Bad Budgeting Leads To $7M Shortfall In Nutley Schools

NUTLEY, NJ — Some bad budgeting in Nutley has saddled the local public school district with a $7 million shortfall, and it may take some serious belt-tightening to climb out of the hole, administrators say.

Last month, Nutley school officials announced that the district is experiencing “financial issues” and has been working with the state department of education to get the train back on track. No specific details were given about the nature of the problem – or who was responsible for it – although administrators said they planned to “maintain all vital academic and extracurricular programs.” See Related: Nutley School Finance Probe Continues, But Scope Remains Unclear

Acknowledging the growing rumor mill surrounding the news, Nutley school officials promised more information in the coming weeks. They delivered on that pledge at the board of education meeting on Wednesday (watch the video below).

“As a board, we are embarrassed by the circumstances surrounding the deficit that we now face,” president Salvatore Ferraro told attendees. “However, upon learning of this deficit, my fellow board members and I took immediate action to address those concerns.”

“We have not and we will not ignore our responsibility to the community in this regard,” he added.

The district has since released several documents that outline the problem – and proposed solutions:

• Community Update/Presentation
• Corrective Action Plan
• District Finances FAQ

According to school administrators, the district was able to verify the current $7 million shortfall on March 13. But the financial probe into its business office actually began in the second quarter of 2023, when a $686,291 deficit was identified for the 2022-2023 academic year. An independent audit was finished on Feb. 7, and a mid-year budget projection completed on March 7, which revealed more about the full scope of the problem.

Here's what the investigation found, Nutley school officials said:

“Within the past year it has become clear that inaccurate budgeting practices over the past several years, along with the ongoing reduction in fund balances, has amplified the rising costs of health care, special education, and transportation that are affecting educational systems over the past decade. However, this acute condition was primarily rooted in incorrect budget creation. As indicated above, a large amount of revenue expectations were misstated, and key expenditures were under budgeted with reserve lines being utilized for necessary unbudgeted items and overages in under-budgeted lines. The trend in misstated revenues has continued (and amplified) over the previous two budget cycles.”

The short story? The district’s cash reserves are tapped out – and there is a big gap that will need to be plugged.

Nutley administrators said the district’s business office repeatedly assured board members that there was enough money in the district’s coffers to keep things running, and blamed the declining trends in balances to extra capital projects and other board-requested projects.

According to the board, the district’s assistant superintendent of business/board secretary has been placed on administrative leave. That staff member – David DiPisa – was still listed as the assistant superintendent of business/board secretary on the district website as of Thursday.

DiPisa resigned as business administrator from the Lyndhurst Public School District in 2017. A $1.1 million deficit was reported in Lyndhurst that year. DiPisa later found employment in the Bergenfield School District until 2020, when the Nutley Board of Education unanimously appointed him as business administrator and board secretary.

Will there be any criminal or civil action taken against anyone in connection with the district’s financial woes? According to a statement from the school board:

“Subject to the completion of a forensic investigation directed by the New Jersey Department of Education (NJDOE), the information at hand points to unreliable revenue and expense assumptions in the preparation of the district's budgets. A determination will be made upon completion of a forensic audit directed by the NJDOE. Once the forensic audit is completed, the board will comply with any reporting requirements directed by the commissioner of education.”

Interviews for an interim business administrator are underway, the board reported.

CORRECTIVE ACTION PLAN

Nutley school officials have released a corrective action plan that will hopefully get things back on track. However, it’s possible that the NJDOE will assign Nutley a state monitor to oversee its finances if the district needs an advance of state aid to bail it out.

How will the budget be balanced? That’s still a work in progress – but it may include cuts.

“We identified several areas where there is excess expenditures or underutilized staffing and inconsistent adoption of vendors and services,” the school board reported.

Although administrators repeated their earlier stance that academic and extracurricular programs for students won’t be “significantly” impacted, there may be “minimal changes” that come down the pike for 2024-2025, they said this week.

If cuts need to be made, they won’t impact the district’s plan to expand its preschool program, as the upcoming year’s budget has been approved by the state, administrators said.

So where will the money come from? According to the district’s corrective action plan, here are some possibilities:

• Freezing Budget
• Eliminating Professional Development
• Freezing Non-Essential Hiring
• Eliminating Non-Essential Overtime
• Downsizing Non-Instructional Aides

Nutley school administrators are also eyeing the “rising costs of health care” for potential savings, the board reported, including:

• Investigate options with health care plans
• Investigate options with health care brokers
• Discuss options with collective bargaining unions

There are also plans to examine rising costs in the district’s special education program, the board said – a prospect that some residents questioned during the public comment portion of the meeting. Some possibilities include:

• Audit out of district placements
• Investigate privatization of paraprofessionals, and other related staff for cost savings
• Meet with collective bargaining units
• Continue to implement NJMTSS for building general education tiered interventions for general education support

Other possibilities for balancing the budget include:

• Investigate privatization of transportation
• Conduct reduction in force consistent with maintaining critical academic and extracurricular programming
• Transition elementary schedule to be more efficient and utilize resources better
• Restructure district coordinators to include teaching component

The board submitted a preliminary budget for 2024-2025 on March 20. The final budget is due on May 14.

Send local news tips and correction requests to eric.kiefer@patch.com. Learn more about advertising on Patch here. Find out how to post announcements or events to your local Patch site. Don’t forget to visit the Patch Belleville-Nutley Facebook page.