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State Board of Education Chair Eric Davis and state Superintendent Mo Green recently sent a letter to the Winston-Salem/Forsyth County Board of Education asking members to address reports of a $16 million budget shortfall for Fiscal Year (FY) 2024-25.
The letter also raises concerns about the district’s financial audit for the last fiscal year, which the letter says “was submitted over 4 months after the November 30, 2024 deadline.” Each year, North Carolina school districts are required to submit financial audits to the Department of Public Instruction (DPI).
“These audits are required to ensure that you have a report on the financial condition of your district and to allow you to take timely action to correct any deficiencies,” the letter says. “The audit reflects material findings related to a reduction in fund balance, expenditure over budgeted revenues, and other items.”
The letter was also sent to Superintendent Dr. Tricia McManus and Chief Financial Officer Thomas Kranz. Kranz announced his resignation at an April 8 board meeting, following public discussions of the overspent budget. Later in the month, McManus announced her retirement. Both leaders will step down from their roles effective June 30.
During April board meetings, the proposed remedy from school officials would have reduced central office positions and salaries to help account for the budget gap. The superintendent also said the district would “freeze hiring and discretionary spending (exceptions for essential purchases), restrict summer school funding to state resources only, discontinue long-term substitute positions, eliminate take-home vehicles and out-of-state travel expenses and limit travel between districts.”
Other potential cuts for the 2025-26 school year include furloughs for the executive team, overhauling the district’s virtual academy, and merging two schools.
“This is not the place we wanted to be in,” McManus said in a written statement to WFDD. “And I apologize that we’re even having this conversation today and that we didn’t predict this two years ago and make these changes then.”
At an April 22 school board meeting, McManus announced she would retire from the role at the end of the school year. The board said she stepped down to focus more on her children and family, according to a WFMY News 2 report.
The letter from Davis and Green laid out several other financial concerns in the district, pulled from the 2024 audit:
- A decline in the unassigned fund balance of $17.7 million, leaving a balance of $5.39 million, equating to only 0.7% of total expenditures,
- A decline in student membership of approximately 1% from fiscal year 2023, yet an increase in the total general fund expenditures of $48.8 million or 7%; and
- Over $16.2 million in expenditures that were not included in the budget.
For the current fiscal year, the letter also says that the district’s expenditures for state non-instructional support allotments exceed the given allotment by $10.3 million. Expenditures for the last round of federal COVID-19 relief funding exceed grant funding by $3.7 million.
Finally, the letter says the district is “projected to exceed the State funded position allotments by a material amount, unless the district transfers the positions on to another funding source until the end of the year.”
The letter directs the WS/FCS Board of Education to “provide a detailed explanation of the actions that your board and school staff taken place to mitigate any further budget shortfall for the fiscal year ending June 30, 2025.” The district must also send a summary of actions to the state Board regarding steps “in making immediate correction actions for fiscal year 2025, and fiscal year 2026 budget,” no later than May 15, 2025.
“This communication serves as a warning that you must meet your legal and fiscal oversight obligations to avoid financial sanctions and additional oversight of the district by the State Board of Education and DPI,” the letter says. “We welcome the opportunity to engage in further dialogue about the current financial challenges facing Winston-Salem/Forsyth County Schools and trust that you will take the necessary corrective actions.”
According to the WFDD report, the Winston-Salem/Forsyth board voted 5-3 last month to approve the first round of cuts to make up the shortfall.
Forsyth County Association of Educators President Jenny Easter spoke out against the cuts and asked the board to request more funding from county commissioners, per the report, but multiple board members said “they felt it was wrong to ask the county to bail them out of a situation they say is the district’s fault.”
“We are deeply concerned about the issues raised by the State,” WS/FCS Board of Education Chair Deanna Kaplan said in a statement. “We want the community to know that the Board is committed to adopting and maintaining a balanced budget. We take this responsibility seriously. Being in good financial standing is something we are all committed to achieving. We will develop a plan to submit to the State Board of Education that will address the financial concerns as well as outline steps to mitigate future budget issues.”
Amanda Lehmert, the district’s chief communications officer, told EdNC in an email that “WS/FCS is working diligently to right-size the budget and set us up for fiscal sustainability.”
“We have already implemented a series of cost-saving measures this fiscal year and have more that will go into effect for the next budget year, beginning July 1,” she said. “We have sought assistance from outside experts in public school finance administration to ensure we are headed in the right direction. We will work with NC DPI to provide the assurance it needs that we are meeting our financial obligations.”
What are fund balances?
According to 2023 statewide data, WS/FCS had $23,062,631 in its fund balance, reflecting about 14% of expenditures.
Since then, as mentioned above, the district spent $17.7 million of its fund, leaving a balance of $5.39 million, or 0.7% of total expenditures.
Fund balances consist of local money that school districts get from their county commissioners. Districts can put money in their fund balance when there is a surplus of county funds. At that point, the money is under the control of a district’s school board. Fund balances do not include the cash school districts get from the state or federal government.
