4-day school week draws a crowd

A R.
02/27/2010 11:32 AM

Mark B. appreciate your investigating the real reasons behind large levy requests being asked for from the tax paying community. It's great to have intelligent people in the know keeping it honest. Thanks.

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Mark B.
02/27/2010 11:14 AM

I received a private e-mail asking if it was fair comparing the District 0381 FY 2009 Employee Compensation percentage of 88% of fund usage to State Compensation averages of 78%, when the multi-million dollar under-funded charge appeared to be added in a lump sum to benefit costs in FY 2009 but did not apply to earlier years and may not apply to future years. It’s a good question, and the best way to look at it from an earlier reporting year perspective, is that the Employee Compensation numbers reported in years past by the district were actually lower than they should have been. This gives a misleading impression that district employees were compensated at levels lower over past years than in actuality, and the subsequent audit and OPEB increases now indicate was the case. As for future years, any subsequent calculations of OPEB contribution to employee compensation should be more accurate, and one would expect better accounting would show an appropriate general increase in average Employee Compensation costs for the district. Whatever the case, the FY 2009 multi-million dollar charge (around $7,000,000 or so) must still be paid out of the school district’s budget, and from what I understood at the recent Truth-in Taxation meeting most likely will be levied against the taxpayers of Lake County over a period of time. Since I don’t know, at this time, if the FY 2009 OPEB charges covered the total under-funding shown by the audit, or just an allowable payment of a larger amount, it is always possible additional charges could be possible in the future. I’m sure the district office can explain exactly how all these OPEB charges came about, why the situation happened, how the district will bring the situation into balance over time and keep it from re-occurring, how they addressed obtaining funds to cover the liability, and the eventual impacts on the school budget and the taxpayer.

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Mark B.
02/26/2010 4:35 PM

Oh, and by the way, Employee Compensation for the Lake Superior Public School District (0381) comprises just short of 88% of fund useage, versus the previously mentioned state-wide average of around 78%.

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Mark B.
02/26/2010 4:27 PM

Nat A.---I have been out of town on business, or I would have attended the first and subsequent meetings. My only concern is drawing conclusions from FY 2008 “old” data, but I have found and am now taking a look at FY 2009 District Consolidated Financial Statements on the Minnesota Department of Education web site. I have no doubt the school district is facing financial challenges, whether of their own making, due to the current economic situation, or other reasons. My only concern is how the district got to where it is, what options are most practical for resolving the issues, and how can the impact on taxpayers be minimized...all while providing a quality education for students. At this juncture, I am not sure a referendum to raise additional working capital is an appropriate solution, as opposed to some further tough decision making on the administration's part regarding school expenses and what is driving them. Unfortunately, the largest portion of their budget, by far, is salaries and benefits for the teaching staff, which doesn't make the process an easy one. Hopefully, there are other places where expenses could be cut and fees raised to help mitigate this difficult set of circumstances. Statewide, it looks like around 78% of the cost of running the average district is in employee (administration and teachers) compensation (salaries=55%, benefits and payroll taxes=23%, and other compensation=21.5%). A quick glance at the FY 2009 financial statements shows an unusual expense charged against employee benefits of around $7,000,000 which as I understand (and I may not be 100% correct) was an audited under-funding of “Other Post-retirement Employee Benefit” (OPEB) programs. This under-funding was required to be brought current when the district turned to the Public Employees Retirement Association (PERA) to manage their program obligations (previously “self-managed” by the district, believe). OPEB obligations tend to be primarily health care cost-sharing required to be shouldered by the district for their retirees, based upon current district health care program costs provided as part of an employee benefit. Had this $7,000,000 been appropriately accrued over prior years while under the district’s “self management”, normal benefit costs for the district would have been around $3,253,000 for FY 2009 instead of $10,442,000. Paying off these additional OPEB dollars (I’m not sure, at this point, if the money was borrowed by bond issuance or not by the district) is now definitely a large part of the ongoing annual levy process assessed against property taxpayers in the district. This "benefits" expense certainly seems to be an area for cost savings potential, albeit it would have to come in the form of greater employee cost sharing of premiums, higher co-pays, etc. I confess I don’t know the specific costs and coverage for the school district employees (although general plan descriptions are available on the district’s web site, without premium information), versus what regular working families might average from their private sector employers…if those private sector employers even offer a health benefits plan upon retirement other than provided by Medicare/Medicaid. So, this process of examination should go on, and I believe the better the public is informed, in terms we can all understand, the better we will be able to work with the school district in arriving at decisions which are fair and reasonable for the district, for the equally financially-stressed taxpayers, and for good educational outcomes for the district’s students.

