Budget & Finance

Bailout Deal Reached For Baltimore Schools

By John Gehring — February 25, 2004 4 min read
  • Save to favorites
  • Print

Acting to avert a financial meltdown that could have left the Baltimore school district insolvent by the end of the academic year, Maryland’s governor, the city’s mayor, and a local foundation offered the system millions of dollars in loans last week.

Pictured from left to right are Baltimore Mayor Martin O'Malley, Lt. Gov. Michael Steele, Gov. Robert L. Ehrlich Jr., state schools chief Nancy S. Grasmick, and Baltimore district chief Bonnie Copeland. Address.

Pictured from left to right are Baltimore Mayor Martin O’Malley, Lt. Gov. Michael Steele, Gov. Robert L. Ehrlich Jr., state schools chief Nancy S. Grasmick, and Baltimore district chief Bonnie Copeland.
—Photograph by Matt Houston/AP

After several days of negotiations involving Gov. Robert L. Ehrlich Jr., Bonnie Copeland, the chief executive officer of the Baltimore schools, and state Superintendent of Schools Nancy S. Grasmick, the governor announced on Feb. 18 that he would ask the state legislature to provide a $42 million advance to the district.

The state’s offer came just days after Mayor Martin O’Malley pledged that the city would provide an $8 million loan and the Abell Foundation, a Baltimore nonprofit organization that has provided grants to the district for years, matched the mayor’s offer with another $8 million.

The infusion of money appeared to have halted the possible layoff of 1,200 employees, many of them teachers, from the 90,000-student system. Ms. Copeland had pointed to more layoffs as the only alternative to address the $58 million deficit in the system’s $914 million budget after members of the city teachers’ union on Feb. 12 roundly rejected a 3.5 percent pay reduction to avoid job cuts.

“We are pleased the school system has been able to find money,” said Carla Tyler, a spokeswoman for the Baltimore Teachers Union. “The resources are out there. Teachers are feeling proud they were able to stand their ground.”

The district has already faced significant downsizing. Ms. Copeland laid off 800 central-office employees in November, a day after she was appointed as the CEO by the school board. (“Velvet Glove, Steel Hand,” Jan. 14, 2004.)

‘Never Again’

Gov. Ehrlich’s loan offer, which must be approved by state lawmakers, comes with conditions. City school leaders must present a plan for how the system will become more accountable for its budgeting decisions, and the governor wants someone to report directly to him about the system’s ongoing financial condition.

“The governor has been very clear that he is going to demand accountability for the first time in a long time,” said Henry Fawell, a spokesman for the Republican governor. “His focus is on finding the root of the problems, and taking it out of the equation so it never happens again.”

Ms. Grasmick, the state schools chief, has already appointed a three-person panel to investigate the Baltimore schools’ finances. A former Baltimore County circuit court judge, a lawyer from a well-known Baltimore firm, and another lawyer who once served on the Baltimore County school board will report back this spring.

If any evidence of criminal misconduct is found, the information will be turned over to Maryland’s attorney general, according to the state superintendent.

The new money will be used by Baltimore school leaders to address what they are calling a cash-flow emergency for this school year. Money will help pay employees’ salaries for the rest of the year, and help pay bills for food service and maintenance provided by contractors.

While the bailout announced last week made it less likely that up to 1,200 employees could be fired, layoffs could still be necessary to address the district’s budget deficit, which has accumulated over a period of years.

“Everything is on the table, because we’re not sure how much we have to demonstrate to the legislature and the governor in terms of making up the deficit in 2004 rather than in 2005,” Ms. Copeland said last week.

If state officials end up pushing for a deficit reduction sooner rather than later, she said, salary cuts, furloughs, and layoffs will all be considered.

Financial Fix

Ms. Grasmick met with Ms. Copeland last week to help city school leaders begin structuring an accountability plan to present to Gov. Ehrlich’s administration. Meetings over the past two weeks, Ms. Grasmick said, have focused on addressing the system’s immediate cash-flow problems.

“There was an urgency in all of this,” she said. “This is about creating a level of discipline within the system and an understanding that you can’t spend more than you have. That hasn’t happened in Baltimore in a long time.”

The state has not been a stranger to working with the city schools. In 1997, a city-state partnership was formed under which the Baltimore schools received $254 million in additional state funds over a five year period. In exchange, the district agreed to let the Maryland Department of Education have a greater say over curriculum issues and other areas of academic accountability.

But Ms. Grasmick said last week that the financial problems that have plagued the Baltimore schools do not mean the city-state partnership has been a failure.

“The academic dimension of the system has improved considerably. What was not part of the legislation was a focus on the financial dimension,” the state superintendent said. “In retrospect, we should have said it would have been a good idea for more financial oversight, but you have to understand the dynamics. People viewed any state involvement as a takeover.”

Robert Embry, the president of the Abell Foundation, said Mayor O’Malley, a Democrat, told him that the governor would be hesitant to provide a substantial infusion of state aid unless immediate cash-flow concerns were dealt with first. The foundation’s loan—along with the mayor’s promise of $8 million from the city—will address those issues.

Mr. Embry said he expects the Baltimore schools to make progress. “We have a great deal of confidence in the new team that is running the school system,” he said.

Related Tags:

Events

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Recruitment & Retention Webinar
Substitute Teacher Staffing Simplified: 5 Strategies for Success
Struggling to find quality substitute teachers? Join our webinar to learn key strategies to keep your classrooms covered and students learning.
Content provided by Kelly Education
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Artificial Intelligence Webinar
AI in Education: Empowering Educators to Tap into the Promise and Steer Clear of Peril
Explore the transformative potential of AI in education and learn how to harness its power to improve student outcomes.
Content provided by Panorama Education
English Learners Webinar Family and Community Engagement: Best Practices for English Learners
Strengthening the bond between schools and families is key to the success of English learners. Learn how to enhance family engagement and support student achievement.

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Budget & Finance Quiz
Quiz Yourself: How Much Do You Know About STEM Funding?
Answer 7 questions about the whole child approach of connecting schools and communities.
Content provided by PLTW
Budget & Finance Don't Forget About Money for Schools: How Public Education Fared at the Polls
Voters approved billions for school construction bonds in California—but rejected more than $4 billion in bond spending in Houston.
5 min read
Photo collage of U.S. currency and stock market trading graph.
Getty
Budget & Finance From Our Research Center The 'Zero-Sum Game' of School Budgets and Teacher Pensions
Pensions represent a rising cost, but many school district administrators don't understand how they work.
5 min read
Illustration of a big fish getting ready to eat a smaller school of fish. All of the fish have a dollar sign on them.
iStock/Getty
Budget & Finance ‘Money Matters. Now What?’: How Districts Get More Funding for Poor Students
Targeting more funding to students who are most in need has a measurable effect on their academic performance, according to new research.
7 min read
Image of a bullseye, darts, and money.
Laura Baker/Education Week with DigitalVision Vectors