October Surprise: NOLA Schools Learn They’ll Lose at Least $20M in Funding

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Updated Nov. 18

On Nov. 8, Orleans Parish School Board leaders informed school leaders that the projected deficit had grown to at least $36 million and could still increase in coming months. To offset the shortfall, which comes to at least $1,000 per student, district leaders hope to tap reserves to loan schools some $15 million. On Nov. 14, Superintendent Avis Williams announced her resignation, effective Dec. 1. 

Three months into the academic year, New Orleans school leaders have learned that because of a series of miscalculations by district officials, their funding will drop dramatically, starting with their October payment.

The early back-of-the-envelope math is alarming, according to financial consultants who help the city’s schools manage their budgets. The initial estimate is that annual funding will fall by at least $20 million.

NOLA Public Schools leaders say they are working with city officials, who collect the taxes that help support what was until recently an all-charter district, to pin down the exact amount. But so far, there has not been an official calculation of how big the error is.

In the meantime, school administrators say they have only rough, varying estimates of how much lower their actual payments will be, no idea how long the shortfall may affect their budgets or whether their allotments will continue to decrease as the district reworks its ledgers. 

“The impact of $700 to $900 per pupil for a school of 500 students could translate to the loss of six or seven teacher positions,” says Joe Keeney, founder of 4^th Sector Solutions, a consulting firm that provides charter schools with financial and administrative services. “It could be upward of $400,000 for some [individual] schools.” 

The timing makes the red ink especially problematic. New Orleans schools, like many throughout the country, are struggling to survive the so-called fiscal cliff, the one-two punch of enrollment declines — which translate to less state funding — and the end of federal pandemic recovery aid.

“We are a quarter of the way into our school year,” says Rhonda Kalifey-Aluise, CEO of the city’s largest charter network, KIPP New Orleans Schools. “There is no way to say, ‘Okay, I have to cut $500-$800-$1,000 a kid.’ It’s impossible to do. These numbers are so big.” 

At an Oct. 22 school board meeting, Superintendent Avis Williams said she is researching options. “I do take responsibility for this happening because it was on the district’s watch,” she said.

NOLA Public Schools typically tells its 67 charter schools in March how much money they can expect to receive for the following school year, including local property and sales tax revenue. They use those estimates to draw up their budgets for the year. Schools get the funds in monthly payments, and near the end of the academic year, small expected differences between projections and actual revenue are reconciled.

For fiscal year 2024, the district’s finance team projected an 18% increase in income from property taxes and a 3% hike in sales tax revenue. But it based those estimates on the full calendar year, instead of the fiscal year starting in July. Property tax collections actually rose by slightly less than 9% while sales taxes fell 1%. 

District leaders didn’t disclose the shortfall until an Oct. 9 meeting attended only by a handful of charter finance leaders, according to Caroline Roemer, executive director of the Louisiana Association of Public Charter Schools, and some of those present. 

“Moreover, the district’s limited information was presented without any definitive statements about how this would impact schools, why the over-projections occurred or what actions they should take, leaving schools to speculate on the next steps,” Roemer wrote in an Oct. 17 letter to district leadership. “Finally and significantly, the district has yet to formally notify all school leaders of this urgent matter.”

In response to questions from The 74, a district spokesperson said the discrepancy in revenue projections was identified earlier this month: “As soon as we realized the variance between the projected and actual revenues, we began working with our auditors and the city of New Orleans to verify the data and make necessary adjustments.”  

But at the Oct. 22 board meeting, Comptroller Nyesha Veal said NOLA Public Schools staff began receiving monthly updates from the city in May indicating the March projections were incorrect. At the board meeting two days later, Veal said she had not realized that no one communicated the shortfall to school officials until she met with them Oct. 9. 

At a meeting Oct. 23 with board members and school leaders, district staff blamed the mistake on a “personnel issue” they refused to describe, according to association staffers present. They also said the unspecified issue should have triggered a review.   

In her letter, Roemer wrote that there were similar discrepancies last year: “Last spring, the district also alerted school finance directors that the district made over-projection miscalculations for the 2023 fiscal year and erred in how they presented and utilized the 2023 fiscal year audited actuals of revenue collected in the 2022 fiscal year.”

District officials dispute this, but KIPP New Orleans CFO Katie Walmsley and other school finance chiefs say they have been told multiple times that discrepancies from past years persist. Most recently, at the Oct. 23 meeting, Veal again told the CFOs there were miscalculations for fiscal year 2023. A district report due to the state at the end of the calendar year will contain audited totals, Walmsley says.

