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Claremont’s multi-million dollar school deficit crisis requires a criminal investigation, School Board Chair Heather Whitney told NHJournal.

“I personally believe the magnitude of our situation warrants an investigation,” Whitney said.

Whitney spoke to NHJournal on Sunday about the likely origins of the budget gap and the painful way forward for Claremont’s schools. Whitney said a thorough, forensic examination of the district’s financial records by law enforcement is necessary, if for no other reason than to rule out criminal activity.

While there’s not yet any evidence pointing to an intentional, criminal scheme behind the missing millions, Whitney wants the New Hampshire Attorney General’s Office to get involved. She hopes that the crisis started due to errors and carelessness by district administrators, rather than malfeasance, but she wants to be sure.

“It’s difficult to reconcile how errors and oversights can explain this,” Whitney said.

Claremont discovered this summer that the district is at least $5 million behind on critical bills, including employee health insurance, school food service, and $1.2 million in state retirement plan payments. Since news of the situation became public, the board has worked to find the total dollar amount and the reasons behind the gap. At the same time, Claremont has made painful staffing cuts to save millions in order to keep the schools open for the academic year. 

But Whitney said the work to uncover the total deficit won’t be done for a few more weeks. In the meantime, the board knows enough that it has been forced to make decisive and difficult cuts, like 19 new teachers and 20 non-teaching staff.

“When we say we don’t know and can’t provide clarity, that’s the God’s honest truth,” she said. “We know how big this [tsunami] is, we just don’t know how many gallons.”

Superintendent Chris Pratt and Business Manager Mary Henry are still both on paid administrative leave. Interim Business Manager Matthew Angell has said he believes he will know more about the financial picture by the end of September. 

Following a public hearing on Wednesday, the district officially approved a Reimbursement Anticipation Note (RAN), described by some officials as a “payday loan.”

It will allow the district to bridge the current cash-flow gap to cover immediate operational needs like payroll and benefits, until state funding arrives.

The loan was taken from Claremont Savings Bank against monies to be collected by the district in the April disbursement of the education adequacy aid grant. Notably, the loan will not reduce the existing budget deficit.

The roots of Claremont’s school funding crisis may go back to at least 2016, the last year the district completed an on-time financial audit, according to information released last week. Whitney was new to the board in 2019 when then-Superintendent Michael Tempesta discovered the district was at least three years behind on the annual audits, she said. 

A key moment in the crisis appears to be in 2023, when district officials like Henry mismanaged the federal grants programs supplying millions in funds for the annual budget. Those likely errors were complicated by the previous administration’s mistakes in 2021 and 2022 when district officials falsely believed there were surpluses and returned about $2 million in total to the taxpayers. 

Those fiscal missteps occurred during the COVID-19 pandemic, and while the SAU 6 offices were undergoing a major renovation, Whitney said. Many critical financial records were physically misplaced as they were not digital and still kept on paper, she said. 

Going forward, the board will now require annual audits to be completed and presented to the public by the auditor, not a school district employee, so that the results cannot be misconstrued, she said. She also wants all documentation and reports on the federal grant programs to go to the board, and not just the administrators, as had been the practice.

“We were following previous practices of the board, and not what we now know are best practices,” she said. 

Claremont will now have to rethink its entire educational system, she said. In a way, the financial crisis frees the board to do difficult things that it previously could not. For instance, Whitney said the political will did not exist to consolidate Claremont’s three elementary schools before the crisis, even though that is an obvious and, ultimately, necessary move. 

The crisis also means Claremont schools can jettison educational programs that do nothing to help students learn. For too long, the district has been hamstrung by the current social-emotional educational theories instead of focusing on providing the best education for all students, she said. 

“Now we can tear things down and start from the beginning,” Whitney said.

Facing an angry crowd of concerned parents and taxpayers, Claremont officials acknowledged Monday night that the worst reports are true: the school district has dug itself a $5 million hole.

As parents asked pointed questions about whether there will be any school sports this year and what happens if the district is unable to remain open for a full semester, Comptroller Matthew Angell broke the bad news. The district knows it has around $5 million in unpaid, critical bills, a fact school board members claim they were unaware of until recently.

