Roane County Schools is facing a projected $2.5 million budget deficit due to overspending, according to the state education department.

District employees have gone over budget on the construction of a and used federal dollars to buy furniture. Some purchases appear to be made without the county board approval, which is required under state code. 

“Was everybody asleep at the wheel in Roane County?” asked Paul Hardesty, a state school board member. “You guys are hemorrhaging cash.”

Earlier this year, the county received a $402,225 advance on their June allocation of the state aid formula to make payroll.

Roane school leaders this week requested another financial advance of more than $300,000 to cover expenses. 

“You guys are bankrupt. You’re absolutely bankrupt,” board member Gregory Wooten said.

The West Virginia Board of Education declared a state of emergency for Roane County Schools on Wednesday, adding to the growing list of counties now under board control or in a state of emergency.

Declining student enrollment was also cited as a reason that the district should be under a state emergency and develop a plan to correct the problems.

Michelle Stallato is the new county superintendent, just five days on the job. She stood before board members, pledging to fix the problems and do what’s best for children.

“We are going in with eyes wide open. I have an amazing staff that are willing to do the work,” she said. “We understand it’s going to be very unpopular. We understand we’re going to have to make very difficult decisions.”

County didn’t cut positions while student enrollment declined

A report from the West Virginia Department of Education showed that in October 2024, Roane County Schools employed more than 16 teaching and service positions over the funding formula.

“It’s projected we didn’t make enough cuts into this year and that deficit will grow,” Stallato said.

The county overspent $600,000 on special education in the current fiscal year due to improper budgeting, the report said, linking the problem to “inaccuracies in data certified by Roane County Schools.”

The state education department also found that Roane County Schools initially purchased furniture with dollars from multiple federal programs, which were unaccounted for in the budgets for those programs.

Roane County serves a little more than 1,600 students. Like , the county is dealing with a declining student population due to the state’s overall population loss and students opting to use the — the Hope Scholarship — for private schooling or other options.

The district operates on a yearly budget of $27 million. The school system had close to a $2 million budget surplus in 2021; now there’s a projected $2.5 million deficit.

Jeff Mace, president of the Roane County School Board, said they’re pushing for more transparency in budgeting and forecasting.

“We were not completely aware of the magnitude of where we’re at, even as recent as this current budget preparation,” he said. “The board understands … the current position now.”

Last month, the state school board because of multiple issues in the system, including potential conflict of interest and potentially using board of education resources to maintain property.

The board also in Randolph County Schools for six months due to financial concerns, tasking the county with creating a balanced budget. The district is grappling with declining enrollment and aging facilities, which contributed to the financial issues.

On Wednesday, board members selected Hardesty to serve as president, replacing current President Nancy White who said she wasn’t going to seek reelection. Hardesty is a former state lawmaker and Logan County school board member. He has previously served as board president.

“I am humbled by the support and confidence that my fellow board members have placed in me,” Hardesty said. “This board faces many challenges this upcoming year. We will face those challenges head on, with the purposes of doing what is in the best interests of our 241,000 students across the state.”

is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. West Virginia Watch maintains editorial independence. Contact Editor Leann Ray for questions: info@westvirginiawatch.com.

The U.S. attorney’s office for the Southern District of New York served the grand jury subpoena in early September to the court-appointed trustee managing the liquidation of AllHere’s assets to pay off its creditors, according to records filed with a federal court in Delaware. A federal grand jury subpoena indicates that AllHere or someone associated with the company is the target of a federal criminal investigation by the Department of Justice.  

Attorney Stephanie Wickouski, a partner at the New York-based firm Locke Lord, told ĂŰĚŇÓ°ĘÓ the subpoena means that federal prosecutors “have a reason to commence a criminal investigation and that’s certainly an exceptional circumstance.” 

“There are a fair amount of investigations that involve bankruptcy cases and a lot of them are for conduct that occurred prior to the bankruptcy,” said Wickouski, the author ofon bankruptcy fraud and white-collar crime. 

