Fact check: What the candidates for governor got right or wrong during this week's debates
EDUCATION

Ferebee: IPS never faced $30M deficit

By Eric Weddle
eric.weddle@indystar.com

An ongoing $30 million deficit that spurred Indianapolis Public School leaders to lay off more than 100 teachers and staff last year, cut student programs and limit teacher pay increases does not exist, according to an analysis by new Superintendent Lewis Ferebee.

Ferebee’s conclusion, discussed Tuesday night at a school board meeting but not yet confirmed by an independent audit, drastically alters the often-repeated narrative that the state’s second largest school district is mired in red ink and on the cusp of closing schools and potentially laying off hundreds of teachers. In fact, the district ended last year with a $8.4 million budget surplus.

Since at least 2010 district leaders used a “very flawed” process, Ferbee said, and overstated expenses to protect the district’s cash reserves.

But two past IPS superintendents defended their practices and one warned financial problems resurface if the budget is not reduced.

Former interim superintendent Peggy Hinckley, who preceded Ferebee, first publicly discussed the $30 million deficit last year. After a board vote to cut 109 jobs in June, she said it would go toward chipping away at the shortfall.

Tuesday night Hinckley said Ferebee may be correct that there is no deficit today because cash is on hand. But the district revenues, she said, continue to be eaten away by declining enrollment, underutilized facilities and other factors.

“I think this issue tonight is how do you define deficit? I always talked about how we had a projected deficit and in 2015 we will get in trouble if we don’t make those cuts,” Hinckley said. “I am not wrong about that.

“I think this is just the inexperience of a new superintendent.”

Eugene White, former superintendent, defended how the budget was created under his administration from 2005 to early 2013, and told The Star that “padding” expenses was a long-used process understood within district to plan for unforeseen needs.

“I never said we had a deficit,” White said.

Ferebee maintained, “The district is not in the financial situation that has been communicated.”

Potential programs, such as an expanded pre-K program and a science-focused high school, were added to budget projections but never launched. Yet the budgeted cost of these programs have carried over in each budget cycle and artificially increased expenses that outpaced local and state revenue. That created a false deficit, Ferebee said.

School board members Tuesday lauded Ferebee’s findings while maintaining their belief there was no wrongdoing in how past budgets were created.

Gayle Cosby, school board vice president, described herself as “duped” by the manufactured deficit. Annie Roof, board president, heralded Ferebee’s discovery and said it signaled a new day for IPS.

“This is what transformation looks like,” she said.

No IPS detailed financial documents were released Tuesday during a school board meeting to shed light on how precisely stalled programs increased budgeted expenses. Ferebee said an outside auditor would be hired to review district finances to confirm his findings.

Ferebee said the budget deficit for 2012 previously was estimated at $39 million and 2013’s deficit was expected to be $30.2 million. Instead, the district basically broke even on expenses and revenues for those two years. The surplus for last year was 3.5 percent of the $237.8 million general fund that covers payroll and other operational expenses.

Le Boler, IPS organizational strategist, said it appeared administrators sought to keep two months worth of payroll expenses in reserves. Schools in Indiana are funded on a calendar year but school operations are typically fall to summer. That difference in timing, she said, can make reconciling expenses and revenues tricky.

“In terms of going back and really unfolding what was in the minds of the folks who implemented this practice, we aren’t able to do that,” Boler said.

The perceived financial deficit at IPS has dominated discussions of how the urban district can increase opportunities for its students and attract new students amid a growing market of charter schools and vouchers. Enrollment has fallen by 22 percent — or 8,300 students — since 2005-06, to 29,800 this academic year causing facilities to become under used.

The Indy Chamber recently recommended IPS sell property and reduce staff as means of closing the $30 million budget gap. In a report released last month, the Chamber critiqued the district for a budget that appeared to be developed based on expenditures, not revenues.

When Ferebee sought the job of IPS superintendent last year he expected to inherit a district plagued by massive financial burdens, forcing the closings of schools and the layoff of hundreds of teachers. Ferebee said he’s now reached different conclusions.

“I don’t anticipate a reduction in force and I don’t anticipate us closing schools for the 2014-15 school year,” he said.

He said the new budget analysis provides IPS with the opportunity to enhance its transparency. Quarterly financial reports will be released and regular public briefings, he said.

Call Star reporter Eric Weddle at (317) 444-6222. Follow him on Twitter: @ericweddle.