After cutting 19 teachers to save $1.8 million last week, the district cut another 20 positions, ranging from custodians, para-educators, and school secretaries, to save an additional $1 million. The district is also working on a plan to bring back some special education students placed out of district, for an additional savings of about $1 million.

But it won’t be enough, said Angell, who was hired to take command over Claremont’s books in the wake of the crisis. The massive hole left by mismanaging district finances is simply too deep to fill through cuts. And while there could be missing money baked into the district budget waiting to be found, Angell said, “I can’t tell you, from the accounting records, what it is.”

When a parent asked if their kids should plan on playing in sports competitions scheduled for this week, Jim O’Shaughnessy, Claremont School District’s attorney, warned that his answer would be blunt.

“If people don’t come forward with money, there are not going to be any fall sports, winter sports, or spring sports. This is dire. There’s not enough money.

“If people don’t move forward and do some fundraising and bring passion — and soon — there’s not going to be fall sports, there’s not going to be winter sports, there’s not going to be summer sports,” O’Shaughnessy added.

It was a tough message, which may explain why Claremont School Board Chair Heather Whitney was greeted with stony silence when she said, “I really believe we’re going to be stronger for this.”

Angell is sorting through years of financial records left to him by Business Administrator Mary Henry, who is currently on paid administrative leave. She was not the only missing district official, as Superintendent Chris Pratt was absent again. Pratt has been disinvited from board meetings since Whitney disclosed the district was looking at the newly discovered deficit.

While the board previously could not commit to schools opening on Thursday, Assistant Superintendent Michael Koski said there will be teachers in the classrooms ready for students this week. Class sizes will be larger, and some classes will double up on grade levels, he said. The district has to reshuffle classroom operations after losing para-educators and the 19 new teachers.

“It’s been a very unpleasant experience,” Koski said of the staff cuts. “No one has taken any joy in this process.”

The board brought in attorney James O’Shaughnessey to help guide officials when the money gap was discovered. O’Shaughnessey told residents Monday night he had positive meetings this week with Gov. Kelly Ayotte and Department of Education Commissioner Caitlin Davis, but Claremont is still on its own to fix the mess.

“No one is coming to save you,” O’Shaughnessey said. “I know that’s hard to hear, but it can’t be ignored.”

Ayotte has insisted the blame lies with local mismanagement and has ordered a series of independent financial audits of Claremont’s books.

“This is unacceptable,” Ayotte said. “Local mismanagement has happened, and we are working through the Department of Education to ensure the district addresses immediate cash flow issues to keep the schools open.”

After Ayotte ordered the state Department of Education to ensure the district completes independent financial audits, Education Commissioner Caitlin Davis released a statement.

“The governor believes it is necessary to complete independent financial audits for all fiscal years and has ordered the Department of Education to ensure these occur in a timely and ongoing manner.

“In the meantime, my team and I are engaging directly with Claremont schools to ensure the district addresses immediate cash flow issues to keep the schools open through the year, educate our students, and support our educators.”

Aside from the painful cuts, Angell said the district had a meeting this week with Claremont Savings Bank executives about a short-term loan to get the district through to March. More decisions will need to be made, like a possible consolidation plan for the district’s three elementary schools, Angell said.

So far, students have lost sports, teachers have lost their jobs, and city residents will likely see their taxes go up again because of reported financial incompetence by employees in the district’s administrative offices.

That’s the one school building in Claremont that has not seen any staff cuts since the crisis began.

EDITOR’S NOTE: An earlier version of this article misattributed comments made by James O’Shaughnessy, Claremont School District’s attorney. We regret the error.

New Hampshire taxpayers don’t have to pay a $537 million education spending bill just yet, as the New Hampshire Supreme Court stayed the decision in the ConVal lawsuit.

In a unanimous decision issued Wednesday, the Supreme Court put a hold on Rockingham Superior Court Judge David Ruoff’s November order that the state’s per-pupil spending must go up to at least $7,300. Ruoff had denied a motion to stay his decision pending appeal earlier this year.

