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Education Officials Report Losing Federal Funds at Budget Hearing

July 14, 2006 – Though senators had few concerns about a $17.2 million General Fund budget request presented Friday by officials from the Education Department, they were alarmed when Education Commissioner Noreen Michael said the territory runs the risk of losing more federal funds come September.
During Friday's budget hearing, Michael explained that while the U.S. Department of Education has continued to withhold federal funds until a local third-party fiduciary is put in place, the department still has to obligate approximately $22.5 million worth of federal grant money within the next two months. If not, the money reverts back to the federal government.
Michael said the funds come from a grant awarded to the department for Fiscal Year 2005. However, due to provisions in the now expired compliance agreement created by the U.S. Education Department, the money cannot be used until the third-party fiduciary has come online. "But while we're not able to use that money, we still have to obligate it by September 30," Michael said. "Whatever we aren't able to obligate goes back."
While Michael assured senators that the department is working "aggressively" to obligate – or earmark – the money, she did say that "in the worst case scenario" approximately $12 million might be returned to the U.S. Treasury. Michael said that the department has been filing various requisitions forms to obligate the money, but still has to open an account through the Finance Department for the funds transfer.
Senators became even more concerned when Michael said she may be coming before the Legislature during the next fiscal year to request more money to cover the cost of various federally funded programs and staff salaries. She said that since the money is being "borrowed" from the local government against the grant, it would be reimbursed by the federal government once the third-fiduciary party is in place.
A similar "loan" totaling some $10 million was recently granted by the Legislature to cover some of the department's costs for the current fiscal year. Michael said this, too, would be repaid upon the naming of a third-party fiduciary, and "implored" senators to consider funding another request, should one be submitted.
However, she added later that there is currently no contract in place for a prospective third-party fiduciary – though negotiations have been ongoing for the past few months. She said the department is working to "solve the issue as soon as possible," since the loss of federal funding would have a "huge impact on the department, our government and the territory."
She said that many of the department's programs are federally funded – including the development of school improvement plans (a requirement laid out by the federal government in the No Child Left Behind Act), and programs for special education students. "If we don't have this money there are several significant activities for our students that we would not be able to engage in," Michael said.
Thus, the department has submitted a federal grant application for FY 2005 and is currently working on a grant application for FY 2006. "We have not received word about whether our 2005 consolidated grant application has been awarded," Michael said. "I think the outcome and how quickly we'll hear from them [the U.S. Department of Education] will be impacted with respect to our not having a third party fiduciary in place."
While Michael added that the "department is committed" to solving the "federal fund problem," she did not specify when a contract would be awarded for a third-party fiduciary.
School maintenance and repair was also an important issue raised, especially since the closing of several schools last year on St. Croix. In an attempt to address various concerns, Michael outlined the status of ongoing projects and the department's approach to summer maintenance repairs.
"Basically, we've been focusing on health and safety issues, looking at items we could not do during the regular school year, and dealing with various wear-and-tear issues," she said, adding that department has also implemented the first phase of a comprehensive school maintenance plan that details the department's facilities, along with a list of repairs and possible preventative measures.
Michael also said that repairs on the parking lot at John H. Woodson Junior High School on St. Croix – which has been closed for the majority of the 2005-2006 school year – is in the completion stages, while mold remediation work is scheduled to be finished by the time the school reopens in the fall.
She added that new classrooms are currently being erected at the Lew Muckle Elementary School to replace the modular units used by students for the last 10 years.
Michael said various capital improvement projects – including repairs to the gym at Charlotte Amalie High School and the construction of a track and field at Ivanna Eudora Kean High School on St. Thomas – are progressing.
In response to a question from Sen. Liston Davis about the status of the CAHS gym, Michael added the project would not be completed by the time classes resume in August. She said a funding request has been submitted to the Public Finance Authority to begin the improvements.
While many of the larger capital improvement projects coming online for the department will be funded through the PFA, approximately $2.75 million for FY 2007 has been requested for other maintenance work. "We're looking at giving the districts the funding they need to complete to address whatever problems they're having," Michael said, adding that other capital improvement projects would be ongoing throughout the next several months to ensure the high schools on both St. Thomas and St. Croix can be reaccredited.
Personnel costs and other budget needs
During the meeting, Michael said a significant chunk of the department's budget (more than 64 percent) would go toward personnel costs – specifically to fund salary increases negotiated for the local American Federation of Teachers' union members.
"In fact most of the increase reflected in this year's budget is going toward that," she said.
This year's General Fund request is approximately $18.52 million more than what was appropriated for the department for FY 2004.
To cut down on some salary costs, Michael said the department would be able to reprogram a portion of the funds allotted for approximately 114 vacant positions – totaling some $3.4 million – to cover other staff salaries and mandatory initiatives.
Senators said they were concerned about the high number of vacancies within the department, and human resources coordinator Alcess Lewis-Brown said 90 positions have recently been certified to be filled.
Michael added that many of the vacancies represent critical positions that the department is working to fill. However, she said the department has experienced a reduction in the number of qualified teachers applying for jobs, due in part to the low salaries offered by the government.
Michael said that more than 100 teachers have retired or resigned within the past year in the St. Thomas-St. John district, while approximately 55 have resigned or retired on St. Croix.
Other areas within the department's FY 2007 budget include:
–$35.9 million for fringe benefits.
–$3.4 million for materials and supplies.
–$15.65 million for other services and charges – including bus transportation, janitorial and security services, and communications.
–$5.56 million for utilities.
Non-appropriated funds totaling approximately $40 million from both the federal and local governments will bring the department's overall budget up to approximately $213 million.
Present during Friday's meeting were Sens. Roosevelt C. David, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Hi
ll, Neville James, Norman Jn Baptiste and Ronald E. Russell.
Sen. Usie R. Richards was absent.

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