Merrill offers ‘early warning’ as another WCPS budget shortfall looms

Wayne County Public Schools’ interim superintendent told members of the Board of Education that he remains concerned about the district’s budget — and hinted that cuts might still be necessary — at the tail end of the board’s regularly scheduled meeting Monday evening.

Dr. James Merrill shared his concern after a months-long effort from Central Office leaders and a team of financial consultants to get WCPS’ financial house in order after an auditor revealed in June that the district was facing a multi-million-dollar deficit — and after school closures in the spring saved WCPS thousands of dollars.

Characterizing it as an “early warning,” Merrill said a budget shortfall remains.

“We’ve run our first payroll and we’re not balanced. We are still several hundred thousand dollars away from a balanced budget,” he said, before seemingly indicating cuts could be on the way.

“I think it’s going to be felt deeper across the organization,” Merrill said. “So, this is an early warning, if you will.”

The interim superintendent’s revelation comes the day after a records request revealed WCPS has paid Raleigh law firm Schwartz & Shaw more than $1.5 million since October 2017 — and nearly $500,000 for the 2019-20 fiscal year. (Note, that figure does not include the firm’s June bill, as, despite a request for that figure, the district has still not provided it.)

Both sums are seemingly in line with reports from both the auditor and WCPS’ newly hired financial consultant that overspending on “contract services” contributed to the district’s budget crisis.

According to the audit report’s “Statement of Revenues, Expenditures and Changes in Fund Balances,” which covered the years 2016-2019, the district finished 2016 with a deficit (the difference between revenues and expenditures) of $73,743 and a general fund balance of $7,017,875.

The next year, 2017, the district ended the year with a deficit of $778,223 — a deficit uptick of 955 percent — and a fund balance of $6,280,314.

In 2018, the district recorded a $3,491,395 deficit — a deficit uptick of 349 percent — and a fund balance of $2,755,873.

In 2019, the deficit was up to $11,982,691, a 243 percent increase from the previous year, while the fund balance moved from positive territory to $2,416,692 in the hole. However, additional liabilities increased the district’s deficit load to $5,394,060.

The auditor highlighted four areas where significant increases were posted over the same period. School Leadership increased 98 percent from 2016 to 2019, with incremental jumps until 2019, when spending spiked from $535,525 in 2018 to $1,023,760 in 2019. Systemwide Support Services, Support and Development, spending increased from $273,798 in 2016 to $1,077,298 in 2019. Significant increases also were noted in technology and financial and human resources support.

In addition, the audit firm included some statistics from the end of the 2014-15 school year.

That year, WCPS finished with a fund balance of $7,091,618 and ended the year in the black with $1,553,793. The deficits began the following year.

During a June 29 meeting, former Durham Public School chief financial officer Aaron Beaulieu, the consultant hired to help clean up the district’s financial mess after the release of the audit report, said there were many factors that contributed to the state of WCPS’ finances — from “a lack of fiscal oversight in the district” and not following statutory requirements, like passing a balanced budget resolution, to not having complete, accurate and in-balance budget documents.

He also told the board the deficits did not just pop up, but were evident in audit and budget documents presented to the board in previous years.