Gov. Chris Sununu praised the stay decision, saying Ruoff’s ruling went too far.

“Today, the Supreme Court rightfully paused an attempt by one judge to usurp the power and preferences of both the legislative and executive branches,” Sununu said. “Grateful for the Supreme Court’s action to stay a decision that was so clearly overreaching.”

According to Senate President Jeb Bradley (R-Wolfeboro), implementing Ruoff’s order would wreck state finances, hurt lower-income communities, and eventually force an income or sales tax on Granite Staters.

“This decision could mean a $500 million spending increase for New Hampshire taxpayers and could cause reduced education funding for all the original towns that brought the Claremont education funding lawsuit by limiting the legislature’s ability to target special education aid to local school districts that need it the most,” Bradley said in a statement. “I remain optimistic that the Supreme Court will recognize that such huge financial decisions rest with representatives and senators that the people of New Hampshire have chosen.”

Lawmakers are looking for an affordable funding solution, and according to House Speaker Sherman Packard (R-Londonderry), the Supreme Court’s stay will give both houses time to keep working.

“We’re hopeful the Supreme Court has a different take on the matter than the lower court that will be less costly to taxpayers. The stay will allow the legislature more time to further analyze the situation,” Packard said.

The Peterborough-based Contoocook Valley Regional School District filed the lawsuit in 2019, arguing that the state’s education grant of $3,600 per pupil was far below the true cost and, therefore, unconstitutional. ConVal and the dozens of school districts that joined the lawsuit wanted closer to $10,000 per pupil.

Ruoff originally refused to set a dollar amount when he ruled the state violated the constitutional right to an adequate education, leaving that up to lawmakers. But a subsequent appeal to the state Supreme Court resulted in a 2021 order that forced Ruoff to come up with a figure.

Since the ConVal lawsuit was filed, lawmakers and Sununu have bumped up the grants to $4,100 per pupil, an amount Ruoff still found unconstitutionally low. Ruoff’s decision acknowledged it is up to the legislature to determine the funding but that it can be no less than the amount he set.

“What is the base cost to provide the opportunity for an adequate education 239 years after that fundamental right was ratified in our constitution? The short answer is that the legislature should have the final word, but the base adequacy cost can be no less than $7,356.01 per pupil per year, and the true cost is likely much higher than that. At a minimum, this is an increase of $537,550,970.95 in base adequacy aid to New Hampshire Schools,” Ruoff wrote.

The legal tussle over New Hampshire’s state spending for education “adequacy” is unrelated to another hot-button political issue: Taxpayers are already burdened with increasing education costs even as the number of students is declining.

The total cost of education in New Hampshire, including the portion paid through local property taxes, averages more than $20,000 per pupil. That’s up from about $11,000 total per pupil spending in 2000. Over the same time, the state’s student population has fallen by more than 20 percent. According to the Department of Education, student enrollment numbers in the Granite State have dropped from 207,684 in 2002 to 165,095 in 2023. That’s a decrease of 42,589 public school students, or about a 20.5 percent decline during the past 21 years.

Just days after a New Hampshire Department of Education report showing public school enrollment plunging amid spending hikes, a judge has ordered the state to pay even more.

Rockingham Superior Court Judge David Ruoff released his long-awaiting ruling in the ConVal education funding lawsuit on Monday, declaring the state must pay a per-pupil minimum state adequacy grant of $7,356. The net cost to state taxpayers would be nearly $538 million per year. And, Ruoff said, that’s likely just the beginning.

“What is the base cost to provide the opportunity for an adequate education 239 years after that fundamental right was ratified in our Constitution? The short answer is that the Legislature should have the final word, but the base adequacy cost can be no less than $7356.01 per pupil per year, and the true cost is likely much higher than that. At a minimum, this is an increase of $537,550,970.95 in base adequacy aid to New Hampshire Schools,” Ruoff wrote.

Ruoff wasn’t done. In a separate ruling in the Rand vs. State of New Hampshire case, Ruoff ruled that property-rich communities can no longer keep excess Statewide Education Property Taxes revenue in reserve. That practice allowed these communities to set a negative SWEPT tax rate.

