Edgar Harney elementary school, the former Central City charter school recently taken over by the Orleans Parish school district, faces a budget shortfall of more than $750,000 — hundreds of thousands above a previous estimate — due in part to unavailable federal funding. The needs at the school, identified by the district, include “critical instructional priorities” such as substitutes to cover teacher absences and funding for special education contractors.

District officials are asking the Orleans Parish School Board to shift money to the school to cover the gap.

On Tuesday, a board committee approved a resolution “declaring exceptional circumstances” at Harney elementary school and dedicating $754,236 from district reserves for the school. The resolution will go before the full board for a final vote on Thursday. (Update: On Thursday, the school board voted unanimously to allocate the money to Harney, The Advocate reported.)

The committee also discussed the need to find a permanent solution to fund midyear takeovers. The district took over Harney in January after the school’s former governing board relinquished its charter. Such takeovers can often become costly as student enrollment, along with state per-pupil funding, dwindles. The district is facing deficits at its other two direct-run schools as well.

Midyear takeovers can also leave federal school funding in question. After taking over Harney in January, the district ran into an unexpected roadblock: it couldn’t access roughly $431,000 in funding that had been allotted to Edgar Harney Spirit of Excellence Academy when it was a charter school.

That’s because Spirit of Excellence, Harney’s charter operator, was considered its own school district, just like the Orleans Parish school district and most charter schools. State officials said they couldn’t transfer money from one district to another midyear.

District officials requested the budget adjustment in part to make up for the lost federal funding and in part to pay for additional issues the central office identified, according to district documents.

The same committee declined to act on a December request and deferred a January request to the full board, criticizing officials for lacking detailed budgets. Tuesday’s request came with a budget and one-page explanation.

Orleans schools Chief Operating Officer Eric Seling said the district’s lawyer and other staff members went to Baton Rouge to try to address the funding problem with Louisiana Department of Education officials.

“It really comes down to federal law and the inability for the state to transfer from one (local education agency) to another LEA midyear,” he said. “They are still allowing claims from the Harney group as well.”

Many federal grants come in the form of reimbursements and as Harney’s charter group shuts down operations it can still make claims on allotted money if it was spent appropriately while it ran the school. Once the organization is closed, any unclaimed money would return to a state pool, a state official told The Lens.

School board member Ben Kleban had questions for Seling.

“If a similar situation arose, where the district were to take over a charter, are we going to have the same problem?” Kleban asked.

Seling said the district is working with the state, but without any changes, accessing federal money during a midyear school district takeover would continue to be a problem.

Kleban said he was still concerned.

“Every time a transition like this happens we end up dipping into the fund balance significantly,” he said. “It seems to be a necessity, given that the enrollment is down oftentimes in these situations and the students still need their services. So I don’t think there is anyone to blame, but we don’t have a recurring funding source to take care of these kind of expenses.”

Superintendent Henderson Lewis Jr. said the state was sympathetic to the district’s arguments but simply couldn’t make the changes. Much of the district’s decentralized system functions on the way its funding generally follows students. But the state system doesn’t account for the rare circumstance of an entire school district closing midyear.

“Clearly it’s the same exact students in there,” Seling said of Harney, explaining what they said to state officials.

But, he said, that wouldn’t work this year. He said the two agencies are working to identify solutions for next year.

The district forced Spirit of Excellence to surrender its charter for Harney mid-school year and took over day-to-day operations of the Central City school over winter break. Before the charter board voted to give up the school’s charter, Lewis had threatened to have it revoked. That announcement came after the school received numerous warnings over the last two years for financial issues, problems with special education and governance.

Harney was the second school to come back under district control in the last year. After Cypress Academy charter abruptly announced it would close last spring, the district stepped in to run it, initially saying the arrangement would continue for two years. But with Cypress operating at about an $894,000 deficit, Lewis decided to close it at the end of this school year.

“We need to figure this out long term,” Kleban said. “Because if we continue to do this with multiple schools every year we’re going to be running out of reserves real quick.”

The full board meets Thursday.

This story was updated after publication to note that the full school board approved the requested allocation at its Feb. 21 meeting.