Among the examples Walmsley cited were miscounts of different groups of students who receive extra per-pupil funding. “District staff have confused themselves by not being extra-precise,” she says. “It’s only coming to light because us CFOs have asked questions such as, ‘Why did the number of over-aged students double year-over-year?’ ” 

Reacting to the news at public meetings held Oct. 22 and 24, members of the Orleans Parish School Board called for the district to hire a financial consultant, form a working group of outside experts and school leaders, come up with a plan for communicating with school administrators and produce a report explaining what went wrong. 

“As a board, we are focused on getting to the root of the problem, finding a solution going forward and communicating with all stakeholders,” says Olin Parker, chair of the board’s finance committee. “What I have pushed the superintendent on is that if there is ultimately a negative impact, we also need to bear some of the brunt of this.”

The lack of communication, Roemer wrote in her letter, is just the latest of a series of episodes in which the district — which hired Williams as superintendent in July 2022 — has not engaged school leaders about citywide issues. This is a major departure from past practices in what was an all-charter school system from 2017 until this academic year.  

The former chief of Selma City Schools in Alabama, Williams had no experience with charter schools when she took the reins in New Orleans. Before her appointment, district and charter community administrators had met frequently to troubleshoot common problems. 

Policies crafted with the input of charter leaders, who operate independently of the district, include processes for enrolling and disciplining students and holding schools accountable for academic and financial performance. 

Roemer and others have said Williams has not engaged with school leaders on solving problems. “Recent failures by district staff and systems have caused major issues,” Roemer wrote in her Oct. 17 letter, including problems with enrollment, absenteeism, accidental data breaches, funding for student support programs and “misinformation about laws applicable to charter schools.” 

During a board meeting last winter, Roemer complained about poor communications regarding a series of decisions Williams made on the fate of an underperforming school that by law was likely to lose its charter. The superintendent ultimately chose to open a new, traditional, district-run school in the failing charter’s building.

The move came after months of confusion as to how the district planned to deal with declining enrollment. In February, its nonprofit partner, New Schools for New Orleans, warned that its 4,000 vacant seats had become a systemwide financial issue. 

On average, each of the city’s K-8 schools had space for 550 students but enrolled 484, leaving a funding gap of $625,000. In opening a new school, Williams missed an opportunity to lower the overall vacancy rate through attrition, critics charged. 

“In short,” Roemer wrote, “this district has yet to properly or successfully execute many of the functions they are directly responsible for as a school itydistrict — and functions that had previously worked until now.”

Schools do their own budget projections involving state and federal aid but depend on the district for local tax calculations. Because Louisiana, like many states, sends extra aid to districts with low property taxes — and because discrepancies from fiscal year 2023 are still being tallied — the mistake will also cost schools an as-yet unknown amount of state aid. 

In addition, schools that enroll large numbers of children with profound needs will suffer disproportionately large losses because New Orleans apportions money based on a long list of weights — extra funding intended to offset the cost of educating students with disabilities, who are learning English, are over-aged and have been suspended or involved with the criminal justice system, among other challenges. 

Because the combination of enrollment declines and the end of one-time COVID aid could put schools on shaky financial footing, 4^th Sector Solutions had already urged its clients to shift from annual budgets to multiyear plans, says Jonathan Tebeleff, vice president of the firm’s New Orleans finance team: “We’ve been working to put them in a position where they won’t sail over that fiscal cliff.” 

Some older schools or those in large networks have built up reserve funds that may help cushion the blow, but newer, standalone charter schools don’t, says Kalifey-Aluise. Even for those schools that have rainy-day funds, spending down savings can leave them vulnerable in emergencies. 

“KIPP has a board policy of putting money away every year, but some of that is literally reserved for disasters, like hurricanes,” she says. “The conversation we haven’t had is whether there is a systemwide way to make people whole?”

Unlike a traditional district, which can move money from one budget line to another when need be, NOLA Public Schools has relatively little financial wiggle room. Its main source of revenue is the 2% of each school’s allotment it receives as a charter authorizer. Because the schools operate autonomously, there are relatively few central office staff.  

In order to pay for district assistance with issues such as teacher recruitment, student mental health support and specialized staff training, New Orleans charter schools contribute to a special systemwide fund. It’s not clear whether that account can be tapped to help make up the tax shortfall.

Also unclear is how the red ink will impact schools slated for charter renewal in the next couple of years. By law, fiscal health is a large part of the evaluation that is used to determine whether a school’s charter will be renewed or rescinded. 

In an Oct. 25 letter, New Schools for New Orleans CEO Dana Peterson told city school leaders that the organization — which serves as the school system’s research and policy partner — had agreed to pay for an outside expert to help the district improve its finance operations. School leaders will meet with him in early November to discuss the impact of the shortfall.    

At the Oct. 24 board meeting, district finance officials said they hoped to have hard numbers by Oct. 30, so schools can begin planning how to make up the deficit.

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