THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, December 29, 1995 TAG: 9512290746
SECTION: VIRGINIA BEACH BEACON PAGE: 06 EDITION: FINAL
TYPE: Opinion
SOURCE: BY JOHN T. EARLY JR.
LENGTH: Medium: 63 lines
Regarding the Virginia Beach school budget debacle: what did the City Council know, and when did it know it?
Recently uncovered documents obtained through the Virginia Freedom of Information Act indicate that council was advised of projected school deficits as early as November 1994. Worse still, it knew these projections were skewed to conceal even larger, looming deficits.
On Oct. 20, 1994, at the behest of city budget planners, the school budget office submitted its five-year, comprehensive forecast for analysis and publication. Coupling that forecast's most conservative or ``base'' expenditure scenario with city-projected revenue streams, city staff calculated that over $71 million in school deficits would accumulate by the end of the decade.
Alarmed by these results, high-level city and school administrators conferred to ``quickly take a look'' at the school forecast. Within 19 days, the school budget office was overruled and, on Nov. 8, 1994, a revised school forecast was published by the city's Department of Management and Budget. The final report projected over $34 million in total deficits, or less than half the school's original forecast for the five-year period.
All this information was presented to council. According to a memorandum dated Oct. 10, 1994, council was to see the school district's original ``forecast package'' with all ``actual figures and data'' in addition to city staff's final, revised forecast.
The glaring disparity ($37 million) between the city and school forecasts waved a prominent ``red flag'' in front of council, but members chose to ignore it. Why?
The answer may be tied to plans that were under way to borrow $46.5 million with a new issue of General Public Obligation Bonds, and that the city's bond rating had to be protected. Accordingly, council approved the revised forecast, but the entire matter was quietly shelved.
Two months later, on Jan. 15, 1995, the city formally presented its ``Official Statement'' or prospectus to the bond market, but failed to include its gloomy forecast. In essence, the city's main budget item - the school system accounts for 53 percent of total city expenditures - was set to hemorrhage, and unsuspecting investors were denied information crucial to a 20-year term investment.
Recent court decisions suggest that this might represent a ``material omission'' of relevant financial data for the reasonably prudent investor. The U.S. Securities and Exchange Commission has yet to determine if anti-fraud provisions of its disclosure rules have been violated.
But, several points remain clear: school budget deficits inflict serious damage to our children's education, the taxpayers' purse, our city's bond appeal, the credibility of city bureaucracy, and the integrity and quality of leadership provided by our governing authorities.
Lastly, school budget deficits represent grave violations of the Code of Virginia with unfortunate consequences for a lot of innocent people, and those who countenance or ignore them for any reason are not fit for public office. MEMO: John T. Early Jr. is chairman of Kids First, a Virginia Beach watchdog
group concerned about local education issues. by CNB