Ruoff initially tried to avoid setting a number in the ConVal case. He ruled for ConVal in 2019, finding that the state’s education funding system results in an inadequate amount per pupil, and is therefore unconstitutional. However, he originally ruled that it is up to the legislature to determine the number, not a judge.

After the state appealed, the New Hampshire Supreme Court ordered Ruoff to hold a trial and determine what the cost per pupil ought to be. 

Ruoff’s order still faces a possible challenge from the state. Gov. Chris Sununu called Ruoff’s decision an overreach.

“New Hampshire currently spends among the most per capita on public education than nearly any other state. Today’s decision is deeply concerning and an overreach into a decades-long precedent appropriately placed in the hands of our elected representatives in Concord,” Sununu said.

New Hampshire Department of Education Commissioner Frank Edelblut’s office declined to comment. Michael Garrity, communications director for New Hampshire Attorney General John Formella, said Ruoff’s decisions are being reviewed.

“We have received the court’s order. We will review it and consider potential next steps,” Garrity said.

But the Josiah Bartlett Center for Public Policy, a pro-education-reform think tank, immediately blasted the premise of the judge’s ruling, noting that education spending in New Hampshire has exploded, even as the number of students in the k-12 fallen drastically.

“NH public schools are not ‘underfunded’ and have not experienced a decline in funding this century. On the contrary, as school district enrollment fell by 30,000, spending, adjusted for inflation, rose by nearly $1 billion,” the Barlett Center posted on X.

As for the judge’s arbitrary price of an “adequate” education, the center responded:

“Trying to figure out the true cost of an adequate education by measuring what monopoly school districts spend is like trying to figure out the true cost of package delivery by measuring Post Office prices before the arrival of FedEx and UPS. Markets, not judges, set prices.”

But Democrats, who’ve been pushing for more state spending for decades, were delighted.

State Sen. Democratic Caucus Leader Donna Soucy (D-Manchester) is ready to start charging. Ruoff’s decision will be the template she and other Democratic lawmakers will use going forward as they look to increase school spending to at least the $7,300 minimum,

“Our caucus will closely review the court decisions released today, and we will examine legislative action to ensure that a constitutional formula is enacted,” she said.

Zack Sheehan, the executive director of the left-leaning New Hampshire School Funding Fairness Project, called the decisions big wins for students and property taxpayers. He said that the legislature’s refusal to fund education at the state level has pushed the bill down to local property taxes and burned homeowners.

“These are exciting rulings, but for their impact to be felt, the legislature has to get to work and bring our school funding statutes into line with this and all past school funding rulings,” Sheehan said. “The changes promised in the Claremont decisions have been denied to Granite Staters for too long already, so I want to see the state accept this ruling and not continue wasting time by appealing it to the New Hampshire Supreme Court.”

In actuality, New Hampshire hit a state-spending record on k-12 education in the current budget, while few communities cut their property taxes.

In deciding that $7,300 is the minimum adequate education amount, Ruoff used numbers provided by public school districts and the Department of Education. There was no data from public charter schools or private schools, Cline said. He added that it is like deciding what the price of a hamburger ought to be based on just the McDonald’s Big Mac while ignoring Burger King and Wendy’s.

“Markets, not judges, determine prices. That’s the fundamental flaw in this whole game. New Hampshire needs a market for educational services,” Cline said.

The ConVal and Rand lawsuits are the ideological, if not legal, sequels to the Claremont lawsuits of the 1980s and 1990s. In Claremont, the New Hampshire Supreme Court ruled all New Hampshire children have a constitutional right to an adequate education, and the state is on the hook to make sure that happens. The Supreme Court, however, left the funding details up to lawmakers.

The Peterborough-based Contoocook Valley Regional School District filed the lawsuit in 2018, arguing the state’s then-adequate education grant of $3,600 per pupil was far below the true cost and, therefore, was unconstitutional. ConVal and the dozens of school districts that joined the lawsuit wanted closer to $10,000 per pupil.

Since the ConVal suit was filed, lawmakers and Sununu bumped up the grants to $4,100 per pupil, an amount Ruoff still found unconstitutionally low. The total cost of education in New Hampshire, including the portion paid through local property taxes, averages just shy of $20,000 per pupil. 

