Questions linger about state's role

Some asking if Coffman should have noticed red flags

By Kate Larsen, Camera Staff Writer
December 25, 2002

While it's clear the St. Vrain Valley School District mismanaged its budget into a $14 million debt, some community members say they think the State Treasurer's Office should share the blame.

It's common for school districts to borrow money from the state treasury's interest-free loan program to tide them over until property tax revenues are collected in the spring. For the past two years, St. Vrain Valley borrowed a larger amount of money than normal to cover its growing debt and did it earlier than usual — and some say that should have raised a red flag at the state level.

Rick Samson, vice president of the St. Vrain Valley school board, said if a lending institution notices an abnormal borrowing pattern, it should take notice.

"We hardly ever borrow, and then one year we borrow six times and earlier — you'd think that someone would say, 'What is St. Vrain doing?'"

State Treasurer Mike Coffman, who approves the loans, said the law outlining the loan program is not set up in a way that would help him detect problems. Additionally, Coffman said St. Vrain Valley used misleading numbers on its loan request forms.

"I wish they had been honest with us," Coffman said. "They disguised their purpose."

On a Nov. 5 loan request, St. Vrain Valley Finance Director Walker Nielsen stated the district's cash balance to be about negative $2.4 million. The debt was in fact much larger — about $10 million — at that point.

Nielsen has since resigned. Ken Kirkland, the district's assistant superintendent of business services, has been suspended without pay.

In an agreement with St. Vrain Valley last week, Coffman ordered across-the-board pay cuts and a series of other cost-cutting measures to rectify the district's recently uncovered $13.8 million deficit, attributed to budget mismanagement over several years. The Boulder County District Attorney's Office is investigating the mismanagement.

Jennie White, the parent of a Skyline High School student, said she holds St. Vrain Valley staff and board members accountable for the budget crisis, but Coffman should also take some responsibility. White said she's concerned that Coffman loaned the district so much money without ever asking questions.

"I have concerns not only as a citizen of the (school) district but of the state," she said. "Where was Coffman's office when it came to checks and balances?"

Dick Murphy, who served as a deputy state treasurer and as the chief financial officer for the Boulder Valley School District, said St. Vrain Valley's loan applications may not have raised any red flags because school districts' spending patterns can vary.

"One large purchase can throw off a budget," Murphy said. He is acting as a liaison between Coffman's office and the St. Vrain Valley staff as the district works on its financial recovery plan.

"The state treasurer doesn't have much choice but to loan the money unless there is evidence that the loan cannot be repaid," Murphy said. "I don't think there's anything within the (loan) document that would indicate one way or another if it could be paid back."

Coffman said he had no reason to be suspicious, as St. Vrain Valley had never been in default on previous loans and there hadn't been any problems with other school districts.

But Jack Pommer, a Democrat recently elected to the State House to represent Boulder and Longmont, says it is Coffman's job to be suspicious because he's watching over the state's money.

"Mike Coffman is so interested in becoming governor that he forgot he's the state treasurer, and the state treasurer has the responsibility to watch over our money," Pommer said.

Pommer said Coffman overreacted to the situation to keep the public's attention away from his office and on the school district.

One change Pommer said he would like to see in the loan program is for school boards to be notified within 30 days of how much their district is borrowing and for what purpose. He is drafting legislation to introduce during the next legislative session.

Currently the loan program requires the signature of a school district's chief financial officer and the superintendent.