Saving the Claremont School District from its $5 million disaster comes down to Wednesday’s scheduled state Senate vote on a revolving loan plan.
The plan, negotiated between Sen. Ruth Ward (R-Stoddard) and Rep. Jim Kofalt (R-Wilton), creates a framework for distressed school districts like Claremont to obtain a loan equivalent to a payday loan from the state. Under the arrangement, districts could borrow money based on the amount of anticipated adequate education grant funding.
The impetus for the proposed fund is the fiscal scandal in Claremont, where millions of dollars remain unaccounted for, and the district is struggling to keep its doors open. It’s not free money, though, according to Kofalt. The loans come with strict limits and oversight.
“This bill imposes rigorous audit requirements, requires detailed monthly financial reports, and expands school choice options for families in the district. It also mandates that the district repay the state with interest, based on the effective federal funds rate, so none of this comes at a cost to New Hampshire taxpayers,” Kofalt said.
The plan allows districts to get up to 75 percent of their expected annual state grant total upfront. The loan must be repaid within the same fiscal year from the full adequacy grant, plus interest at the current federal prime rate of 3.88 percent.
But the interest payment is just one of the strings attached. Districts receiving loans must submit to full fiscal and performance audits, and district officials, such as superintendents and business managers, would be subject to sanctions if it is determined that their errors necessitated the loan. Those officials could have their credentials suspended or revoked by the state board of education if found at fault.
In order to get GOP support, the program also promotes some of the party’s education priorities. Participating districts must allow voters to impose an education tax cap if they have not already done so. The plan also lifts the cap on the number of students who can participate in the Education Freedom Accounts (EFA) program, giving families the choice of whether to keep their children in a school that may or may not stay open.
The Ward-Kofalt plan is meant to be a temporary stopgap measure, and it limits districts to receiving loans in no more than three consecutive fiscal years.
The plan is not a given to pass. Democrats have already signaled unhappiness with the interest rate and the EFA option.
“I don’t know why we have to put [the EFA option] in here,” Sen. Suzanne Prentiss (D-Lebanon) said during a committee hearing on the plan.
Some Republicans remain skeptical of creating a state-funded escape hatch for poorly managed districts or the administrators who run them. Asked whether the legislation before the Senate would pass in the House, Majority Leader Rep. Jason Osborne (R-Auburn) said it would depend on the bill’s specific language.
“We’ll see what they pass and if it goes far enough to protect taxpayers. We won’t support a bailout,” Osborne said.
The loan plan became necessary this year when the Claremont School District informed its elected board that years of mismanagement and serious errors resulted in a $5 million deficit that threatened to shut down the district before the start of the school year.
Claremont was able to obtain a bank loan this fall to smooth out its cash flow problems and made serious budget cuts. Forty teachers and staff members were laid off, and one of the city’s three elementary schools was closed. However, Claremont still anticipates ending this school year with a deficit just shy of $2 million.
