The city’s school district may be forced to cut 120 employees if the school board fails to approve a $10 million loan to balance its 2018-19 school year budget, warned superintendent Eileen Shafer on Monday night.
Shafer’s dire warning was prompted by school board president Oshin Castillo’s question, “If we don’t do this, what happens?”
“If we don’t do this loan, we all know the money comes from salaries,” said Shafer. “That $10 million will be 120 staff members that will be eliminated.” She said she understands the loan is a “gamble,” but the district cannot continue see its class sizes increase.
There are 25 classrooms with over 30 students. That number could balloon to 100 classrooms with over 30 pupils if the loan fails, said the superintendent.
“We cannot increase the class size anymore,” said Shafer. “We’ve exhausted all of the non-salary lines.”
School board members expressed general opposition to taking out the loan.
The district will borrow $10 million by using textbooks as collateral — so called “sale and leaseback of textbooks.” Loan would be repaid over a five-year period with a 3-percent interest rate or $964,500. Educational Funding Sources of Leonia, which is tasked with taking inventory and assessing value of the textbooks, serves as consultant for the project. Consultant will get 1-percent commission or an estimated $100,000 that is covered by the loan.
“We’re operating by ‘management by crisis.’ It’s a terrible way to operate. We’re borrowing something that we might not have the money to pay back,” said Nakima Redmon. The district will have to pay more than $2 million every year to payoff the loan.
“It’s a one-shot infusion of cash,” said Kenneth Simmons. He compared it to the city selling government properties to balance its budget.
Simmons predicted the district will find itself in the same financial position next year.
“What happens when we’re back in the same position next year?” asked Simmons.
“If we do make the moves, we won’t,” said business administrator Richard Matthews. He said the district has to make “big moves” to ensure it doesn’t end up in the same situation next year. He sees the loan as one of those moves.
Matthews presented three options to balance the district’s budget. The most optimistic has a $33.4 million shortfall. It includes a 5-percent increase in state education aid.
“The state has its own financial issue. I’m not banking on it. My view is that we’re going to be flat funded this year unless there is an unforeseen miracle,” said Simmons.
If the district is flat funded it will have a $43.78 million shortfall.
Matthews said the district is also looking at raising taxes. He said property taxes were not increased in seven years from 2009-16. Last year, the district raised taxes by 6.4-percent to bring in $2.5 million in revenue.
“We’re getting blamed for raising taxes and we’re not raising taxes,” said Matthews. “So, let’s raise taxes.”
Newark schools have raised taxes every year since 2008 except in 2010, according to Matthews’ information.
“I can’t take another tax increase. I can’t afford to live here,” said Simmons.
Matthews has presented a number of ways to balance the budget. It includes making changes to the teachers contract. Switching to a self-insurance program. Reducing personal and instructional aides. And going above the 2-percent tax cap.
The school board was expected to take a vote on the loan plan on Monday. But that was postponed to Wednesday night.