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Nat A.
02/26/2010 12:14 PM

Good points, Mark B. Perhaps you should attend the next meeting (if you haven't already) and address those concerns. I went to the first meeting and felt they took the time to answer everyone's questions. To me, that seems like the most logical place to seek the answers you are looking for.

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Mark B.
02/26/2010 8:50 AM

NOTE: The district over-spending of 102% of General Fund Revenue is indicated in the 2008 Fiscal Year Report to Taxpayers. Of the three other funds detailed, Food Service and Debt Service Fund expenditures were also exceeding revenues. It should be noted that recently there was a newspaper story regarding theft from the Food Service monies (Fund showing FY 2008 overspending of around $25,000) by an employee, of around $75,000 (If I recall correctly) to be subsequently recovered by district insurance claims. Any restitution should have a significant positive impact the performance of Food Service Fund in the current operating year (assuming the district does not restate its financials for prior years). Finally, the Community Service Fund was the only fund operating without exceeding its revenues in FY 2008. The revenues covering the overspending in FY 2008 come from school district reserve funds, which the district sets aside to cover such occurrences. Unreserved General Fund Balances in FY 2008 were $946/student (well over $1,300,000 total, based upon a student population of around 1,400+ students), representing resources available to meet current and future years' expenditures. The FY 2009 Fiscal Year Report information has not yet been posted on the State Department of Education web site, under “School Report Cards”, making it difficult to ascertain the current financial picture of the school district.

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Mark B.
02/25/2010 10:54 PM

"It’s expected the district would save about $250,000 a year, which is equivalent to nearly six teacher salaries, including health insurance."--Quote from newspaper article. * Information provided to the State of Minnesota by the district, and linked through the school district's web site, indicate for the 2008-2009 academic year the average teacher salary for the school district was $51,711. I don't know if that includes benefits, which typically in private industry are around 30% of actual base salary. So, the salaries being referred to in the article must be starting/entry-level salaries, to yield an equivalent savings of six teacher salaries plus health insurance subsidies. "One of the possible upcoming levy questions would ask for $425 per pupil unit, which means property taxes would go up $69.94 a year on a $100,000 home for 10 years. A “no” vote would lead to a follow-up question asking for $300 per pupil unit, which would increase property taxes by $49.37 on a $100,000 home for 10 years."--Quote from newspaper article. * Information provided to the State of Minnesota by the district, and linked through the school district's web site, indicate in the "Report to Taxpayers" for the 2008-2009 academic year, the average home value in Lake County is $154,253. This means the average tax impact for a typical taxpayer would, in fact be closer to $108.00 per year for the $425/pupil levy. Lake homes would be substantially higher; some typical homes on Lake Superior could possibly see property tax increases in the $350 (low side)-$1,400 (high side) per year range. The final impact, based upon property limited-value readjustments to actual market value this past year, could drive many of these estimates even higher. The same math would apply to the reduced proposal of $300/pupil unit, yielding higher actual average costs per typical taxpayer.

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Mark B.
02/25/2010 8:19 PM

The driving force behind the four-day week proposal is apparently driven by the claimed financial position of the school district. This claim may be accurate; it may also not be accurate. One would hope this particular strategy is not intended as a ploy to panic residents into voting favorably for the proposed operating referendum, i.e., if citizens approve the money we'll keep a five-day week. I hope families with children affected by this proposed change would remain calm, and demand more accountability and transparency on the financial drivers supposedly making this four-day option better than other choices which might be available. Every one should be asking the school board and the administration where the district shortfalls are, what is contributing to those shortfalls, and what all the options for addressing those shortfalls are. Based upon the latest reporting information posted on the district's web site, this is a district over-spending at a rate of 102% of its current revenues, against a state spending average of 99% (underspending by 1% of total revenues). Yet at the same time, it is also being funded on a per student basis at a comparable dollar/student rate, or very close to the same total rate, as some of the highly ranked suburban districts of the metro Minneapolis/St. Paul areas. There is typically more to every story like this than meets the eye, and I would encourage folks to demand clear and understandable information on the school district's financial condition, and the causes leading up to any claimed adverse effects. Whatever the case, no one should allow themselves to become panicked by the proposal at this point in time

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