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School officials want a cut of federal bailout

Posted by gradefund on January 15, 2009

School officials want a cut of federal bailout

By Greg Toppo, USA TODAY

http://www.usatoday.com/news/education/2009-01-12-school-stimulus_N.htm

If banks, insurance companies and automakers are getting a piece of Washington’s bailout largesse, why not cash-strapped schools?

That’s the thinking of officials at a few hard-pressed school systems, who have set wheels in motion to get a share of the $700 billion Troubled Asset Relief Program, or TARP, intended for ailing financial institutions, and the economic stimulus package now before Congress.

 

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In Olmstead Falls, Ohio, Superintendent Todd Hoadley sent in the paperwork two days before Thanksgiving to request $100 million from the federal government, half of it for school construction. He has yet to see a check and concedes he dabbling in a bit of hyperbole by latching onto the program, but he says the problems are real.

“We were trying to make the statement: ‘Don’t forget public education,’ ” Hoadley says.

In Olmstead Falls, 1,200 students cram into a 40-year-old high school built for 800. The school board wants to cut $1 million from the district’s $34 million budget, and Gov. Ted Strickland has asked advisers to see what a 25% statewide school funding cut would look like.

Hoping for some help

In Florida, Broward County school board members directed Superintendent James Notter in early December to devise a plan seeking as much as $500 million from the pot of federal money.

The 260,000 student district, sixth-largest in the country, has trimmed $128 million from its operating budget the past two years.

School districts across the nation are quietly hoping that the federal government finds a way to include them in aid proposals. The National School Boards Association has published a list of priorities that includes money for construction and modernization as well as cash to reduce the cost of debt-servicing on bonds.

Also hoping for a slice of the pie: after-school and arts advocates, career and technical programs and Head Start.

Though no district yet has followed Hoadley and applied for the bailout, most are counting on Congress’ stimulus plan to include as much as $25 billion for school construction, teacher training and other chronically underfunded line items. Educators say they need the cash as they face budget cuts in the next two years. Nearly half of districts are cutting hiring and supplies, a November survey by the American Association of School Administrators found. One in five has laid off staff.

Trimming past the fat

“This has become, in my opinion, an economic development problem because we are endangering the preparation of the workforce,” says Miami-Dade Schools chief Alberto Carvalho.

A proposed Senate plan would give schools $2.5 billion for construction, but funding for the rest remains unclear until Congress acts, probably by mid-February.

“This is the first time that we’ve been in a big stimulus package like this since the ’70s,” says the administrators association’s Bruce Hunter. “That’s a big deal.”

In Miami, Carvalho says he has spent the past few months trimming nearly $280 million — but he faces another midyear cut of more than $100 million.

“We’re well past cutting through the fat, through the flesh, muscle,” he says. “We’re now sawing into bone.”

He has led a handful of Florida superintendents calling for federal aid to schools as state lawmakers, meeting this month in special session, consider nearly $500 million in school cuts.

In Florida and elsewhere, most schools are seeing the grim results of higher expenses and lower tax revenue. But in a few cases, they’ve taken hits from large investments gone sour. In Wisconsin, five small districts that funded retiree benefits by investing $200 million — much of it borrowed from an Irish bank — in collateralized debt obligations are suing after their “safe” investments went south.

Schools created the mess?

Mike Petrilli of the Thomas B. Fordham Institute, a Washington think tank, says many districts’ financial woes can be traced to long-term teacher contracts that have locked them into automatic raises and growing pension expenditures without the flexibility to cut costs “in a smart way.”

“School districts have gotten themselves into this mess by making promises they can’t fulfill,” he says. “And now the chickens are coming home to roost.”

When Hoadley filed for the bailout, he sent it directly to U.S. Treasury Secretary Henry Paulson and to the Federal Reserve of Cleveland, where an official said he didn’t think school districts qualify for TARP funding. Then, a few weeks later, Hoadley looked on as lawmakers offered the auto industry a piece of it.

The rules, he says, keep changing — who will get the rest?

“One wonders where that’s going or what that’s going to go for,” Hoadley says. “Hopefully it’s going to come our way.”

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