Monday, February 4, 2008

Recovery schools get help with cash flow

Shortly before unveiling its first complete budget in almost two years, the Recovery School District has received a $15 million infusion to temporarily ease a cash crunch. The district also anticipates getting another $58.4 million for school construction through new legislation in Congress.

Officials however, still have to craft a long-term solution to deal with the cash shortage. The state-run district faces cash-flow issues partially because it lacks a reserve and spent millions on costly academic interventions early on. The district also had to front millions in flood-related construction expenses while it negotiated the amount of reimbursements available from the Federal Emergency Management Agency.

The $15 million in Community Block Development Grants will help the district dig out of the hole, paying off about half of its about $30 million in overdue -- mostly construction-related -- bills, Superintendent Paul Vallas said.

One vendor awaiting payment is Arrighi Simoneaux LLC, a Baton Rouge commercial construction company. The firm did site work for nine modular campuses and renovated 400 bathrooms in 25 schools last summer in the rush before the start of the 2007-08 school year.

The company was paid $37 million, but $2 million is still owed, operations manager Shane Kirkpatrick said.

"We jumped through hurdles to get the kids in schools, to get the project finished. And three months after, we cannot get paid," said Kirkpatrick, who met with state Superintendent Paul Pastorek last week to discuss the outstanding invoices.

Pastorek said this week that state officials will settle the balance with Arrighi Simoneaux. The Recovery District expects to eventually receive $90 million in grants through the Louisiana Recovery Authority.

Vallas said he will tackle the balance of outstanding invoices this month.

Penalties change

More relief will come from FEMA. The agency is now obligated to pay the recovery district at least $58.4 million because of legislation that Sen. Mary Landrieu, D-La., inserted into the 2008 federal omnibus appropriations bill, amending the Robert T. Stafford Disaster Relief and Emergency Assistance Act, the oft-criticized law governing federal disaster assistance.

Pastorek said it could take up to 180 days for the $58.4 million to arrive. Meanwhile, the system will try to secure short-term and long-term cash to ease the budget crunch. Pastorek said state education officials are working with Gov. Bobby Jindal's office and Louisiana Recovery Authority executive director Paul Rainwater to develop a framework to ease cash-flow issues. Officials may reveal the strategy this week before they present a roughly $250 million budget to the state board of education in February, Pastorek said. Landrieu's legislation, which Congress passed in December, altered the way FEMA assesses penalties for Katrina- and Rita-affected school districts not fully covered by the National Flood Insurance Program, a subsidized insurance for policy holders in hazardous regions.

Government facilities, such as public school districts, may be insured by the National Flood Insurance Program if the building is located in the 100-year flood plain. Before the 2005 storm season, many of the more than 100 New Orleans campuses taken over by the state were not covered by the National Flood Insurance Program.

After the 2005 storm season, FEMA established a policy penalizing applicants not covered by the program up to $1 million per building. The agency levied a penalty of up to $500,000 for the desks, chairs, pencils and other contents, and another penalty of up to $500,000 against the damage estimates of each building on a campus.

Under the new system, schools under the control of the Recovery District would get up to a $500,000 penalty per campus, regardless of how many buildings it has. Many campuses in New Orleans had several buildings, even small one-room structures.

The new model applies to Gulf Coast school districts impacted by Hurricanes Katrina and Rita, and could mean millions for public and private schools in St. Bernard, St. Tammany, Plaquemines and other parishes.

Cutting red tape

Landrieu said many of the public projects in Louisiana are mired in red tape and "stuck in the muck." Initially, she wanted FEMA to ultimately streamline grant procedures for all storm-related projects, but FEMA resisted some of her proposals.

"So I basically asked, begged and then forced them to change the process relative to schools," Landrieu said. "It literally took an act of Congress to get this done."

The Recovery District initially faced more than $88 million in National Flood Insurance Program penalties under the old policy. Now the district will pay only about $30 million in deductions. For example, the district would recoup $6 million more for buildings on the Carver Elementary and Carver High campuses, $2.8 million more out of Alfred Lawless High and millions more for other schools. The $58.4 million, however, will pay for construction districtwide.

The $58.4 million would mostly be put into a capital budget, said budget director Ramsey Green. Some of the money could be used to finance a school-facilities master plan, Green said. Officials concede that financing the 10-year rebuilding plan, expected to be presented in May, will be a challenge.

More for repairs

Officials said about $50 million of the more than $150 million spent on renovations in the last two school years came out of the district's operating budget.

"We had to pay everything out of one pot. Now we're not going to be straining the operating budget trying to pay for capital expenditures," Vallas said. "We now have money up front."

Landrieu's legislation also enables FEMA to cut one check for all the money that a school district is slated to receive. It also eliminates a 25 percent penalty for schools wanting to relocate, change the use or add protective measures that the Stafford Act would not pay for. Rainwater helped write the law when he worked as Landrieu's legislative director and chief of operations.

"We can do $58 million more of repairs than before," Pastorek said. "That could mean three brand new schools or as many as 15 or 20 rehabilitations."