Sources: RCSD deliberately pushed budget to breaking point, banking on state bailout

In 2017-18 there was a budget gap of $55 million. Deane-Williams overcame it — at least on paper — then, over the course of the year, added 346 positions, most of them teachers.

In 2018-19 the structural gap was $65 million, the highest in seven years. That year the district’s workforce grew by 145, a two-year head-count increase of 8.1%.

At the same time, the district had drawn down about $40 million from its general fund balance.

Deane-Williams did not respond to several requests for comment for this story, via phone and through intermediaries. In interviews while she was superintendent, she said investing more in students would save money down the road.

“You’re shifting resources from a failure-driven model, where you’re having to redo things, to doing it better the first time,” she said in April 2017. “And that actually will over time reduce the resource need. … I don’t underestimate the cost of doing that well. That’s something we need to invest our resources in.”

Whether or not the district could afford them, those new hires were hardly superfluous. Deane-Williams responded to low reading scores with reading teachers and deep trauma with social workers and help zone staff.

Indeed, it is hard to argue even today that those areas are overstaffed. At James Monroe High School, for instance, 860 students — nearly all of them living in poverty, and large numbers at risk of not graduating — are currently served by five social workers and three psychologists.

“It was needed funds; it was for the students and all that,” Interim Superintendent Dan Lowengard said later. “But that’s what a structural deficit looks like.”

A risky gambit

At first — at least in public — there was little dissent to Deane-Williams’ direction. Her budgets passed easily; school board members supported her focus on adding needed support for students, even at the cost of draining the bank account.

“What would be of more concern to me is not having the teachers we need in special education and bilingual classrooms,” School Board President Van White said in May 2018. “I prefer not to (use so much fund balance), but if I have to, I’ll choose to make the investment in our future.”

At the same time Deane-Williams was adding staff by the hundreds, she was also a vocal advocate for greater state funding.

“Rochester simply does not have the reading and math teachers in place to provide adequate instruction for our students to meet grade-level expectations in reading and math,” she told the state Legislature in 2018 in asking for $58 million more in foundation aid. “We will clearly need to invest in a significant number of new teachers for Rochester schools to meet state requirements.”

Behind closed doors, she revealed her strategy even more plainly.

Three current and former high-ranking district officials, speaking on condition of anonymity, said they heard Deane-Williams state she intended to push the district budget to the breaking point, including exhausting its reserves, because it would force the state to increase funding to match.

All three recalled the superintendent framing the strategy as a gambit — that, ultimately, the state government would never allow the district to go bankrupt.

Cracks emerge

Privately and publicly, signs of stress soon emerged.

In April 2017, auditors reviewing the district’s payroll operation found a lack of discipline and controls nearly everywhere they looked. Of particular note, the district’s own internal claims auditor was conducting only “cursory” reviews, not up to professional standards.

Later that year the district received a report from Rick Timbs, the former Spencerport superintendent and an expert on school district finance. It did not make it public until 10 months later.

In that report, Timbs provided an ominous picture of RCSD’s books: that it did not have enough money in its reserves; that it did a poor job of monitoring budget lines; and most of all, that no one seemed to understand how any of it worked.

RCSD, Timbs said, needed to “turn around an existing culture where leaders have had minimal concern for the District’s budget.”

The stressed budget, broken process and urgent student needs came to a tumultuous head in the spring of 2018.

As Eamonn Scanlon, an RCSD budget analyst at The Children’s Agenda, summarized it: “The 2018-19 RCSD budget was plagued by a rushed timeline, multiple far-reaching crises happening simultaneously, leadership distracted by its own major initiative, pressure to increase spending in multiple areas, a huge budget deficit to close, and many last-minute revisions with little input or understanding from those outside the finance department.”

The district was late in putting a budget proposal forth, and some of its numbers changed dramatically from proposal to adoption.

One expense line related to teacher salaries, for example, was reduced by $16 million without any underlying staffing changes. The $3.3 million contingency fund was eliminated because, finance committee chairwoman Willa Powell said, its presence would encourage undisciplined spending.

At about the same time, union leaders recounted in September 2019, the district was overruling its own internal experts and severely under-budgeting for its self-insured health and dental plan, an ultimately unsuccessful attempt to squeeze out savings away from the classroom.

The budget was eventually approved with $20 million used from fund balance,leaving hardly anything in the bank. Alarmed, board member Beatriz LeBron wrote a letter to City Council warning that the district was on track to go bankrupt.

“The trend is clear that our expenses continue to increase while our revenues fall flat,” she wrote. “We will not have enough money to meet the growing demands of our community.”

City Council debated whether it had the ability to reject the budget and ultimately decided it did not. One final opportunity for public dialogue was missed when Council held an improper closed-door meeting on the question.

Fourteen months later, and eight months after Deane-Williams resigned, news surfaced of an eight-figure budget hole.

Defining the problem

The budget office has had no monopoly on chaos and crisis in the district for the last 18 months.

Deane-Williams resigned at the end of January and was replaced by Lowengard, who was partially successful in bringing the ballooning budget to heel.

Distinguished Educator Jaime Aquino’s report, which echoed many of Timbs’ observations in the area of finance, provided the basis for a communitywide call for change. Mayor Lovely Warren launched an offensive aiming for a state takeover and a consent decree around special education was submitted to a federal judge.

District defenders — or, at least, sympathizers — point to these and other challenges unique to urban education as important context for the budget crisis.

Structural breakdowns and aggressive budgeting, they say, are a predictable response when RCSD is made to bear the burden of regional problems with poverty, housing and jobs, among other things.

“Increased pressure from policymakers and the community leads to maladaptive responses and quick fixes to reduce the pressure and improve results, only to cause new or more problems which then lead to greater oversight and pressure, and so on and so on,” Kara Finnigan, professor of educational leadership and policy at the University of Rochester’s Warner School of Education, wrote in an essay. “A more productive and lasting response will require all of us to consider a new way of approaching the ‘problem’ of a district in crisis.”

In the short term, RCSD financial analysts, joined by those from the Comptroller’s office, will remain ensconced in their offices, looking for the money.

JMURPHY7@Gannett.com