LOS ANGELES -- Facing a $4.3 million deficit and courting insolvency, Idaho’s Nampa School District No. 131 is seeking a judge’s approval to borrow up to $4.3 million to cover the shortfall.

The board will vote at its January 15 meeting whether to put a supplemental levy on the March ballot to help close the budget gap, according to Allison Westfall, a district spokesperson.

Nampa School District No. 131 is one of three large school districts educating K-12 students in the Boise metropolitan area. The school district had nearly 15,000 students enrolled during the 2011-12 school year.

The district’s financial woes began when accounting errors were discovered in late July.

One-time federal stimulus funding and state funding had been counted twice resulting in overspending that led to a $2.3 million deficit by the end of fiscal 2011-12, Westfall said.

The district had to seek a judge’s approval to issue notes because Idaho law restricts issuance of bonds to school construction and maintenance, and generally does not allow it to be used for operation costs, according to the district’s bond counsel, Nicholas Miller, an attorney in the Boise office of Hawley Troxell Ennis & Hawley LLP.

A hearing has been scheduled for Feb. 15, Miller said.

The law allows for short-term borrowing for “necessary or ordinary,” expenses, but limits that to borrowing an amount equal to revenue anticipated from that fiscal year, Miller said.

Districts are allowed to issue notes “in anticipation of the distribution of state appropriated funds, and in anticipation of other revenues of any nature, for the year in which said revenue anticipation bonds or notes are issued,” according to a presentation Miller made to the school board.

The district will be seeking judicial validation on a definition of what comprises “necessary and ordinary,” and also approval to seek financing that would not be repaid within a year, Miller said. The district does not anticipate being able to pay back the note within the upcoming fiscal year, he said.

“It is relatively standard to get judicial validation” on an issue like this, Miller said. “If we gain authority, the district will be able to borrow against the supplemental levy or future revenues.”

While Miller is laying the legal groundwork for the district to be able to issue notes, district officials are working on improving the district’s cash flow so it will be able to repay the bonds.

The board has implemented mandatory and voluntary furlough days for teachers and administrators, authorized sales of district property, implemented new student fees and eliminated busing to community afterschool programs.

“We are beginning to identify the solutions and our plan is coming together,” Westfall said.The district has $131 million in outstanding bonds, according to its comprehensive annual financial report for the fiscal year that ended June 30, 2012.

“That is a pretty high level of indebtedness – only one other district has a higher level of bonded debt, and that’s Meridian, [another Boise-area school district],” said Michael Ferguson, director of the Idaho Center for Fiscal Policy.

The cash-strapped district has experienced an exceptional amount of executive turnover over the past year.

Superintendent Gary Larsen resigned on Sept. 20 after an 18-year tenure, saying in a statement the district’s financial problems could not be solved without a new leader, because he had lost the confidence of the people.

Tom Michaelson, who retired in 2010 after working as a superintendent for California school districts including King City and Esparto, was hired to replace Larsen on Nov. 15.

Joshua Jensen, deputy superintendent, resigned on Nov. 19 just days after the new superintendent was named. The district decided not to fill that position to save money, Westfall said.

The district’s finance officer, Michelle Yankovich, started work in August 2012. The position had been vacant since June 2012 when the former finance officer, Dennis Clague, who had submitted his resignation several months earlier, resigned.

The former superintendent said when he resigned that state cutbacks to education had resulted in layoffs in the accounting department that likely led to the accounting errors, Ferguson said.

In order to cover the entire shortfall, the district would have to get a levy passed that is three times the half-mill levy approved by voters in 2011 that brought in $1.6 million, he said.

He added voters might approve a 2-mill levy, which would add $200 a year to the tax bill for a home valued at $100,000.

“I don’t think that’s out of the realm of possibility,” Ferguson said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.