Available fund balances are like “a savings account that schools can use” in the event of unanticipated expenses or opportunities, the Local Government Commission (LGC) told EdNC in 2020.
Districts also rely on fund balances when there is budget uncertainty ahead of the start of the new school year.
“It’s not something that you want to use,” Kendra Boyle, director of the Fiscal Management Section of the State and Local Government Finance Division, told EdNC last year. “You want to have that (fund) for emergencies.”
While there is no minimum fund balance requirement for North Carolina local government agencies, according to the LGC’s website, fund balance available is just one of several factors used by the Local Government Commission (LGC) to assess the fiscal health of tax-levying units.
Some people advise state agencies to keep a minimum of 8% of yearly expenditures in their fund balances, but the LGC said that recommendation doesn’t account for the fact that school districts cannot levy taxes like county and municipal governments, and that “there are few units that can operate in a fiscally sound manner with only 8% fund balance available.”
Instead, the LGC recommends that local governing boards “develop a fund balance policy that requires they maintain a fund balance that is consistent with that of their peers. The policy should include corrective action should the fund balance fall below the intended targets.”
For school districts, the LGC previously told EdNC that such a policy might include an agreement with their county, taking into account how much the county is willing and able to help in the case of emergencies.
Statewide budget shortfalls
School districts across North Carolina have faced budget shortfalls in recent years.
Most recently, some school districts in western North Carolina are facing budget shortages following Hurricane Helene.
In January, the Buncombe County Board of Commissioners voted to cut $4.7 million from the budgets for Buncombe County Schools and Asheville City Schools in order to balance the county budget following storm-related costs.
Education is still the number one line item on the recommended budget, according to a report by Blue Ridge Public Radio, but the proposed education budget is about $20 million less total than what both school systems requested.
“We need to fully fund the Asheville City and Buncombe County School Board budgets,” Joan Hoffman, a technology teacher at AC Reynolds High School and parent, said, per the BRP report. “It is what is right in the wake of this destruction.”
In Wake County, the Board of Education recently voted on a budget that asks Wake County commissioners for about $40 million more in local funding. However, that budget also included more than $18 million in cuts across the system.
In January 2024, Durham Public Schools (DPS) staff members learned prior raises would be changed, following major accounting errors regarding implementing a 2023 salary study. Soon after the issues became public, both CFO Paul LeSieur and Superintendent Pascal Mubenga resigned.
After weeks of disruptions and school protests, the DPS Board of Education voted at the end of February 2024 to stop paying the promised raises at the end of the month, instead giving across-the-board 11% raises to 1,875 classified staff members the rest of the school year — based on the previous year’s salaries.
Since then, in May 2024, DPS asked Durham commissioners for a $27 million increase in funding, which included salary increases for educators and classified staff.
Originally, the county’s proposal allocated only an additional $13 million for DPS. In June, commissioners voted to further increase that proposal, WUNC reported, which “effectively funds 98.9 percent of that request.”
Dr. Anthony S. Lewis, who joined DPS as superintendent in August 2024, previously told EdNC that the extra funding from the commissioners was greatly appreciated by the district.
“This unprecedented vote of confidence demonstrated our collective agreement on the critical and necessary importance of student achievement and teacher excellence,” he said. “It also acknowledges the positive impact that intentional collaboration and a shared agenda can have on a community that prioritizes public education.”
In other districts, unexpected issues with the system’s physical plant can cause budgeting challenges.
That was the case in the Alamance-Burlington School System (ABSS). Multiple ABSS system leaders resigned in spring 2024 — including the superintendent and CFO — after significant mold problems last summer and major repairs at older schools led to budget shortfalls.
In September 2024, ABSS swore in Dr. Aaron Fleming, former superintendent of Harnett County Schools, as its new superintendent. At the time, Fleming said he would work to keep stabilizing the district’s finances.
In an email to EdNC, Fleming also said that the district had hired a new CFO, Tony Messer, and that the hire would put the district “on a strong path toward fiscal responsibility and accountability.”
Ahead of the funding cliff for federal COVID-19 relief funds last September, multiple other districts also announced budget shortfalls — including the New Hanover, Charlotte-Mecklenburg, and Carteret school districts.
Together, these budget shortfalls highlight the importance of district’s chief financial officers (CFO), who are responsible for managing school system budgets.
Across North Carolina, CFOs manage budgets ranging from $12.8 million in Hyde County Schools to $1.9 billion in Wake County Schools, according to 2021-22 data from DPI.
CFOs can help districts prevent making budget mistakes while maximizing funding, but they also must help school districts navigate unexpected challenges or emergencies.
“People often don’t realize just how big a school budget really is,” Mark Garrett, superintendent of Henderson County Public Schools, previously told EdNC. “For example, our budget is about $145 million, depending on the year, and that’s quite a bit to manage. So you’ve got to have that chief financial officer.”
In North Carolina, the State Board of Education must approve all district finance officers.
Editor’s note: This article was updated after publication with a statement from Winston-Salem/Forsyth County Schools.
