Newberg-Dundee Public School’s Financial Crisis

Newberg-Dundee Public Schools are in a massive financial crisis because of gross negligence and mismanagement by the current superintendent and administration. The 2023-24 school budget is the first budget created entirely by the current administration, and until two weeks ago they were seemingly unaware that they have made an $11 million mistake. 

Just this past Monday, in an emergency School Board meeting, the administration informed the Board that the district is projected to end this school year $3.7 million in the hole. They began this year with a $7.7 million surplus. In one year, they made mistakes in revenue and over spent budgeted expenses by more than $11 million on a $53 million budget. 

This will cause unprecedented harm to our students and staff, and is far worse than other school districts in the state are facing. It’s time to demand the resignation of the current superintendent and the entire cabinet (sign petition here.)

Read on for more detailed information.

What is the current budget situation for Newberg-Dundee Public Schools? 

Abruptly and unexpectedly, the current administration announced on Monday, May 20, 2024 that the district would end this school year $3.7 million in the hole. The recommendations were to take out an emergency loan to cover payroll through November; cut $10 million out of next year’s proposed $53 million budget; and cut $2 million from the current school year’s budget (a very difficult task when there are only 14 days of school remaining.)

This announcement came after two years of the current administration touting the strength of the budget and their fiscal responsibility. It comes after previous Superintendent Joe Morelock had brought the district back from almost being broke at the end of the 2017-2018 school year, to having $9 million in the bank in fall of 2021, when he was fired without cause by the previous school board. 

The current administration began this school year with $7.7 million of that reserve fund still available, and in one year has spent it down to a $3.7 million deficit.

They mistakenly estimated revenue and overspent expenses by more than $11 million on a $53 million budget.

This is the worst financial crisis Newberg-Dundee Schools have ever faced, and on a percentage basis, is currently the worst in the state of Oregon.

How was this problem discovered?

When the current Director of Finance was almost done creating a budget for next year (on May 7, 2024 she was still projecting to end this year with a multi-million dollar surplus), questions from the budget committee made her see a problem. She told the School Board in their regular meeting on May 14, 2024 that there was a problem and that she had called in an expert from the Oregon Association of School Business Officials (OASBO) for help. This announcement on May 14th was the first word the School Board received from the administration that there was anything to be concerned about.

Historically in Newberg-Dundee, budgets for the next year are prepared February through April, approved by the Budget Committee in May, and approved by the entire School Board in June. By law, it must be approved by June 30. This problem was discovered so late there are serious concerns about getting things fixed in time, and it displays a level of shocking incompetence by the current administration.

Aren’t other school districts in Oregon having financial problems? How is Newberg-Dundee’s situation different?

This situation is different in four major ways: the timing, the depth of the hole, the reasons for the shortfall, and the Superintendent reaction.

First, timing: Salem-Keizer and Portland Public Schools are facing major cuts for next year, but they began talking publicly about the need for those cuts last July. Silver Falls School District in Silverton has been in the news media for their “surprise” shortfall, yet even that was discovered in March of this year. 

The Oregon Department of Education sends updated financial estimates to every district’s Superintendent and Director of Finance at least three times a year. Those estimates cover enrollment, property tax revenue, and projected payments for the previous school year, the current school year, and the upcoming school year. There is absolutely no reason other than incompetence to be surprised by such a gigantic shortfall in May.

Second, the depth of the shortfall: Overestimating revenue and then overspending their own $53 million budget by a net $11 million is an error of 20.8%. Overestimating revenue should not be a surprise with multiple updates from the state every year. (The Superintendent and Director of Finance have blamed over-collection of property tax revenues in 2022-23 for part of the shortfall, but that would have started showing up in the state estimates in May of 2023, and shouldn’t have been a surprise now.) Additionally, overspending the budget to that level is gross negligence of doing the basics of fiscal management and accountability.

For comparison: 

Silver Falls School District had an $8 million error for a $51 million general budget: 15.7%. They were the only other district in Oregon which had a surprising error for this year like Newberg-Dundee, and are the only other district that needs to resort to taking out a loan to meet payroll. 

Other districts had to make cuts for next year’s budgets:

Tigard-Tualatin had to cut $10.48 million from next year’s $191 million general budget: 5.5%. 

Salem-Keizer had to cut $71 million from next year’s $646 million general budget: 11%

Portland Public had to cut $30 million from next year’s $2.39 billion general budget: 1.3%

Again, Newberg’s mistake is 20.8% of their budget. The projected $10 million cut to next year’s budget is over 20%.

Third, the reasons for the shortfall: Other districts are struggling because of the end of COVID Relief money from the Federal Government. Called ESSER funds (Elementary and Secondary School Emergency Relief), these came in three phases since 2020. The first two were under Superintendent Morelock’s administration, which chose to prioritize things like technology (Chromebooks and internet hotspots) rather than spend the temporary Federal funds on staffing. So Newberg-Dundee is not drastically affected by the ending of these funds, as were other school districts in the state who hired staff with ESSER funds. 

