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Cash-Flow Crisis Threatens To Close Schools in Little Rock

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The Little Rock, Ark., public schools are facing a cash-flow crisis that will force them to close next month unless efforts to secure an infusion of funds prove successful, the district's superintendent, Ruth Steele, said last week.

District officials were negotiating with banks and state education officials last week to stave off the crisis, which they project could leave them $26.6 million short--almost a quarter of the district's total budget--if they are allowed to continue operating until the end of the school year.

"It's quite scary, frankly, at the present time," said Ms. Steele, the former chief state school officer in Arkansas who assumed her current post last summer.

School officials pointed out that the projected operating deficit is only about $4 million; the balance of the shortfall consists of funds that the district is scheduled to receive, but might not have in hand when payrolls and other bills are due.

Some $15 million of the shortfall is due to a new hitch in efforts to settle the state's obligation to fund desegregation efforts in Little Rock and two surrounding school districts.

Earlier this month, U.S. District Judge Henry Woods approved an agreement under which the state will pay $129 million to fund desegregation plans in Little Rock and two adjoining districts that are parties in the case.

But Judge Woods eliminated or amended some of the provisions that had been negotiated between the parties, and ordered that the funds be controlled by a court-appointed metropolitan supervisor rather than by the school districts themselves.

Both the Pulaski County school board and the North Little Rock school board have voted to appeal the ruling, saying that Judge Woods had no authority to change the terms of the negotiated settlement.

And lawyers for black plaintiffs in the case have also said they would appeal Judge Woods's decision to cut their fees by $2.3 million.

Appeals Jeopardize Settlement

State officials said that the pending appeals jeopardize the entire settlement, and as of last week were refusing to release the funds until the challenges are settled.

Because of the appeals, even Judge Woods may not be able to order the state to release the funds, district officials said, although they have asked him to "use his office to persuade" the state to free up the money.

"The litigation and adversarial relationships are standing in the way of common sense," said Eugene Reville, the former superintendent of schools in Buffalo, N.Y., who was appointed metropolitan supervisor by Judge Woods last year.

Mr. Reville said he was confident that an agreement would be reached before the district was forced to close its doors, because "I don't think people can responsibly let that occur."

A potentially more troubling issue for the district is its projected $4-million operating deficit, which may force school officials to rescind a 6 percent salary increase they had offered to teachers.

The raises, which would cost the district $3.3 million this year, have been rejected by the Little Rock Classroom Teachers Association, and a fact finder is currently examining the district's finances.

Last week, Ms. Steele said she was not yet willing to recommend that the offer be retracted, but that "along with everything else, it will be subject to intense review and scrutiny."

New Assignment Plan

The district is also seeking to renegotiate its long-term debt in an effort to reduce its current payments.

Ms. Steele said the district would probably also ask Judge Woods for permission to hold a special election in order to ask voters to approve a 9.5-mill increase in property taxes.

The increase is needed to put the district on a sound financial footing and to pay for a new student-assignment plan proposed this month by Mr. Reville.

The plan calls for the creation of 14 new magnet schools and programs in Little Rock that would also draw students from surrounding counties.

It also calls for the district to eventually close six schools that remain racially identifiable this year, and to replace or expand them so they can be integrated.

Mr. Reville was appointed in part because Judge Woods was frustrated with the continuing presence of segregated schools in Little Rock, despite the implementation of numerous previous desegregation plans.

Repeated changes in the district's student-assignment plans, including a short-lived experiment with "controlled choice," have angered many parents and accelerated the flight of middle-class families from the district, Mr. Reville said.

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