Overview:
Claremont's schools are expected to remain open for the academic year after the School Board accepted a $4 million loan from Claremont Savings Bank to cover costs. The loan will be paid back in April using the district's education adequacy aid grant. The district is believed to be facing a multimillion deficit and is looking for ways to reduce spending and cut costs. The CSB loan will not add to the deficit or require new taxes. The administration stressed that the path forward rests in spending less, and closing the deficit by sending a bill to taxpayers is not feasible.
CLAREMONT — School officials this week told residents that the city’s schools will remain open for the entire academic year, something that was in doubt in recent weeks as the district grapples with an unprecedented fiscal crisis.
The reassurances from Patrick O’Hearn — the district’s recently named interim superintendent — came during a Wednesday meeting at which the School Board unanimously voted to accept a $4 million short-term loan from Claremont Savings Bank to help cover costs.
The loan, or Reimbursement Anticipation Note, is intended to help the district shore up its cash position while it continues to look for ways to reduce spending and shrink a projected deficit now estimated to be about $3 million.
The loan will be paid back in April using the district’s education adequacy aid grant, a per pupil amount of $4,100 every New Hampshire district receives. Interest on the loan of about $70,000 will come out of the current budget.
The administration stressed to the public at Wednesday’s meeting that the loan will not add to the deficit or help reduce it, nor will it require new taxes.
“It is like a payday loan,” James O’Shaughnessy, the school district’s attorney, said. “There will not be new taxes to pay it.”
The $4 million loan will be used to pay overdue invoices including food service, health insurance and retirement, said Matt Angell, who was hired last month as comptroller and later as acting business administrator.
“Closing the deficit by sending bill to taxpayers is not feasible, and the solution rests in spending less.”
James O’Shaughnessy, school district’s attorney
Angell replaced Mary Henry, who is on paid administrative leave. Superintendent Chris Pratt also is on paid administrative leave.
Still, more spending cuts appear likely, based on comments Wednesday night by O’Hearn and Claremont School Board Chairwoman Heather Whitney.
“We are trying to cut our operating budget as much as possible so as not to require a special appropriation. We can’t guarantee it, but that is our goal,” Whitney said.
Closing the deficit by sending bill to taxpayers is not feasible, O’Shaughnessy said, and the solution rests in spending less.
“You can’t absorb the hit to the tax rate,” he said. “We are cutting as much as we can now and will be really fiscally responsible over the next year and a half.”
Angell said if necessary he will look to “bridge some payments” to the next fiscal year to avoid the need to borrow money.
Angell apologized for having to recommend steep cuts, which included forgoing the hiring of 19 new teachers and eliminating other 20 non-teacher jobs.
“I am truly sorry to all the people who were let go,” Angell said. “I am hoping we did cut enough.”
Exactly how much the district needs to cut in order to make revenues match expenses is not clear.
“The general ledger is completely unreliable,” said O’Shaughnessy. “What has been spent has not been entered.”
The forensic accounting challenge was described Wednesday night in one slide of a PowerPoint presentation: “Mr. Angell is manually rebuilding the general ledger, entering old transactions and reconciling the District’s cash flow, assets, and liabilities. He is also working to determine how much the recent budget cuts will impact the deficit.”
The district’s financial standing won’t be known until Angell completes his work, the presentation stated.
“Matt has to figure out what the financial picture is,” O’Shaughnessy said. “We need a couple of more weeks to know the deficit we are dealing with.”
Looking ahead, O’Shaughnessy said options include getting access to state adequacy aid on a revolving basis or borrowing money to cover the debt, both of which would require legislative action.
‘Administrators failed the taxpayers’
Wednesday’s meeting included about three hours of discussion that included an overview of how the district found itself in a cash flow crisis along with a public hearing, with most comments and questions about topics other than the loan.
Residents were more focused on determining who was responsible and holding them accountable.
“Career administrators failed the taxpayers,” said resident Chris Cogswell, who thought legal action should be considered. “What rises to gross negligence? I bristle when I hear they are protected. That is offensive to the taxpayers of Claremont. We are asking that they be held accountable.”
Resident Jerry Cross said he doesn’t believe this is just a “bookkeeping error. I have to wonder if there is malfeasance here.”
Others chastised the School Board for not paying closer attention in the past and for not demanding that previous administrators provide information that could have revealed the financial crisis long before this summer.
Whitney apologized at the School Board meeting for the appearance that the board and administration were deliberately withholding information.
She likened the constantly changing situation the last few weeks to being at the beach expecting a “little tide to come in” then being hit with a “tsunami.”
“We had to operate so quickly to meet payroll and our invoice obligations,” Whitney said. “There was no time to talk about rebuilding. We had to get people to higher ground. We are going to work toward communicating more effectively.”
“With a stable number from Mr. Angell at the end of the month, we can begin moving forward with clarity.”