The Rand lawsuit saw parents in property-poor towns challenging the way they claimed wealthier communities were able to game the SWEPT system, increasing the propeller of education funding inequality.

SWEPT accounts for 30 percent of education funding in New Hampshire. Under the law, as many as 30 wealthy Granite State communities keep a portion of the money raised through the SWEPT, while some poorer towns are paying more, according to the lawsuit.

Grafton Superior Court Judge Lawrence MacLeod is recusing himself from the state education funding lawsuit, saying the property he owns in one of the towns intervening in the case could create the perception of a conflict of interest.

MacLeod recused himself from the case in an order he released Wednesday before he had a chance to rule on the injunction. The plaintiffs are seeking to stop the state from setting a property tax rate for the coming year.

MacLeod and his wife own more than $1 million of property in the city of Lebanon, one of the communities trying to now intervene in the case as part of the Coalition of Communities. It is fighting the plaintiff’s injunction that seeks to keep the Statewide Education Property Tax, or SWEPT, rate at $0.

“The undersigned justice and his wife have a legal and/or beneficial interest in one residence, two rental properties, and two undeveloped lots in Lebanon with a combined property tax assessment in excess of $1,000,000,” MacLeod wrote.

The Coalition, formed in 2006, is made up of mostly towns and cities with high property values working against the return of a “donor” and “receiver” town system for education funding.

The plaintiffs in the case, represented by Andru Volinsky, John Tobin, and Natalie Laflamme, claim the state continues to ignore the 1990s Claremont decisions issued by the New Hampshire Supreme Court by using varying rates for the statewide property tax. They claim it punishes poor communities with lower property values.

The plaintiffs argued last week before MacLeod that New Hampshire cannot set any SWEPT rate for the coming year as the system is currently in violation of the Claremont rulings and flies in the face of the state constitution. Currently, property-rich towns that raise more in taxes through the SWEPT tax are allowed to keep the surplus.

After that hearing, the Coalition filed to intervene in the case and stop MacLeod from approving the injunction. Coalition attorney John-Mark Turner wrote that these would-be “donor” communities would face chaos and uncertainty and be forced to raise local property taxes if the plaintiffs prevail. They oppose changing the current system.

MacLeod’s recusal states that since he and his wife could potentially benefit from the Coalition’s efforts, he needed to step aside.

“(I)t appears that the undersigned justice and his spouse may enjoy a tax advantage under New Hampshire’s existing education taxation structure given the assessed values and fortuitous locations of their real properties not available to the plaintiffs and other real property owners similarly situated, such that the undersigned justice and his spouse would or could be placed at more than a de minimis economic disadvantage should the plaintiffs prevail in the case,” MacLeod wrote.

The SWEPT accounts for 30 percent of education funding in New Hampshire. Under the law, as many as 30 wealthier communities in New Hampshire are keeping a portion of the money raised through the SWEPT, while some poorer towns are paying more, according to the lawsuit.

SWEPT started in 1999 as a response to the Claremont decisions, which found that the state has a constitutional obligation to fund an adequate education. The money raised, more than $360 million estimated in the coming year, is used to fund state adequacy grants.

The debate is over the definition of “adequate.”

According to the plaintiffs, wealthy communities raise more funds per pupil through SWEPT than the state’s low standard for what it asserts is the cost of an “adequate” education. Further, since 2011, the state has allowed those wealthy towns to keep the surplus, which flies in the face of the Claremont decisions, according to the motion.

“The SWEPT tax as currently administered is not uniform in rate as the State allows towns with surplus SWEPT funds to either set a negative local education tax rate to offset the State’s official equalized SWEPT tax rate or retain the excess,” the plaintiff’s motions states. “Both of these mechanisms have been previously deemed unconstitutional by New Hampshire courts.”

MacLeod’s order states a new judge will be assigned to the case soon. It is not yet clear how much of a delay his recusal will add to the lawsuit’s timeline, or if the new judge will have to rehear the parties on the injunction against the SWEPT rate.