CLAREMONT — A cash flow crisis has placed the school district’s ability to keep city schools open in the coming months in jeopardy after the discovery of a projected deficit of up to $5 million for the academic year that ended in June.

At Thursday’s School Board meeting, Chairwoman Heather Whitney announced the deficit figures at the start of a discussion on the district’s dire finances.

She said the administration is doing all it can to keep the schools operating this fall, but when Whitney asked SAU 6 Business Administrator Mary Henry how long the schools could operate with the cash available, Henry would only commit to one month.

“I’m going to tell you the end of September because I am working on October,” Henry said.

At the outset of the discussion, the district’s attorney, James O’Shaughnessy of the Manchester firm DrummondWoodsum, gave a blunt assessment of the district’s financial situation. He said that it has become “readily apparent to the administration and the board its ability to meet its obligations and pay bills is at risk.

“There is insufficient cash flow on a week-to-week and month-to-month basis,” he said. “A lot of payments are being held off. I would call this a state of fiscal distress. There is clearly a concern the state has regarding the district’s fiscal solvency in both the short and long term, so this is a very serious condition.”

Henry and SAU 6 Superintendent Chris Pratt said they will be returning to the board next Wednesday with a list of potential cuts — essentially any spending not mandated by law, Pratt said — to see where savings can be found.

The district is scheduled to receive a state adequacy aid payment on Sept. 1. And Henry also said she is communicating with vendors trying to push back paying some bill payments.

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“That is the starting point,” Pratt said. “The (state education) commissioner said we have to solve the cash flow problem.”

O’Shaughnessy said Claremont’s situation appears to be without precedent in New Hampshire. He said in most states a financial crisis of this magnitude would likely lead to the takeover of the district by the state, but New Hampshire law does not allow that.

“It is really a big challenge with not a lot of history,” he said.

Toward the end of the discussion, O’Shaughnessy said an email from Education Commissioner Caitlin Davis provided “clear guidance” on the immediate steps the district needs to take to get a handle on its short-term finances and keep the schools operating.

“While a lot of other things are happening, cash flow is the priority,” O’Shaughnessy said, reading from the email.

Davis, who was formally appointed earlier this summer, asked the school district to provide the state with a detailed cash flow statement.

“I think that is a really good starting place to look honestly at cash flow,” O’Shaughnessy said.

If and when the cash flow is stabilized, O’Shaughnessy said, the district needs to focus on a financial recovery plan to get the community out of this situation.

Neither Henry nor Pratt offered any details on the reasons for the deficit, but board member Frank Sprague pointed to special education, where he said the year end deficit is about $2.5 million. He said overages, inefficiencies and mismanagement have created a “dysfunctional system” and are a huge piece of the deficit.

But board member Candace Crawford said even if special education is removed, the district still needs to find millions of dollars for operations in 2025-26.

“In a skinny budget, the money isn’t there,” Crawford said. “It is going to be catastrophic for this district and I don’t have any idea what is going to happen.

“Right now I think we have already spent a million and half dollars of the ’26 money to pay ’25 bills, and we don’t have that kind of money.”

Crawford, a member of the district’s Finance Subcommittee, also talked about her frustrations trying to obtain financial reports from the administration that she has been seeking for several months.

“I blame myself for not being more insistent until I got the reports,” Crawford said.

The minutes from the School Board’s Finance Subcommittee meeting of July 31 show there was concern with the deficit situation. A preliminary report, the minutes state, has a June 30 deficit of $1.8 million, even after $900,000 was taken from various capital accounts to reduce the deficit. A complete year end report is expected in October.

“However, the committee wanted to see where the overages occurred,” the minutes state. “Although more than $1 million is attributable to (special education) expenses, another approximate $750,000 in overages occurred in Regular Education and benefit lines in all schools.”

Limited options

Floating a bond to pay the debt is not allowed by law, O’Shaughnessy said. So besides budget cuts, the district’s only other option to find cash, O’Shaughnessy said, is a special school district meeting, which needs approval from a judge, to ask voters for an appropriation. He emphasized the time that would take to organize and includes a deliberative session followed by a citywide vote.

But board members felt that would be a waste of time because taxpayers are already struggling and would likely defeat it.

“I won’t support going back to the taxpayers for more money,” board member William Madden said.

Madden was angered because in May the administration said changes were being undertaken to avert another deficit situation, though it was known at that time there likely was a growing deficit for the 2025 fiscal year, primarily because of special education

“All of us in this room, including myself, have failed,” Madden said.

In May, DrummondWoodsum Attorney Matt Upton suggested the board ask voters next March to establish a deficit reduction expendable trust fund with $400,000 in the first year to begin paying down a $2 million deficit from the fiscal years 2020 and 2021.

Henry, who was hired in July 2023, told the board in May the scope of the district’s financial problems came to light when audits were recently completed for those years. She blamed the deficit on the district returning too much money to the taxpayers, which changed surpluses to deficits, in those years and also failing to apply for reimbursement of grants.

Pratt and Henry assured the board that the current school administration is addressing the causes of the deficits.

“We have been working hard to put things in place to make sure this doesn’t happen again,” Pratt said. “We found it; we are fixing it.

Board member Arlene Hawkins said at Thursday’s meeting the district is now in “survival mode” but can’t lose site of its mission.

“We are obligated to stand up for our kids,” Hawkins said.

Claremont has three elementary schools, a middle school, high school and technical center. Combined student population is about 1,700.