WCPS, once $5 million in the hole, is now debt free

Wayne County Public Schools is officially out of debt.

The Board of Education approved paying off the district’s $3 million loan to the School Nutrition Fund at a special called meeting Tuesday.

The payment, which will be made from a $3.4 million fund balance in one of two local funds accounts, will include a reimbursement of an estimated $60,000 in interest, said Leslie Rouse, the district’s chief financial officer.

Rouse said that the district maximized the use of local funding, the state allotment, and federal funds that came in as a result of COVID-19 to accumulate the money necessary to pay off the district’s debts, which also included a $2 million loan from the state, which was used to cover a deficit last year.

That debt has also been retired, making the district now free from the encumberments that resulted in the resignations of former superintendent Dr. Michael Dunsmore and finance director Michael Hayes in 2020.

Rouse and Interim Superintendent Dr. David Lewis said that the financial records and fund balances were reviewed by the district’s audit team to make sure the payment would not harm Wayne County Public Schools’ financial picture.

“We believe that we are in a position to pay off the entire debt,” Lewis told the board before the vote Tuesday.

Also in attendance at the meeting was Aaron Beaulieu of School Operations Specialists, who has been “instrumental” in not only helping the school district get its financial picture under control, but also in coming up with a new system to manage its financial dealings moving forward, Lewis said.

Key to that recovery was former interim superintendent Dr. James Merrill, who Lewis and Board Chairman Chris West said set the course for a new way of handling budgets and spending.

That included understanding that there had to be regular communication about the budget with the board, staying within teacher allotments and scrutinizing every purchase, fund transfer and expenditure.

Beaulieu said the fact that the district was able to recover the deficit and clean up its financial position in a year was “amazing.”

He said the district’s administrators should be the model for “how to get out of” a financial crisis.

He added that while the district benefitted from the reduced costs created by COVID-19 and some early use of COVID funding, the repayment was not just a result of juggling funds.

“You have really become fiscally responsible,” he said.

That includes replenishing the district’s fund balance, strengthening carry-overs and preserving $80 million in Elementary and Secondary School Emergency Relief funding, he added.

State education officials recently approved the district’s plans to use some of that $80 million to maintain its second- and third-year beginning teachers, who had been in danger of being cut as the district worked to stay within the state allotment for teachers’ salaries.

Lewis added that getting the fund balance in shape was not just a matter of looking around for unused funds. He credited central office staff, administrators, teachers and others with not only looking for ways to save money but embracing the principle of living within the district’s means, which he said was created and modeled by Merrill.

“Everybody learned how to live without,” Lewis said.

The next step, he said, is staying on track.

“Now, our job is to make sure we never find ourselves in this situation again,” he said.

West agreed that the path to the district’s repayment of more than $5 million in debt was about more than just juggling dollars. It was a change in the way district personnel look at spending, budgets and fiscal accountability.

But he added that there is no question that tough advice from consultants — and intense savings from COVID-19 closures — are why the district was able to retire the debt in 12 months and move into a more responsible financial plan.

And West added that the key to staying fiscally responsible and avoiding another deficit are changes in philosophy — especially larger class sizes — that are a requirement to keeping that balance under control.

West said that when he first heard about the $5 million debt, which included a $3 million loan from the School Nutrition Fund, and the district’s negative fund balance, and then when he realized that the district could not meet its payroll obligations requiring an additional $2 million in the form of a loan from the state, with interest, he was shocked.

“You are kind of wondering, where do you go now?” he said.

West said hiring consultants, including Merrill — although a major additional expense at the time – was the first step to undoing the damage.

“Every penny we spent was well worth it,” West said.

Redoing the budget, keeping an eye on expenses and getting right with state allotments, reporting procedures and spending requests were important, but West added that reduced costs brought about by the extended COVID-19 pandemic closures were critical to getting the debt resolved quickly.

“This wasn’t supposed to happen (repaying the debt in a year),” West said. “As devastating as COVID-19 was to our students and our schools in so many ways, we were able to save money.”

Additional state COVID dollars and federal funding, including the Elementary and Secondary School Emergency Relief dollars, allowed the district to cover expenses by the book while saving money toward a fund balance.

Recently, the district announced that through a plan developed by Lewis, with advice from Beaulieu, ESSER funds would be used to keep from having to let the district’s beginning teachers go, while the district makes staffing changes, hopefully through attrition and resignations, to get its teacher allotment in line with state funding.

West said it is an indicator that school personnel understand that the days of just making any expense request without regard to budgets or limits are over.

“From custodians and bus drivers to teachers and principals, they have learned to do more with less,” West said.

That mindset, he added, was first introduced by Merrill and has since been reinforced by Lewis.

“It has been a team effort for everyone,” he said.

Lewis, who was previously in charge of accountability and information technology, worked with Merrill and Beaulieu to understand school financing, and that experience has helped him become a critical part of the district’s financial team, West said.

And that means understanding that moving forward, there had to be some changes.

“Although the line has been very hard, it was a line we had to hold to,” West said.

Also keeping the district in strict financial compliance is Rouse, who West said does not hesitate to tell administrators and Central Office staff that an expense was not in line with the budget or standard financial practices.

“She has held the line,” he said.

West said the community will notice some changes in how the district does business, especially with regard to class sizes.

The effort to provide smaller class sizes, without the funds to support it, is how the district, in part, got into the financial mess in the first place.

Other districts, West said, have already made adjustments to stay in line with the state allotment for teachers and administrators.

“We are going to have less individualized learning because of those larger class sizes,” he said. “We can no longer afford to live outside those means.”

He added that the district is looking at ways to offset the effects of those larger classes.

Also under question in the wake of the district’s financial crisis was the overspending on consultants, including the contract for attorney Richard Schwartz of Schwarz & Shaw, which included hundreds of thousands of dollars in legal fees just in 2019-20 alone.

The district is still employing Schwartz & Shaw.

West said the overspending on the legal fees was “our fault,” adding that Schwartz and his staff are working with board and district personnel to cut those costs.

“We have to do a better job of minimizing the number of hours we require (Schwartz & Shaw’s) services,” he said.

West said he believes that the firm’s expertise has saved the county money.

When asked if the board and district have a plan in place to greatly reduce the attorney line item, West said he hopes that the district will not have any of the kinds of cases this next year that would require significant attorney fees — like those associated with special education or student concerns or staff questions.

“A lot of those costs are based on cases,” he said.

He said he was not sure of the exact costs so far this year, but added that the board is focused on keeping not just attorney fees, but all expenses in line.