A Teachable Moment

As Santa Fe schools face fiscal crisis, critics cite poor accountability

It's Friday just before lunchtime, but Melville Morgan, the deputy superintendent of Santa Fe Public Schools, is anything but relaxed.

"You caught me on a very bad day," Morgan says. "I was ready to go until last night's news."

He’s alluding to the announcement, on the afternoon of Nov. 11, that New Mexico’s state budget may be deeper in the hole than previously thought. For most of the year, working estimates for the state’s budget shortfall have hovered around $260 million; on Nov. 11, that figure jumped to $452 million.

Since the departure of SFPS' former chief financial officer, Michael Erwin, Morgan is now the person charged with finding ways to fund education and services for the district's approximately 13,000 students—not to mention its staff of approximately 1,200. He's sweating it.

He sits at a round table, flanked by the two men he describes as the district's entire finance department, and surrounded by stacks of recession graphs, budget documents and dire projections.

Today's work, he says, is "setting the stage on the looming disaster."

In many states, school districts are funded through local mechanisms such as property taxes. But in New Mexico, they depend on the state for funding. State statute requires that all schools receive funding based on the number of students and their relative needs. The formula is called the state equalization guarantee, and is meant to ensure that poor, rural districts have the same teaching resources as wealthier, more densely populated ones.

So—campaign promises aside—when the state's budget takes a hit, it often affects school districts directly.

Take this current fiscal year. The state initially estimated that it could give Santa Fe Public Schools approximately $79.5 million for its operating budget. The first estimated budget shortfall ($260 million) reduced SFPS' funding to approximately $77 million.

Fortunately, federal funding helped fill most of that gap; Morgan says the district covered the rest of its gap by changing the way it pays for certain programs.

But that federal funding will dry up next year, which puts even more pressure on the state budget to fund education.

Morgan estimates—it’s a very preliminary guess, he cautions—that this will mean another $3.476 million out of SFPS’ budget. That amount is in addition to prior estimates of a $7 million reduction in district spending.

"The question becomes: Where do you go?" Morgan says. He pauses for a long moment. "Where do you go when you have to reduce?"

The bulk of SFPS' budget—between 80 percent and 90 percent, according to the latest figures available—pays for personnel expenses. Those expenses include salaries, benefits, overtime and "additional" pay—such as stipends for department heads—for everyone from teachers to bus drivers, custodians, board members and the superintendent.

Subsequently, "cuts"—a word Morgan eschews in favor of less-foreboding terms such as "reductions" or "cost savings"—are difficult without directly affecting the district's workforce.

But cuts aren’t the only way to tighten the belt; many of SFPS’ critics say better financial management should be the district’s first priority.

“The big problem with the Santa Fe school system is that, quite frankly, the people managing the place probably wouldn’t [qualify] to run a Starbucks,” Peter Baston, a consultant who has worked with school districts around the state and whose educational cost-saving models have won national recognition, tells SFR.

Even though at least half of the work involved in running a school district—such as managing SFPS' $244 million budget—is akin to running a business, Baston says, New Mexico law places no business aptitude requirements on district superintendents.

As a result, he says, “Santa Fe Public Schools throws away 35 cents on every dollar they get, just through poor management capabilities.”

Fred Nathan, the executive director of the Santa Fe think tank Think New Mexico, which advocates for smaller schools, echoes Baston's district leadership concerns.

"If you look at the successful, high-performing school districts, they're run by people with MBAs," Nathan says.

In New Mexico, Public Education Department spokeswoman Beverly Friedman says, superintendents are required to have teaching and administrative degrees—but not MBAs.

In Santa Fe, where most top administrators earn more than teachers, Nathan says it's tempting for ambitious teachers to move into administration.

As a result, he says, "We lose really good teachers in the classroom to get a subpar administrator because of the perverse incentives."

Baston says better accountability would provide an appropriate check for the district’s financial management practices—but, he notes, “Most of the people working there have graduated from a school system where transparency is not the name of the game.

SFR encountered SFPS' resistance to transparency in attempts to inspect the district's budget. Per its own policy, the district does not provide electronic copies—which makes the nearly 5,000 pages of budget, payroll and purchasing documents provided in response to SFR's public records request somewhat cumbersome and wholly un-searchable.

The district also tried to charge SFR a fee for taking photographs of the records, following which the Foundation for Open Government and New Mexico Attorney General's Office issued a statement barring agencies from charging for copies made at no cost to them.

Other evidence of accountability problems is more easily unearthed, such as state audit documents, which, in 2009, cited SFPS for repeated overspending and problems in the use of athletic booster club funds, among other issues.

But SFPS Board Vice President Mary Ellen Gonzales says she's impressed with the district's budget team.

"They manage it pretty well," Gonzales says. "With as many employees as we have and as many details, frankly, I think it's amazing."

Questions of financial management also relate to student achievement. In 2010, only three of Santa Fe’s 30 schools met No Child Left Behind’s Adequate Yearly Progress standards. 

And while the George W Bush-era standards are admittedly flawed, Nathan says New Mexico also ranks near the bottom of the list for the percentage of education dollars that actually reach the classroom.

“Of all the rankings where we’re at the bottom, this is the most pitiful because it’s a matter of political will,” Nathan says. “It shows how the system is run for the benefits and needs of adults, not for children.

Morgan, however, keeps bringing the budget conversation back to the kids. He says he has "no opinion" on whether, despite the new shortfall numbers, Gov.-elect Susana Martinez will keep her campaign promise not to cut education. He's more worried about the recession's ongoing impact on the district's low-income families.

"It's fine to talk about numbers," Morgan says, "but you have to talk about the reality of the impact. And the reality of the impact is on human beings."

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