He says it would be better for the district to come up with a plan to pay back the money this year rather than risk a lawsuit that would allow a judge to make decisions for the district.

Coffman maintains the loan was made according to state law, which allows districts to borrow from the state if they need money. He says accounting regulations require the money to be paid back by June 2004.

The deficit has prompted some parents to ask that their children be moved to neighboring districts. Other parents are buying classroom supplies and offering to pay for groceries and utility bills to keep first-year teachers and principals in their jobs.

Community business leaders led by Longmont United Hospital and joined by parents started a movement called Support Our Students and raised more than $40,000 in donations, says district spokesperson Nancy Herbert.

Five Safeway stores raised about $20,000 in donations for the district, she says. A Chevrolet dealership donated $15,000 and forgave the district's $10,750 bill for renting driver education cars. IBM donated 4,500 reams of paper.

"I believe that the most tragic result of this financial mismanagement is that the children and staff have been called upon to carry the burden for something for which they are not responsible," says Superintendent Randy Zila, who has asked the school board to reduce his $130,000 salary by 14 percent.

Zila says he believes "our taxpayers - the same taxpayers that are our staff, our children's families, our volunteers, our community members - deserve the financial integrity St. Vrain Valley school district should and will provide again."