In The News › Cash-strapped city, school board must weigh options

Apr 10, 2006

Source: New Orleans CityBusiness

Cash-strapped city, school board must weigh options

Cash-strapped city, school board must weigh options
by Mark Singletary

In a really cool move last week, the Public Affairs Research Council of Louisiana and the Bureau of Governmental Research combined resources and published a policy paper on the fiscal health of several hurricane-devastated Louisiana parishes and the political subdivisions within them.

The executive summary was brief: Cameron Parish in the southwest corner of the state has the easiest road to follow toward recovery and our neighbor St. Bernard Parish has the hardest job returning to normalcy.

As for Orleans Parish, the city of New Orleans and the Orleans Parish School Board are out of money, time and options. The best hope for the organizations might be bankruptcy, or so says the report, without taking a position on whether it’s a good idea.

I say bankruptcy is a decent idea for the city and really bad option for the school system.

The city and the public school systems forecast impending cash shortfalls that future revenue tax streams and obligations don’t appear to meet.

City revenues are expected to fall from $260 million in 2005 to a projected $110 million this year. To maintain current spending levels for the remainder of this fiscal year, the city plans to borrow all it can, use the cash it has in the bank and then say a couple of Hail Marys to fund an estimated $147-million shortfall.

The city already owes $964 million. Debt service on that money alone is $96 million each and every year. Payments on just that debt service are likely to exceed property tax collections this year, according to the report.

Unless lots more visitors and conventioneers come to town, we are in a heap of trouble.

The school district’s problems don’t seem as desperate at first blush. But read between the lines, please.

The school district is a hollow shell of its former self. Spurred by its historical failures, the Louisiana Board of Elementary and Secondary Education took control of 102 of the district’s 118 campuses last year. Financial management and control was ceded last year to an independent consulting company, Alvarez and Marsal of New York, after decades of fiscal mismanagement and malfeasance.

The new school district numbers sound pretty good. Projected revenues are supposed to be $235 million in 2005-06, or 55 percent of the pre-Katrina budget, but they have only 16 campuses and no students. Remember, however, as the report points out, that the school district must pass along a fixed amount per pupil for all students controlled by the state after the takeover.

After really reading the report, the school district that forecasts an operating surplus of $12 million is actually going to run out of cash within months. Voodoo accounting is raising its ugly head again.

Without getting bogged down in the details, it’s safe to say the city and the school system are broke — dead broke — with few good options.

One is a declaration of bankruptcy. But it is not an easy thing to do for a governmental unit to do, nor should it be.

To declare bankruptcy, the municipal petitioner must get permission from the state government, conduct good-faith negotiations with existing creditors, then borrow all they can from existing loan lines. After jumping through all those hoops, only then can a city get a new start.

This is fine and dandy for the city of New Orleans. There is nothing to indicate malfeasance, which involves criminal negligence, in the way the city has been managed. While not a shining example of efficiency, the city administration far outshines that of the school board, where malfeasance has cost tens of millions of dollars.

The school district is a completely different situation.

Never before in my experience of watching and reporting on schools have I seen a more pitiful excuse for something called the “board of education.”

Pick a category and school board officials have disgraced us. Facilities were so bad before Katrina that most of the buildings should not have been used. School books were not available. Safe conditions for students and teachers were rare. The list of problems is longer than my willingness to list them.

Suffice it to say that giving these folks a new start, or a new anything, is not a good idea. Any solution that eliminates past sins and shortcomings has to be contingent on BESE’s assumption of the entire system. Any other solution makes us all culpable in continuing a neglectful, despicable waste of money, energy and the future of our children.

BGR and PAR, yet again, earn high marks for a report laying forth our options. It’s up to us to ensure the right medicine is used for each of these sick patients.•

Publisher Mark Singletary can be reached by e-mail at mark.singletary@nopg.com, by phone at 293-9214 or by fax at 832-3570.

Apr 10, 2006

Source: New Orleans CityBusiness

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