Declining enrollment is also an issue in most districts across Oregon. Superintendent Morelock’s administration was planning for this decline. Budgets were created based on the “Hold Harmless” rule, where districts could count on the same revenue as the previous year even if enrollment declined. However, the current Newberg-Dundee administration built the 2023-2024 budget on expected enrollment rather than the more conservative “Hold Harmless” rule, and that proved to be part of their mistaken estimates for revenue.

Fourth, the superintendent reaction:  Newberg-Dundee’s Superintendent did not know about or discover this error, showing he was negligent in his responsibility to oversee public tax dollars effectively. His current proposals to the two unions in the district are asking for the majority of proposed cuts to be on the backs of teachers and other staff, while only offering to cut 5 out of more than 30 positions in the district office. The Superintendent of Silver Falls School District immediately resigned when their smaller error was discovered.

What you’ve written here doesn’t match what the superintendent wrote in the letter sent out last weekend, can you explain?

The letter from the Superintendent (which has not been published online—I’ve uploaded it here) shows a lack of understanding and an intent to confuse. Some key points:

• The fact that the letter begins with focusing only on the $32 million coming from the State School Fund (SSF) is a major red flag. Here are the basics of how school funding in Oregon works to understand why it’s a red flag. Property taxes do not cover all the costs of public education, nor are they fair—if only funded by property taxes, schools in wealthy neighborhoods would have far more to work with. So the state supplements property tax revenue with money from the SSF. Every student (plus some extra for certain categories like special ed, calculated with something called ADMW) is allotted the same dollar amount across the state. Each district receives in multiple estimates a year what their ADMW is and how much they can expect to receive in total between property taxes and the SSF. To use rough numbers, Newberg is allowed $53 million because of our ADMW. If property taxes are $21 million, the state will kick in $32 million to make it up. If property taxes are $23 million, the state will kick in $30 million. Districts must look at the total $53 million, NOT the estimate on what the state will kick in. Evidently the current administration only focused on SSF revenue. Superintendent Morelock’s administration looked at the whole picture to avoid this kind of horrible surprise. (Here is a budget presentation slide from 2022 with the previous Director of Finance, with the ADMW, total budget amount, and subtraction for property taxes clearly stated and circled.)
• The letter refers to an estimated $1 million in revenue from “High Cost Disability.” In previous years, that amount has been $15,000 to at most $375,000 (one time). Last year it was $75,558. $1 million was not close to a realistic estimate.
• The letter refers to supposedly wrong enrollment estimates in fall of 2021, attempting to place blame on errors before his time. However, the money the district had to give back to the state for the 2022-23 school year was NOT based on estimates, but on the actual student enrollment which the current administration reported throughout 2022-23. Furthermore, those numbers would have been accounted for in estimates through the last year, and should not have been a surprise in May of 2024.
• The letter references $5.8 million additional money given to Portland Public Schools, and implies that it affected Newberg’s revenue negatively by causing redistributions in the State School Fund. The number looks big, but must be put in context of the entire Oregon State School Fund of $6.9 BILLION. The number he references is only 0.083% of the state school fund—and 0.083% of Newberg’s $53 million general fund budget is less than $50,000.
• The letter clearly outlines massive overspending mistakes: $1.3 million in Special Education, $1.3 million in Transportation, $1.1 million in Support Services, and some other over-expenses. The total over spending should be $4,048,950, but the letter deceitfully reduces that by $1.1 million from “Reappropriate Contingency Appropriation.” The School Board can choose to do that reappropriation, but they have not yet done that. The only reason to put it there is to be able to make the overspending total look better at $2,918,950. If you move $100 from savings to checking because you overspent by $400, that transfer doesn’t mean you only overspent by $300.

This letter, signed by the current Superintendent, shows negligence, a lack of understanding of school budgets, a lack of fiscal responsibility for expenses, and some clear attempts to mislead.

What happens moving forward?

Unfortunately, this colossal error by the current administration is going to cause major harm to the students and staff of Newberg-Dundee Public Schools, and to our entire community. It seems unlikely that there is enough time left in the current school year to meet the $2 million in cuts recommended by the outside expert from OASBO; the vast majority of the year’s expenses have already been spent.

That means part or all of that $2 million will need to be added to the recommended $10 million to be cut from next year’s 2024-25 budget. It’s difficult to understand the depth of what a 20% cut will mean—multiple days cut from the school year; not just a few, but dozens of positions eliminated; elementary schools potentially combined; programs cut. I grieve for our students and staff.

The 2023-24 school budget is the first budget entirely created by the current administration, and seemingly with them being unaware, they have made an $11 million mistake. The sheer magnitude of that 20% error shows they cannot be trusted to lead the district. 

Please demand the resignation of the Superintendent and the Cabinet of Newberg-Dundee Public Schools by signing this petition.