In an order approved on Monday, the bankruptcy trustee agreed to provide documents to federal prosecutors on the condition that certain sensitive information remain confidential “in the best interests of” the company’s value. Federal prosecutors can use the records “as needed or as required by law in connection with its investigation and/or any resulting criminal proceeding,” the order notes.

A spokesperson for the U.S. attorney’s office didn’t respond to requests for comment and the target of the federal inquiry remains unclear — as do any allegations of criminal wrongdoing. But Wickouski said the court-appointed trustee is in the best position to provide information about AllHere’s assets, business dealings and financial transactions. The “most likely scenario,” she said, is that “the company and its principals” are the target of the investigation.

On the same day as a Sept. 11 bankruptcy hearing, trustee George Miller said he had “discovered assets” at AllHere and changed its Chapter 7 bankruptcy case from one without any monetary value to one where creditors could recoup some of the money they’re owed. The court gave AllHere creditors 90 days to submit proof of claims to “assets from which a dividend might possibly be paid.” 

The “discovered assets” would appear to contradict statements by Toby Jackson, the company’s former chief technology officer and one of its only remaining executives, at the hearing that the company was effectively broke, citing one of its only assets as a $500 company laptop used by ousted CEO Joanna Smith-Griffin. Jackson noted that the company couldn’t access the laptop’s contents because Smith-Griffin had refused to share the password. AllHere listed more than $1.75 million in itemized liabilities, bankruptcy records show.

Neither Jackson, AllHere’s Delaware bankruptcy attorney, Joseph Mulvihill; trustee Miller nor his lawyer, Ricardo Palacio, responded to requests for comments. Smith-Griffin, a former Boston educator and family engagement counselor who went on to create digital tools to combat chronic absenteeism, has not spoken publicly or responded to requests for comments since her company’s sudden financial collapse this spring.

At the hearing last month, Jackson struggled to answer Miller’s questions about why AllHere paid Smith-Griffin $243,000 in expenses between September 2023 and June 2024 and owed $630,000 to its largest creditor — an education technology salesperson with longstanding ties to Los Angeles schools Superintendent Alberto Carvalho. The Florida-based salesperson, Debra Kerr, said during the meeting she was never paid commission for her work closing the lucrative AllHere deal in L.A. Kerr’s son, Richard, is a former AllHere account executive who told ĂŰĚŇÓ°ĘÓ he pitched the company to Los Angeles school leaders.

The school district “has not received any requests to date” from federal prosecutors, a district spokesperson said in a statement Monday to ĂŰĚŇÓ°ĘÓ. Los Angeles Unified School District’s independent inspector general in July launched an investigation into allegations first reported by ĂŰĚŇÓ°ĘÓ that its much-celebrated and now-unplugged AI chatbot named “Ed” exposed students’ personal data in violation of school district policy and standard industry security practices.

Carvalho later announced that he would form to determine what went wrong with the district’s relationship with AllHere and how it could move forward incorporating AI into the nation’s second-largest school system. Carvalho and Smith-Griffin made joint appearances at ed tech conferences throughout the spring touting the capabilities of “Ed,” an animated sun they said could interact individually with and accelerate the learning for some 540,000 students and their families.

Several other creditors listed in AllHere’s bankruptcy case have ties to Carvalho, including the communications firm of his former spokesperson when he was superintendent in Miami and the Foundation for New Education Initiatives, a Florida-based in 2008. The foundation came under scrutiny in 2020 after the for-profit company K12, Inc., now known as Stride, Inc., gave the district-run entity a $1.57 million donation just a day before the school board voted to stop using its online learning platform. The donation gave an appearance of impropriety, by the Miami-Dade inspector general found, but there were “no actual violations.”

In the case of AllHere, the subpoena to the bankruptcy trustee suggests that federal prosecutors are likely “in a fairly early stage” of their investigation, attorney Wickouski said. Any indictments that could follow, she said, won’t likely be announced for months.