It has been more than four months since the state Public Education Department (PED) returned the Española School District its financial authority, and the costs are still are being felt.
Now, District officials are looking to the state, including Gov. Michelle Lujan Grisham, to remedy the issues.
Financial contractors hired by the District in September found that the two fiscal agents placed at the District by the Department made several key errors, including co-mingling of different fund and forgetting to submit important financial documents to state and federal agencies.
Among the largest of those mistakes was forgetting to submit 1094 and 1095 forms, which verify employees are offered health insurance, to the IRS from the years 2016 to 2018.
Chief Operations Officer Daniel Romero said during the District’s legislative breakfast that the penalties for not submitting the required forms to the IRS were $60 per employee, which have now accumulated to over $1.2 million in penalties against the District over the past few years.
“Our explanation is simple: we didn’t have the authority here at the District,” he said. “It was under PED and they didn’t follow through, and that’s why we’re stuck with the $1.2 million.”
Romero said his office submitted a response to the IRS three weeks ago explaining why they should not be held responsible for these fines. They have yet to hear back from the IRS.
While the largest, the 1094 and 1095 forms were not the only mistake made by the Department’s fiscal agents.
They also failed reimbursement requests for federally-funded programs, a $250,000 mistake. Executive Director of Business and Finance Richard Halford was expected to discuss mistakes with the District’s General Obligation Bond fund on Wednesday (12/18), because it appeared the fund was overspent by $719,000.
The costs have ballooned for a district that, like many others in the New Mexico, is barely making ends meet.
“It’s over $3 million for two fiscal agents that didn’t deliver,” Romero said.
Española School Board President Ruben Archuleta said he is scheduling meetings with state Secretary of Education Ryan Stewart and Lujan Grisham about the costs to the District.
“I think they’re responsible to pay for that,” Archuleta said of the tax penalties.
Department Spokesperson Nancy Martira did not grant an interview with Department Deputy Director of Finance Adan Delgado for this story. She said Delgado was unavailable.
Instead, Martira provided a written statement attributed to Stewart which read, “Our role is to partner with Districts to ensure the best possible outcome for students and communities, and we have endeavored to meet that obligation and will continue to do so.”
It is not clear if Stewart was discussing the IRS situation, since the statement does not address the matter specifically and was sent before any questions were asked.
Martira did not respond to a list of questions submitted in writing including whether Stewart thought the Department was responsible for the IRS penalties accrued during the financial takeover or if PED should pay the fines as Archuleta argued.
The District originally had its board of finance taken over by the state in late 2016, after District officials were unable to reconcile their budget and account for different expenditures. At the time, the Department was overseen by a different governor and different secretary of education.
Archuleta said a change in administration does not excuse the Department from responsibility, because many of the same officials who managed the takeover are still there.
“They said it was the previous administration, but the people who oversaw (the takeover) are in charge of this right now,” he said.
He said he plans to ask Lujan Grisham, along with the help of Superintendent Bobbie Gutierrez, to develop a policy to change how financial takeovers of school districts operate.
Rep. Andrea Romero, D-Santa Fe, said she could draft legislation that would prevent school districts from paying fines accrued during state takeovers.
“We’re going to make sure not only this district is protected, but every district is protected if there’s a take over,” she said.
After the meeting, Andrea Romero said she plans to discuss legislation to protect districts during the next legislative session in January.
Daniel Romero, who originally joined the District during the takeover, said there is no statute dictating how the state should take over school districts, which is why so many mistakes were made.
“That model ain’t working,” he said. “There was nothing prescribed as a template.”
Archuleta said dates for meetings with Stewart and Lujan Grisham have not yet been set.