State panel examines whether Clark County schools should be under “fiscal oversight.”

A Nevada Department of Taxation committee has appointed a subcommittee to work with the Clark County School District (CCSD) to decide whether to recommend placing the district under financial supervision – increased government oversight.

The Local Government Finance Committee’s move Wednesday follows news of potential district budget shortfalls, including a $10.8 million deficit at the district level.

The subcommittee members are Tom Ciesynski, executive director of the Nevada Association of School Boards and former chief financial officer of the Washoe County School District; Jim McIntosh, assistant city manager and chief financial officer for the City of Henderson and former CCSD chief financial officer; and Paul Johnson, chief financial officer of the White Pine School District.

This is the latest state action since the district’s budget problems came to light last month and were discovered during the regularly scheduled financial statements process, leading to the firing of its chief financial officer. The district’s interim superintendent, Brenda Larsen-Mitchell, attributes the district’s $10.8 million budget hole to unforeseen litigation and cybersecurity expenses.

Under state law, the department’s Local Government Finance Committee may recommend fiscal oversight if it determines that a serious financial emergency exists. It would declare a state of emergency for a local government if one or more of the 27 conditions listed in the statute are present.

These conditions include whether the local government agency spent money inappropriately, whether money set aside for one use was spent on something else, or whether an audit report showed funds in deficit. Another qualifying condition is whether the corporation’s general fund ending balance has decreased over the past two years or is “less than 4 percent of actual expenditures from the local government’s general fund for the immediately preceding fiscal year.”

Diane Bartholomew, CCSD’s interim chief financial officer, noted that the district was placed under financial supervision in 2018 after its general end fund balance declined for three years. As part of this monitoring mechanism, the district was required to submit monthly cash flow statements to the department and submit regular reports to the committee.

She argued that this time the district did not meet any of the conditions that trigger budget monitoring.

The district’s problems have drawn the attention of top state leaders. Wednesday’s meeting came a day after Senate Majority Leader Nicole Cannizzaro (Democrat of Las Vegas) and House Speaker Steve Yeager (Democrat of Las Vegas) held a legislative subcommittee hearing on the budget deficit on December 16 in response to the Republican Governor Joe Lombardo had announced demands for state audits.

The school district has also come under scrutiny from Jhone Ebert, the state’s superintendent of public instruction, who has been investigating the situation herself. This included budget allocation issues, which schools were notified of in January to help them plan for this school year.

Those inaccuracies, uncovered last month, included underestimating the average salary cost for licensed educator positions by about $5,700 and using incorrect numbers to calculate additional funding for students deemed “at risk” for not graduating .

“Schools were not under-allocated $5,693.64 per licensed employee, as is the case with allocations

regardless of the principals’ personnel decisions,” Larsen-Mitchell wrote in a letter responding to follow-up questions from Ebert. “Rather, the cost of licensed employees was higher than was originally communicated to clients in January 2024.”

Larsen-Mitchell said the errors that led to the budget problems at individual school sites could not have been predicted because they resulted from errors, although she acknowledged that “the errors were avoidable.”

“In my opinion, the errors were due to inadequate process documentation and communication, as well as organizational and process silos,” Larsen-Mitchell wrote. “The errors were unacceptable and should not have happened.”

In her response, Larsen-Mitchell said the district does not have processes or procedures in place to notify school leaders of new information received following their budget projections – which must be released by Jan. 15 – but is working on development and implementation this.

At an Oct. 10 school board meeting, district officials proposed filling the district-level budget gap with some of the district’s more than $150 million in unallocated funds, which they said would result in the new unallocated ending fund balance The fund’s total return would be over 4 percent of its budget, more than its goal of 2 percent.

The district approved additional funding for 31 of the 32 schools that submitted applications and were “severely impacted” by the budget errors. Those schools include Robert L. Taylor Elementary School in Henderson, which requested the highest amount at $720,000, and Kathy L. Batterman Elementary School in Las Vegas, which requested the lowest amount at $50,000.

To make up for shortfalls in their budgets, many schools resorted to eliminating vacant or filled staff positions, district officials said at the school board meeting.

Other schools, like Hickey Elementary School, were able to solve their budget problems without cutting teaching and support staff positions by using carryover funds – unspent funds that are carried over into future budget years.

CCSD schools have a total of $363 million in unspent funds, due in part to job vacancies, Bartholomew said at the last board meeting.

In 2023, the Legislature passed a bill, SB282, that would require schools with carryover balances greater than 5 percent of their actual spending to spend their surplus on programs such as tutoring, social and emotional learning, and extracurricular activities.

If a school does not spend the money within two years of the end of the school year, the bill would require schools to transfer the excess funds to the state Education Stabilization Account.

The bill prohibits CCSD from requiring schools to use their excess funds to “replace any duty, responsibility, or funding” owed by the school district to a school.

The Clark County School Board will discuss the budget at its Thursday meeting.