Baltimore Schools Face $129 Million Budget Deficit

School officials have been grappling with declining enrollment and increasing operating costs.

Santelises said she was not prepared to announce any staff cuts or budget cuts, cost-saving measures officials have employed in each of the past two years. She said she hopes to work with state and local lawmakers and school communities on ways to close the gap.

"This is not a layoff announcement," Santelises said. "This is a 'This is where we are, and help me figure out' announcement.

"At this stage, I just need to give people an overall look at where we're coming from."

The deficit represents more than 10 percent of Baltimore City Public Schools' $1.2 billion budget. It's more than double the $60 million gap the school system closed last year.

It comes just weeks before the start of the 2017 General Assembly session, when lawmakers will set the state budget, and nearly three-quarters of the city school system's budget.

Lawmakers in Annapolis will have to deal with the state's own fiscal difficulties, including a $400 million budget hole caused largely by inaccurate revenue estimates.

"This is a really difficult year for us to be helping the school system, but we want to help," said Del. Maggie McIntosh, the Baltimore Democrat who chairs the powerful House Appropriations Committee. "We need to help."

Santelises briefed city and state lawmakers and school principals on Wednesday.

State Sen. Bill Ferguson said the budget gap was large, but commended Santelises for tackling it early. The Baltimore Democrat said he believed the school system understood the need to address the shortfall comprehensively.

"From the state side, we will do everything humanly possible to close this gap, but with a gap this large, the impact will be felt within school communities," Ferguson said. "And we have to make some tough decisions this year to prevent this from being an every-year scenario."

Baltimore City Councilman Eric Costello, chairman of the budget committee, called the news "devastating."

He said the committee would hold a hearing on the school budget early next year as part of a series of oversight hearings.

"It without a doubt underscores the importance of our relationships with the state and federal government," Costello said. "I am looking forward to learning more to figure out how this happened and what steps BCPS is going to take to work through this."

Santelises, who took her post in July, said the deficit reflected a series of high-priced, long-term commitments the district made in recent years, such as a 10-year plan to renovate and build new schools, and to honor a teachers union contract with generous pay and benefits.

Together, she said, those commitments amount to about $60 million of the deficit.

Santelises said continuing to close under-enrolled schools and renegotiating the teachers union contract will be crucial to stabilizing the district's finances.

McIntosh backed that approach.

"I'm a union supporter," she said, "but I believe the unions, in this instance, need to look at the big picture," she said.

The state funds more than 72 percent of the Baltimore City Schools' budget, according to legislative analysts. The city government contributes the second-lowest share of local funding in Maryland.

A panel convened by Maryland lawmakers this year to examine how the state doles out school funding is expected to make a recommendation next year that could funnel more money to Baltimore schools.

Additional state funding would need the support of Republican Gov. Larry Hogan, who campaigned on promises to roll back state spending.

"We'll have to look at what [Baltimore] Mayor [Catherine] Pugh brings to the table," Hogan spokesman Doug Mayer said Wednesday.

But in general, Mayer said, Hogan's budget will support education.

"I'm confident the governor will place an emphasis on education across the state, particularly in Baltimore City," he said.

Pugh said she has met with Santelises about the school system's goals and was "concerned" about the deficit.

"In order for City Schools to meet those goals, the school system will need to prioritize and focus its efforts," she said in a statement. "I believe this can and will happen and that academic excellence will not be compromised."

Lester Davis, a spokesman for City Council President Bernard C. "Jack" Young, was less optimistic.

"This deficit is going to be devastating," he said. "That's a frighteningly large deficit."

Santelises said budget pressures have been mounting for years, but the district hasn't addressed them in a way that was sustainable.

"This isn't something that randomly happened to us," she said. "What we've seen is the district has closed deficits every year, but with a series of one-time fixes."

City school board Chairman Marnell Cooper said he believes Santelises is acting responsibly in addressing the core of the deficit.

In past years, he said, school leaders have tapped reserves to plug gaps and ease the pain of cuts.

"It's going to keep happening until we change the structure," Cooper said.

Santelises has hired consultants to scrutinize the school system's spending. She said the findings of Massachusetts-based Education Resource Strategies will help tailor the district's spending priorities to its new fiscal realities.

Santelises said students who have left the district in the last two years have taken with them millions in per-pupil state funding.

Enrollment declined this year by about 950 students, which will cost the system between $25 million and $27 million this year.

Santelises said the enrollment decline is not attributed to so-called "ghost students," who were kept on schools' attendance rolls but didn't show up to school. Former schools CEO Gregory Thornton said these absentee students had inflated enrollment numbers, and state funding, for several years.

Santelises said school officials believe that hundreds of students are leaving because their families participate in housing relocation programs, and others have transferred to Catholic schools under a new state program that gives students vouchers to attend private schools.

She's now focused on funding a high-quality education for students who remain and that the school system wants to attract.

"I'm not saying the world is coming to an end," she said. "It's going to get tight. This is a structural deficit, and I'm looking for long-term structural solutions. I don't want to be doing this year after year."

Baltimore Sun reporters Yvonne Wenger and Luke Broadwater contributed to this article.