Harlingen school officials to cut costs, restore $23 million fund balance

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HARLINGEN — School leaders are taking cost-cutting steps to help make up for former Superintendent J.A. Gonzalez’s administration’s move to pull $23.3 million from the district’s fund balance to cover unbudgeted expenses.

Now, a special committee is “reviewing and adjusting” the district’s finances, planning millions of dollars in savings.

So far, the new Finance and Planning Committee has cut about $7.2 million worth of costs, interim Superintendent Veronica Kortan said Thursday.

During a Tuesday meeting, the committee reviewed district expenditures, including consulting services, staffing, overtime and travel expenses while planning to reclassify security operations, custodial staffing and summer school classes to help cut costs.

“We’ve increased communication with the board and the school community,” Kortan said in an interview, adding the committee’s focusing on key revenue sources such as student attendance and enrollment.

As planned, officials are ready to give teachers and district employees their $1,100 end-of-year stipends, she said.

Despite several requests, officials have not released information surrounding the district’s previous and current fund balances.

Under Gonzalez, officials pulled $23.3 million from the district’s fund balance to help cover expenses such as security and transportation.

Meanwhile, board members say they didn’t know the past administration was running up unbudgeted expenses.

By June, they were passing a $215.3 million budget.

Then in late August, board members set up the Finance and Planning Committee to review district expenses.

“Many of these expenditures were beyond the approved budget and occurred without adequate communication to the board,” Marcy Martinez, the district’s spokeswoman, said in news release at the time of the committee’s formation.

“With the establishment of this new committee, the board plans to increase communication between the board and administration and also have time to create a strong fiscal plan for these trying times,” she said.

Days later, Gonzalez, who had taken office a year before after serving as McAllen’s superintendent, suddenly resigned with two years left on his contract, five months after board members gave him a one-year contract extension along with a $10,000 pay increase, bumping his salary to $310,000.

After naming Kortan to serve as interim superintendent, officials began working to develop the district’s new fiscal plan.

For weeks, they met with the certified public accounting firm of Carr, Riggs and Ingram as the auditors pieced together the district’s new 200-page annual comprehensive financial report.

In their review of the district’s 2023-24 budget, the auditors focused on what they described as a “significant deficiency.”

“This is a big deal — $23.3 million is a huge hit to the fund balance due to this failure of fiscal management,” school board member Dr. Nolan Perez said in a meeting, adding, “$23.3 million is a huge, huge, huge mistake.”

”It’s absolutely clear that this was a failure of the district management,” Perez said during Nov. 12’s audit presentation. “We want to do our part as a governing board (so) it never happens again.”

Amid discussion, board President Greg Powers called on officials to bolster financial management controls.

“The findings in the report that you brought us indicate concerns in regard to the finances of this district and our finance department,” he told auditor Matthew Montemayor.

“Due to these concerns, including expenditures that were not discussed in detail with the board during the ‘23-‘24 school year, we are requesting that the interim superintendent take further action as deemed necessary and appropriate to ensure that this does not happen again in the future,” Powers said.

”We expect our interim superintendent and administrators to work with the board to take these findings into consideration to create internal controls and assistance for financial oversight for modification of allocations and expenditures to ensure that we are physically sound in the future,” he said.

In their review, the auditors found the district had spent over its budget, while officials failed to make proper amendments.

“We reported significant deficiency over the budgetary process control and expenditures in excess of your appropriation,” Montemayor told board members during the audit’s presentation.

“One of our procedures is to evaluate whether or not you stayed within that budget, and when we evaluated the budget schedule … we noticed various functional categories that were overspent,” he said. “Criteria is that internal control should be designed to effectively monitor the budget and ensure a legal level of budgetary control was followed and any necessary amendments (are made) timely and efficiently.”

In response to the mismanagement, the auditors are recommending officials take steps to monitor the budget.

“You want to make sure you amend your budget throughout the year to account for those additional expenditures,” Montemayor told board members.

“While your budget was amended throughout the year, it wasn’t amended sufficiently to cover those actual expenditures that you incurred, so you went over the budget,” he said. “We identified several instances in which the district’s budget exceeded the overall actual expenditure amounts in the general fund, or that expenditures exceeded the overall budget, and so budget amendments were not made in a sufficient amount to cover these additional expenditures.”

Amid the past administration’s overspending, the auditors’ review of the 2023-24 budget shows federal funding slashes and state-mandated tax cuts continue to heavily impact the district’s finances.

The audit report shows the district’s total assets of $318.8 million fell below last year’s $337.9 million, while total liabilities of $268.5 million exceeded the previous year’s $264.9 million, leading to a total net position of $31.8 million, down from $40.9 million last year.

After three years, officials have been pumping more money into payroll amid September’s expiration of federal Elementary and Secondary School Emergency Relief funding, or ESSER funds, issued to help school districts during the coronavirus pandemic.

Meanwhile, state-mandated tax cuts led property tax revenue to drop by about $9 million.

While total revenues of $251.2 million dropped below last year’s $253.5 million, total expenditures jumped to $260.3 million, exceeding last year’s $246.8 million, leading to an ending net position of $31.8 million, below last year’s $40.9 million.

Amid sagging revenues, funding cuts led officials to pump more money into the budget.

While the district’s instructional program’s funding climbed to $128.3 million, last year’s budget stood at $123 million.

“As ESSER funds are nearing the end, you’re not able to draw down those funds and get reimbursed for those expenditures, so those are coming out of some of your cash and cash equivalents,” Montemayor told board members.

Under the district’s general fund budget, revenues of $181.1 million fell below expenditures totaling $204.4 million.

Last year, revenues of $181.5 dropped below expenditures of $188.9 million.

During the year, officials paid $8.4 million toward long-term debt that stood at $115.7 million at the close of the fiscal year.

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