Why CCSD, year in and year out, can’t manage its money

Sisolak’s hunch is correct: CCSD’s massive administrative structure
fosters internal ‘kingdoms’ that regularly destroy fiscal accountability.

Steven Miller

If the Clark County School District has a “structural” problem, as Gov. Steve Sisolak and CCSD Supt. Jesus Jara have asserted, where, specifically, would that problem lie?

Sisolak said last month that although the state had received and fully funded “education budgets from every school district” in Nevada — including merit increases and pay raises — ever-larger CCSD deficits were presenting “a moving target” for his administration.

“It was $60 million,” he noted, then “$90 million — $120 million — $180 million.”

Currently, said the governor — showing some irritation — “I don’t know what the number is,” adding, “The system is structurally flawed. We need to fix the system.”

Sisolak observed that CCSD’s deficits have kept growing in recent years notwithstanding large increases in subsidies from the state. He was speaking to KLAS-TV reporters as they highlighted draft legislation that would authorize new county-level taxes to feed CCSD.

CCSD’s Jara, for his part, tried to recast Sisolak’s “structural” point into one directly supportive of tax increases.

“We agree with the Governor;” he said, “there is a structural problem with the way we fund K-12 education that has caused ongoing deficits.” (Emphasis added.)

Jara, however, was going significantly beyond what Sisolak had said. The governor had been miffed by CCSD’s regularly demonstrated incapacity to accurately identify, manage and report to the public its actual spending.

CCSD’s problems are, indeed, systemic

Those managing and reporting problems are not at all new, having afflicted the district for decades. They received much examination in Nevada Journal’s 2017 series, CCSD’s systemic problems and their costly consequences.

By that year, CCSD had blown well over $100 million of taxpayer money on an Enterprise Resource Planning (ERP) system that even today, well over a decade after purchase, is still unable to do the basic tasks the district had originally cited to justify the purchase.

Originally, under Carlos Garcia — CCSD superintendent from 2000 to 2005 — the project’s goal had been a fraud-proof yet transparent system that would allow district leaders to oversee, monitor and fully report how they managed and spent the billions they receive from Nevada taxpayers.

After Garcia left, however, several division heads refused to abide by the contract the district had signed with the software firm, the international specialist in ERP systems, SAP.

Under that contract, CCSD had pledged to keep costs relatively low by not seeking significant customization of the software. Instead, said the district, it would train its personnel to adapt to the best business practices already built into the software’s “vanilla” version.

As it happened, however, under Garcia’s successors — then-superintendent Walt Rulffes and then-CFO Jeffrey Weiler — tens of millions of public dollars would go into dubious expensive and time-consuming customizations. Many of them were intended to replicate CCSD’s previous system, which the district’s external auditors had repeatedly said should be abandoned.

It is not clear how seriously the anti-fraud features of the SAP software were compromised.

Notwithstanding protests from district officers directly responsible for the project’s completion, Rulffes and Weiler repeatedly overrode their concerns, approving the continued, costly customization.

Necessarily, that meant the superintendent and CFO were also approving the exhaustion of the funds the state had intended to bring financial accountability to the district.

Was that result “accidental”? Coincidentally, it enhanced the ability of Rulffes, Weiler and their successors to continue business as usual. It even provided a rationale for wheedling millions more out of the state legislature in the 2017 sessionas CCSD told lawmakers it needs money for a “new human capital management system” to replace the roughly 25-year-old system then in place.

The fact that the state had already previously paid for such a system, which was to be a tightly integrated element of the original ERP project, was carefully ignored.

CCSD’s financial accountability: always ‘postponed’

A serious consequence is that today, another decade later, CCSD still lacks a decent financial accountability system. And its heads of divisions, as well as superintendents and CFOs, still get to both spend and conceal spending with virtually no transparency.

Thus, the district’s long-running enterprise-resource-planning fiasco is a large reason why CCSD deficits regularly become the moving targets that Sisolak cites: “60 million — $90 million — $120 million — $180 million.”

And as of the latest reports, even now that tab continues to grow.

