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DC Public Schools Facing Spending Pressures in FY 2001

Thursday, September 6, 2001
Shortfall will not impact the District's overall viability.

(WASHINGTON, DC) Chief Financial Officer Natwar M. Gandhi released the following statement regarding FY 2001 spending pressures for the DC Public Schools.

Good afternoon. I am Natwar M. Gandhi, Chief Financial Officer for the District of Columbia. I am here today with DC Public Schools Superintendent Paul L. Vance to report on spending pressures faced by the public schools’ system as we near the end of Fiscal Year 2001.

For Fiscal Year 2001, DCPS is facing spending pressures totaling $80 million. This shortfall is concentrated in several key areas: special education overspending of $24.6 million, transportation overspending of $6.1 million, utilities overspending of $8.6 million, miscellaneous expenditures of $3 million, and Medicaid revenue shortfalls totaling $38 million. The CFO’s office has worked with Superintendent Vance to produce several gap closing measures that will address areas of overspending; however, we still expect DCPS to end the fiscal year with a revenue shortfall of $38 million.

It is important to note that although this shortfall presents us with significant challenges as we enter the new fiscal year, it will not impact the District’s overall financial viability. Our financial forecasts for FY 2001 included provisions for unanticipated spending pressures or potential revenue shortfalls, giving us the ability to effectively handle unforeseen budgetary challenges such as those described today. An ability to absorb these shortfalls, however, does not excuse anyone from the responsibility to avoid them in the first place.

The shortfall was discovered and immediately reported to Superintendent Vance and myself by DCPS’ newly appointed agency Chief Financial Officer Bert Molina, who has been empowered to improve DCPS’ financial operations. Six senior individuals including those directly responsible for reporting the financial health of DCPS to key stakeholders prior to Molina’s appointment have been terminated or removed and are being replaced with seasoned professionals with direct experience dealing with large city school budgets.

Agency administrators and directors must be responsible for managing their programmatic costs. Superintendent Vance and I will be working cooperatively to address rising costs in special education and Medicaid reimbursements so that DCPS operates within its allocated FY 2002 budget.

DC Public Schools Face $80 million in Spending Pressures by September 30, 2001:

Issue Causes Remedies
 = $42 million
  • Special Education ($24.6 M)
  • Transportation ($6.1 M)
  • Utilities ($8.6 M)
  • Misc. ($2.7 M)
  • $14 M Re-programmed Funding from the District
    $28 M in Gap Closing Measures:

  • Freeze procurement activities for FY01 – $17 M
  • Program available revenues – $7.5 M
  • Misc. – $3.5 M
  • Revenue Shortfalls  
     = $38 million
  • Medicaid Overpayments ($17 M)
  • Lost Revenues ($12 M)
  • Lower than Budgeted Revenue ($9 M)
  • $38 M will be DCPS’ Net Revenue Shortfall for FY01:

  • This will not jeopardize the District’s financial viability.
  • In the District’s financial forecast for FY01, there are provisions for unanticipated contingencies such as this, allowing the District to manage these spending pressures.