Hillsborough school district has been dipping into emergency funds to cover expenses

TAMPA — In the last four years of superintendent MaryEllen Elia's administration, the Hillsborough County School District went on a spending jag, tearing through more than half of its $361 million reserve fund, officials revealed this week.

Left unchecked, the pattern would have resulted in another operating deficit this year — a $75 million hit that would bring the fund down near its legal minimum threshhold.

The situation has surprised Elia's successor, unsettled School Board members and put bonding agencies on alert, which could lead to the district facing higher interest rates when it has to borrow money.

Jeff Eakins, who took over as superintendent after serving as Elia's deputy, says he was caught off guard when he realized the district used $68.5 million in non-recurring funds to meet this year's payroll.

"We're not in any kind of financial crisis," Eakins told the Tampa Bay Times editorial board Tuesday. But, he said, "we need to put some measures in place right now."

Eakins was careful not to criticize Elia, a onetime national finalist for superintendent of the year who, after her Jan. 20 firing in Hillsborough, landed a job as state education commissioner in New York.

Asked if he knew about the spending imbalance before Elia left in March, Eakins said, "not to this extent." Meeting one-on-one with School Board members in recent weeks, he was similarly discreet, said member Sally Harris. "He never mentioned names, just numbers," she said.

Elia's critics on the board were far less subtle.

"We have time and time again requested information that was not given to us, as has been documented for years in her evaluations," said board member April Griffin.

Added member Cindy Stuart: "To me, this validates every reason why we pushed the yes button to fire MaryEllen."

Elia did not return calls for comment Monday and Tuesday.

Board member Melissa Snively, who voted against firing Elia, said of the controversy, "I hope it doesn't overshadow the good things she did in this district. She did a lot of positive things for the children that put us on the map."

While disappointed to learn of the dwindling reserve fund, Snively said, "I'm not one to dwell on the past, except what we can learn from it."

Eakins said he is still gathering information as he tries to get a full understanding of the budget issue.

For example: Teachers were given pay raises in the summer after negotiations with their union. School Board members were told how much those raises would cost.

But those were estimates that fell short of the real number because they did not take into account a new pay structure offered under Empowering Effective Teachers, the system Elia initiated in 2009 with a grant from the Bill & Melinda Gates Foundation. That's because teachers don't decide whether they want to be included in the system until the fall — well after the contract negotiations — and many more opted to be in the system than the district anticipated.

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A study is under way to calculate those extra costs, which could run as high as $50 million.

It is clear, Eakins said, that the district, which serves more than 200,000 children, is spending money to extend programs that were launched with temporary funding from foundations.

The Gates grant is one example, as it is in its final year of funding. Expenses anticipated for 2015-16 include $11.3 million for teacher peer evaluators and $6.1 million to pay mentors. Eakins said he will take a close look at these expenditures to see if they are worth sustaining, or if they should be reduced.

"Ultimately we want the money to be driven to teachers and students and classrooms," he said, promising return-on-investment analyses of all programs and contracts.

Eakins said he does not intend for instruction to suffer, and does not envision layoffs. While there might be some increases in class sizes, they will be within the law and, in some cases, will allow children to remain with teachers who have gotten to know them.

News of the spending imbalance comes after Hillsborough spent years building a reputation for strong financial performance. Elia often said proudly that Hills­borough was unusual in that it weathered the recession without laying off any teachers.

Now, Eakins said, two of three bonding agencies have issued negative reports about the district. While the district has not been downgraded, it could be if things do not improve. Under that scenario, Hillsborough could face higher interest rates if it had to issue more bonds.

While some board members say they were in the dark about the spending imbalance, chief business officer Gretchen Saunders said there were no secrets. The administration shared financial statements with the board regularly and posted them on the meeting agendas. "Was it highlighted? No," she said, referring to the fund balance. Board members did not ask for a public discussion, she said.

As for why Eakins was not fully informed, Saunders said some information about spending was discussed at Elia's 6 a.m. cabinet meetings. And Eakins, who was in charge of instructional and not operational matters, was not always at those gatherings.

"I certainly wasn't having conversations about the fund balance," he said.

Some board members said the budgets that were made public were difficult to understand and they did not get clear answers when they asked direct questions of Saunders and Elia.

"I tried to dig for information," said Harris, who ran for her board seat in 2014 and cast the tie-breaking vote to fire Elia. "But unless you are an expert, it's impossible to get a real budget and real figures."

Stuart, who often asked questions about spending, said she was stonewalled, and despite all her questions was as surprised as the others to learn about the spending issue.

"We had no idea. We honestly had no idea," she said. "We never got the full picture."

Snively said that rather than placing blame, it's important to work on better communication between district officials. "The board needs to understand the finances even more so than ever before," she said. "The board needs to be educated and informed in any area where we're making decisions. It's just as much their responsibility as the district's."

Eakins said it is too early to assign a target dollar amount for the reserve fund, also known as a fund balance. If it grows too large, the district could be criticized for not putting the money to good use.

"We're always keeping our eye on the fact that we have kids in need in our schools every day," Eakins said. "So you have to balance what you're doing with the fund balance with what you're going to do for kids."

Alberto Vazquez, Eakins' chief of staff, has been asked to study each district division to look for savings. School principals are being asked to see themselves as chief executives of their campuses.

Later, Eakins said, the district's audit department — which now reports to both the board and the administration — will see if there are more expenses that can be cut. "When a decision needs to be made that's good for kids, we want to be able to say, 'Yes, we can do that,' " he said. "But we have to be stable in our funds to be able to make those decisions."

Contact Marlene Sokol at (813) 226-3356 or msokol@tampabay.com. Follow @marlenesokol.