Bill would bail out schools facing fine in Española

District faces $1.2 million IRS penalty from period when state controlled its finances

A handful of legislators are trying to ease Española Public Schools’ worries about a potentially crippling fine from the IRS.

Five House members have introduced a bill that would appropriate up to $1.2 million from the state’s general fund to help the district pay Internal Revenue Service fines incurred while the state Public Education Department was in control of Española schools’ finances.

Between 2016-18, when the department was in control of the district’s finances, the district failed to submit proof employees were offered health insurance plans — a violation that could warrant more than $1 million in penalties.

Reps. Andrea Romero, D-Santa Fe; Linda Trujillo, D-Santa Fe; Susan Herrera, D-Embudo; Joseph Sanchez, D-Alcalde; and Christine Chandler, D-Los Alamos, are co-sponsoring House Bill 244, which would help pay the fine during the 2021 fiscal year.

“This happened when the state was in control of the district’s finances, so it’s the state’s responsibility to cover any mishap that happened while it was in control,” Romero said. “We can’t afford to be taking funds out of school districts.”

When the department took control of Española Public Schools’ finances in the fall of 2016, it cited a lack of fiscal management and accountability before returning financial control to the school district in the summer of 2019.

The Public Education Department said it hired a contractor

to look after the district’s finances during that period.

“The [Public Education Department] relied on the expertise of a contractor to provide appropriate services and ensure that all critical business functions were performed pursuant to the terms of the contract between Española Public Schools and the contractor,” PED Communications Director Nancy Martira said in an email. “PED is working to develop processes and procedures that will guide the relationship between school districts and contractors in the event that future boards of finance are in need of this level of intervention.”

Española Public Schools’ Executive Director for Business and Financial Services Richard Halford said the district received a notice in September about a $430,000 penalty for failing to submit forms that prove district employees were offered a health insurance plan in 2016. Halford said he then noticed the same mistake was made in 2017 and 2018 before submitting those forms as well.

The IRS last month told the district it needed at least 60 days to determine the extent of the penalty. Halford said the district’s cash balances are between $2 million and $2.5 million and noted it is possible the IRS could waive the penalties.

“Hopefully it won’t be necessary, but it’s comforting to know that, if passed, funding to pay the fines is available,” Halford said. “We are appreciative of any relief that is given to us.”