POLITICS: Does District’s Budget Crisis Signal Deeper Trouble for NC? – USSA News

Is the financial mess in Winston-Salem/Forsyth County Schools an isolated incident or a sign of more trouble ahead for North Carolina?

It’s hard to ignore the financial mess brewing at Winston-Salem/Forsyth County Schools (WS/FCS).

In mid-August, North Carolina State Auditor Dave Boliek sent a letter along with a special report from his office to the State Board of Education. The letter highlighted how poor financial decisions contributed to a $46 million dollar deficit for WS/FCS. Boliek’s office found not only that the district’s auditor identified poor accounting procedures but also that those audits failed to address any of the issues raised in the state auditor’s recent report on district finances.

At its September meeting, the State Board of Education voted to have an independent audit of the district and set a monthly interest rate of 0.4 percent on the $3.4 million that WS/FCS still owes the state.

At its October meeting, the State Board of Education approved a “scope of work” plan to help define what an outside audit firm will review regarding WS/FCS finances. The plan is not to review factors that contributed to the need for the plan but to ensure the district is taking actions to correct the current problems.

To help dig itself out of the $46 million deficit, the school district has had mass layoffs, employee furloughs, and school closings.

State Rep. Donny Lambeth, R-Forsyth, a former school board member, has tried to pull together a loan plan of up to $20 million between local legislators and the school board. Any such plan, however, is not likely to be voted on until next spring during the legislature’s short session, according to Lambeth. He also said it would likely come with strings attached. One of those strings would likely be that the money would be lent to Forsyth County, rather than the school district, with the expectation that county commissioners would provide oversight of the district.

Compounding the problem is that the reality that WS/FCS still owes $37 million from the 2024–25 budget year, including more than $3 million to the state.

How did this happen? Keep in mind that school districts must have their books audited once a year, in part to ensure that things like this don’t happen.

According to the state auditor’s report, the district spent over $75 million in bonuses and overspent its annual revenue in fiscal years 2022 and 2023. WS/FCS used temporary federal Covid-relief funds to support staff salaries. The district also used these funds to pay the salaries of permanent employees, delayed routine account reconciliations, and inappropriately used suspense accounts, which temporarily hold funds until they can be properly classified.

It should be noted the problems at WS/FCS occurred over several years. Schools are legally required to undergo annual audits (G.S. § 115C-447). The statute also requires the results to be filed with the local school board as well as with the State Board of Education. Those requirements make it difficult for WS/FCS board members or others to claim they didn’t know there were problems. Clearly, problems went unaddressed for years. Such realities show that the scope of the problem seems to extend to the quality of annual audits for school districts.

This situation is troubling for two other reasons. Over the past five years, the federal government pumped an additional $6.2 billion for Covid-relief programs into North Carolina. Most school districts in North Carolina were awash in funds. From 2020 to 2025, WS/FCS received an additional $274.8 million in federal Covid-relief funds. Over half of those funds — $152.5 million — was spent on salaries and benefits.

Adding to this sad mix is that enrollment in WS/FCS plunged nearly 4 percent or about 2,000 students in 2024–25. Four percent is four times more than the district predicted. Understandably, the drop in enrollment led to a reduction in funds, whipsawed budgets, and led to staff reductions.

Should the state provide a bailout for North Carolina’s sixth-largest school district? Some say that the state has a moral obligation to help the district and students. Others say that providing state aid to cover for local problems sets a bad precedent. If the state does nothing, many of the consequences will most likely fall on those who had nothing to do with the actual decisions: teachers and students.

So where is the accountability? The school board members knew of the financial problems. If they say they didn’t, they should have. That’s their job. We also know the audits were compromised. So, the finger-pointing will continue.

Sometimes not having enough money is the problem. Sometimes the problem is how the money is spent. That’s the problem here.

My own fear is that WS/FCS is not the only district with such problems. There are good reasons to be worried. The complexity of North Carolina’s school finance system, the lack of accountability for federal Covid-relief dollars, and a 2016 report saying it takes school business officers two or more years to learn how public schools are funded all offer compelling reasons to suspect that the problem in WS/FCS is not an isolated incident.

These aren’t excuses. Rather, they are reasons to investigate spending in our public schools and work toward a more transparent and less complex system for funding North Carolina’s public schools.

State Auditor Dave Boliek deserves credit for having the courage to ask important questions. Let’s hope WS/FCS and others have same courage to go where the answers lead.

The post Does District’s Budget Crisis Signal Deeper Trouble for NC? appeared first on John Locke Foundation.