Unfortunately, the story of CCSD’s repeated ERP failures is only one of many symptoms that signal that the district has a more fundamental problem, one actually embedded in the very structure of the organization.

Exactly how that’s the case — how the problem is one of structure — is a big subject. However, one of the best explanations available has been provided in great detail by the nation’s preeminent research authority on public-school corruption, Lydia Segal.

Now juris doctor at the Suffolk University School of Law, Segal in 2004 published — through Harvard University Press — the widely praised, well-documented and ground-breaking book, Battling Corruption in America’s Public Schools.

It’s not just financial corruption that the book addresses. It’s also the systemic corruption of the public schools’ educational mission. Both pathologies flourish in big districts because of the reflexive reliance of those districts’ on industrial-style administrator primacy and control.

While some experts dismiss scandals as mere surface rashes on the periphery of school systems, [writes Segal], they are driven by far deeper pathologies within. Corruption is in a sense a symptom of something else gone awry. The underlying illness, moreover, causes not just corruption in the modern sense of illegality but also corruption in the broader, classical sense of the term corruptio, meaning perversion of purpose.

Prioritizing admin, not education

Segal’s book argues persuasively that the root of the problem lies, paradoxically, in the ever-tighter traditional corruption controls — the layers of bureaucratic oversight, the detailed standard operating procedures, rules, and regulations, and the over-specification of money — that schools imposed on their operations over the decades.

Although such control mechanisms were supposed to ensure against fraud and waste, Segal writes, “they have actually eroded oversight, discouraged managers from focusing on performance, and made it so difficult to do business with districts that employees and contractors have sometimes had to seek ‘creative’ or illicit ways to get their jobs done.”

The result, she points out, “is the worst of two worlds: Crooks who want to bilk the system can do so because the top has little handle on what is going on below, but employees who want to improve learning must sometimes break the rules.”

Segal — a passionate advocate for public schools — developed her unique expertise on school districts and the dynamics of their corruption by an unusual path. After graduating from Harvard Law, she interned in the Manhattan District Attorney’s Office, working for Edward Stancik, chief of the Rackets Bureau.

A bit later, “as tales of public-school jobs in New York City being sold for sex and cash filled the airwaves,” she writes, her boss Stancik was named Special Commissioner of Investigation for the New York City Schools.

That soon made her the probe’s special counsel.

For the next three years, Segal led dozens of investigations, interviewed numerous witnesses under oath and listened to multiple conversations secretly recorded by confidential informants.

Then she was asked to join the School Design Project, led by UCLA’s William G. Ouchi, and analyze accountability and control in six school districts — not only New York City, Los Angeles and Chicago, but also three of North America’s most decentralized districts: Houston, Seattle, and Edmonton, Canada.

Segal’s book, therefore, delves deeply into the history of large school districts and records how their attempts at top-down control have actually facilitated the corruption and educational failure they officially abhor.

Parts One and Two of the 2017 Nevada Journal investigative series were largely devoted to more Segal insights — most of them highly relevant to CCSD and Nevada education generally — and will interest readers who’ve read this far.

But Segal is not the only preeminent researcher who has recognized the structural flaw in much of K-12 education’s disproportionate empowering of school administrators, to the serious neglect of and damage to the genuine learning capacity of our young.

Nevada Journal will further explore that subject in upcoming articles.

Steven Miller

Senior Vice President, Nevada Journal Managing Editor

Steven Miller is senior vice president at NPRI and has been full-time with the Institute since 1997. Steven also serves as managing editor for Nevada Journal, NPRI’s news operation, which is online at nevadajournal.com.

Steven graduated cum laude with a B.A. in Philosophy from Claremont Men’s College (now Claremont McKenna). Before joining NPRI, Steven worked as a news reporter in California and Nevada, and a political cartoonist in Nevada, Hawaii and North Carolina. For 10 years he ran a successful commercial illustration studio in New York City, then for five years worked at First Boston Credit Suisse in New York as a technical analyst. After returning to Nevada in 1991, Steven worked as an investigative reporter before joining NPRI.

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