State education leaders aren’t planning to intervene yet in the unfolding financial problems at Durham Public Schools caused by under-budgeting for raises for employees..

A report released by the school board this week shows it will cost $700,000 more per month than was budgeted to keep raises for 1,300 classified Durham school employees.

The district has already taken $4.5 million out of its reserves to pay the raises through January. The state’s ninth-largest school district has just $6.4 million left in its fund balance to potentially keep covering the raises and pay for any other emergency expenses.

In rare cases, the State Board of Education has taken direct control of school districts accused of mismanagement. But Blair Rhoades, a state Department of Public Instruction spokesperson, said in an email Thursday that “there are no plans and no grounds for state intervention.”

Durham using rainy day fund to pay for raises

Durham has been in an uproar the past month after the district said it would withdraw raises it had initially promised to give school employees. It’s led to protests and sickouts that have closed some schools.

An investigation by the school district’s law firm blamed the salary dispute on faulty calculations and a “failure of communication” from top leaders in the district’s administration, The News & Observer previously reported.

Superintendent Pascal Mubenga and Finance Director Paul LeSieur have both resigned.

The school board tapped into the district’s fund balance to cover the raises from October through January. It was unclear Thursday afternoon what will happen with the raises for the rest of the school year.

How much should be in the fund balance?

School districts in North Carolina don’t have taxing authority, so they build up unspent local dollars in their fund balance to cover emergencies.

Durham’s fund balance now sits at half of the $12.7 million that Human Resources Director Alvera Lesane said is recommended.

Neither the Department of Public Instruction nor the Local Government Commission (LGC) sets a specific fund balance or percentage for school districts. The LGC is part of the state Treasurer’s Office and monitors the financial health of local government units.

“LGC staff’s recommendations related to the amount of available fund balance apply to tax-levying units of local government such as counties and municipalities,” according to statement from the LGC. “However, we do encourage school boards to work with their counties to develop an agreed-upon policy regarding expectations for the fund balance a school board will or should maintain.”

The Wake County school board is holding a fund balance of $52.6 million — 8% of the prior year’s county appropriation. That’s enough money to keep schools running for six or seven days, according to David Neter, the district’s chief business officer.