D.C. Public Schools Chancellor Lewis D. Ferebee, right, and Mayor Muriel E. Bowser (D) discussed the rollout of the chancellor's first big initiative at Eastern Senior High School in April. The District’s public school system is facing a $23 million deficit. (Jahi Chikwendiu/The Washington Post)

The District’s public school system is facing a $23 million deficit, drawing criticism from city lawmakers and from the D.C. auditor, who described the shortfall as a “red flag” that suggests a lack of internal controls.

Under District law, government agencies cannot carry debt from fiscal year to fiscal year. That gives the school system — with a budget of more than $900 million — until Sept. 30 to plug the hole. The deficit represents about 2.5 percent of the budget.

The shortfall results from rising personnel costs and cannot be resolved by shifting money within the school system’s budget, according to David Umansky, spokesman for the city’s chief financial officer.

Umansky said the school system and mayor’s office are looking for additional city funds to help balance the budget.

The school system has instituted a hiring freeze at its headquarters office and has curtailed employee travel and training in recent weeks.

Top school officials said in a statement that they plan to end the fiscal year with a balanced budget.

“DC Public Schools has seen rising costs as a district and has worked hard to address them,” Chancellor Lewis D. Ferebee said in a statement. “Despite those costs, we continue to put students first with our robust investments in expanding access to technology, increasing early childhood education options, and launching early college programming.”

The existence of the deficit became public only after lawmakers pressed Ferebee about it during a D.C. Council hearing last month. The lawmakers did not appear to know the size of the budget gap at the time, and Ferebee offered few details.

“It’s a moving target,” Ferebee said when asked about the size of the deficit.

Deputy Mayor for Education Paul Kihn said in an interview that government agencies routinely spend more — or less — than projected at the beginning of the fiscal year.

Kihn said the school system employed more effective and experienced teachers than it had anticipated, which contributed to the deficit.

The school system awards bonuses based on the outcomes of teachers’ annual assessments, with teachers ranked “effective” and “highly effective” receiving more money. Experienced teachers typically earn higher salaries.

Costs for overtime — which staff members earn if they perform tasks outside the terms of their contracts, including teaching additional courses — also contributed to the deficit.

“This specific gap, while it is something that we have to address, is the sign of something positive,” Kihn said. “Personnel costs are increasing because we are retaining more effective and highly effective teachers and recruiting highly experienced teachers.”

But D.C. Council Chairman Phil Mendelson (D) said in an interview that the deficit is a “huge concern.” Education is the city’s biggest area of spending, and Mendelson said the school system ought to be able to stay within its budget.

“The school system has a huge budget, close to a billion dollars a year,” Mendelson said. “And the fact that they can’t stay within their budget is a huge concern.”

D.C. Auditor Kathleen Patterson said the deficit shows irresponsible financial management. Patterson said the school system should have started to more aggressively rein in spending before June.

She said officials knew earlier that overtime costs were high this fiscal year. Quarterly spending reports in April showed the school system was expected to run a deficit close to $30 million, according to public financial documents.

“Anytime you bust the budget, it’s a red flag,” Patterson said. “From an auditor’s perspective, when you see a persistent element of the budget over what was budgeted, that shows there is a lack of internal controls, because it did not happen overnight.”

Council member David Grosso (I-At Large), who chairs the education committee, sent a letter to Ferebee asking him to explain the causes of the deficit and to say whether he anticipates running another shortfall in 2020.

The D.C. government recently completed the budgeting process for the coming fiscal year. During public budget hearings, officials said the school system’s costs are expected to rise 4.3 percent.

Despite an overall increase in education spending, families, education activists and some city officials have denounced the budget because more than 20 schools serving high populations of students from low-income families face budget cuts.

Kihn said any changes schools are seeing in their budgets for the coming academic year are not a result of the current deficit.

“These things are unrelated,” he said. “And the way we are thinking about it is that it’s a gap in the projections of the money that we budgeted in 2019.”