Dallas School District Starts Cutting Staff to Cover $84M Budget Shortfall

DALLAS - The Dallas Independent School District began cutting staff this week with the elimination of at least 160 non-contract jobs, as officials try to cover an $84 million budget shortfall disclosed last month.

"As I told the board of trustees last week and the week before, it costs the district approximately $1.5 million each week there is a delay in addressing this deficit," DISD superintendent Michael Hinojosa said in a release.

"This is a very difficult process for everyone involved. Everything must be done, however, to reduce the deficit and this is the logical first step," said Hinojosa, who has been in the post for just over three years.

The superintendent has suggested cutting more than 1,200 positions, including 675 teachers. This first wave of cuts - nearly 100 of which were vacant positions - is expected to save about $3.6 million.

When the shortfall was disclosed on Sept. 10, Hinojosa said: "The majority of this deficit was caused by inadequate budgeting. The lack of adequate systemic financial controls and the district's inability to reconcile accounts, input budget data, and control staff allocations created this deficit. This is totally unacceptable."

Back in April, Hinojosa said DISD had "formally launched a strategy to transform its financial operations." Chief operating officer Eric Anderson was named head of a new financial management team that included Steve Korby and Carolyn Jones as co-chief financial officers and Tom Canby, a former managing director of financial audits for the Texas Education Agency.

The team is tasked with transforming DISD's financial reporting by implementing strict controls and improving efficiencies while attempting to develop a comprehensive five-year plan.

Hinojosa and the board of trustees have set a goal of being recognized as "the best urban school district in the United States" by 2010.

The Texas Education Agency is closely monitoring the financial situation of the second-largest district in the state. TEA spokeswoman Debbie Ratcliffe said Education Commissioner Robert Scott has met with Hinojosa a few times to remain abreast of the situation, but that the agency has not decided whether to send in a conservator to oversee the district's finances.

The TEA currently has conservators in place at 11 school districts across Texas, which is about 1% of the state's more than 1,000 school districts.

Moody's Investors Service recently revised its outlook on DISD to negative from stable, citing "heightened concerns regarding the district's financial management and reporting abilities" after officials said the budget shortfall will result in a reduction to general fund reserves. The revised outlook affects $1.54 billion of outstanding general obligation debt.

Moody's, which rates the district at Aa3, said "this narrowing in financial reserves is significant and disconcerting as management has indicated that the flawed assumptions that led to the FY 2008 drawdown were incorporated into the FY 2009 budget that was approved in June."

In May, voters approved a $1.35 billion bond package for 15 new schools, 12 additions, and about $500 million of renovations to more than 200 campuses. Many of the 229 schools are more than 50 years old. The district currently serves about 160,000 students.

DISD has come under scrutiny due to a series of financial scandals, particularly since the summer of 2006 when it was discovered that hundreds of employees were abusing district-issued credit cards.

The school district, which is the 12th-largest in the country, carries underlying ratings of AA from Fitch Ratings and Standard & Poor's.

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