District targets critics’ voices

Mark B.
03/12/2010 2:29 PM

Todd....That is not my energy saving figure. It comes from the building designers/architects, LHB, Inc. You can read the State of Minnesota award recap at: http://www.pca.state.mn.us/oea/p2/govaward07.cfm#lakesuperior .I don't know what all they included for the savings, and why they used that particular number. District-wide Facilities Operations and Maintenance, without salaries and benefits, ran around $1.5 million in 08-09; around $1.4 million in 07-08. During the period from 1997-2004, prior to the new school, the MDE data show an average cost of around $2.1 million per year, including some "ups and downs" probably due to energy costs (lowest was around $1.4 million in 2000). 2005 was $1.3 million, 2006 was $1.2 million and 2007 was $1.7 million. So, it appears district-wide there were savings after 2005, but to get an accurate picture you'd have to plot the regional energy cost variations (Including gasoline/diesel for buses) against the district's actual dollar costs. There is certainly more than $85.7K per year difference between the total district averages "before" and "after" the new high school was built, During the first year of the new school, and subsequent years up until now, the average seems to be around $1.45 million/year (without salaries and benefits) so money is being saved somewhere in the budget. Again, you have to look at energy prices to see if they created some aberrations in years prior (driving the averages up, since three of those years were around $1.5 million each) to the new school being built. Stlll, even giving $500K per year average savings, you are talking around 2.2% of the total 2010 budget for savings , which is good. We'll have to watch the future trending, I guess. Sorry for seeming to minimize the overall district contributions, but I was just going with the architects' numbers, ostensibly for the new high school alone, because that seemed to be what the superintendent was referring to.

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Todd R.
03/12/2010 1:12 PM

“These reductions save the school district approximately $85,700 per year, all while keeping the cost to build the school lower than the state and national averages.” Simply put, we built a $24.5 million 190,000 sq. ft. building, to save .38% of the 2010 school district expenditure budget. Mark, does your equation factor in the fact that by building the energy efficient school, we were able to close 4 energy siv school buildings and does your figure represent the energy savings from not having to operate those buildings too?

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nunofurbusiness n.
03/12/2010 10:48 AM

Mark...maybe you should run for a seat on the school board. Then you would be in a better position to get answers to all your questions. The district may even be able to dedicate an individual part-time to satisfy the demands of your curiosity (but that would cost more than the 50 cents a day currently being sought). Of course, we would have to increase the board meeting per diem to include a meal and lodging and maybe reinforce the soapbox to withstand such lengthy oration. With the endless wonkishness, you still wonder why people don't attend the meetings? As you more concisely and accurately inferred the other day...people will decide with their pocketbooks more than from a Lincoln - Douglas debate on minutia.

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Mark B.
03/12/2010 10:26 AM

To the individual who privately e-mailed me requesting more information on OPEB, I offer the following: From Ehlers and Associates, Inc. 'Leaders in Public Finance', "Ehlers Advisor", August 2006 regarding OPEB Concerns--------"IMPLICATIONS: The new accounting standards will not change the actual cost over time of OPEB, nor will they will require employers to change the benefits they provide or the ways those benefits are funded. They simply will require more accurate accounting of the real costs of the benefits and of the liabilities already incurred. For some local governments (including SCHOOL DISTRICTS...my commentary added), the costs and liabilities may be relatively small. However, even if you directly pay nothing for OPEB benefits, you may have to report a liability due to a feature of the new standards called the “implicit rate subsidy.” This is based on the idea that if retirees are allowed to continue in the employer’s health insurance plan, even at their own expense, this will cause higher premiums. The standards require that this subsidy be measured and reported. For government units that provide relatively generous benefits for retirees, the OPEB costs and liabilities may be very large. Recent news reports have quoted officials from the City of Duluth, who report an unfunded liability of nearly $300 million for retiree health insurance and have warned of dire consequences if steps are not taken to reduce the liability. Bringing these costs and liabilities into clearer focus may have implications that will force some government units into other decisions. 1. The new accounting standards may bring to light serious long-term financial concerns that are not as obvious under current accounting practices. 2. Inclusion of the required information in the financial statements may encourage elected officials and their constituents to advocate for changes in benefits and funding options. 3. If the costs and liabilities are especially high, they could have an impact on a government unit’s credit rating. --------COST REDUCTION STRATEGIES: The new standards may speed efforts by local governments to reduce the long-term costs of OPEB. In many cases, such reductions will require changes in collective bargaining agreements. Some strategies for reducing costs may include: • reducing the portion of premium costs that the former employer pays for retiree insurance coverage; • eliminating post-employment coverage for newly hired employees; • making eligibility for coverage more restrictive; • transitioning coverage from defined benefit plans to defined contributions plans; and • reducing premium costs through consumer-driven health plans and other strategies.---------FUNDING STRATEGIES: Once local governments have completed their actuarial studies and seen the size of their accrued liabilities and annual costs, they will also want to consider options for funding their OPEB obligations. Under current Minnesota law (as they existed at the time of the writing in 2006. The law CHANGED IN 2008...my comment, added), options are quite limited. Local governments can set aside funds in a designated fund balance, but this will do little to change the long-term cost of OPEB or the impact on the balance sheet. In other states, however, other options have been used, including the following: • setting aside funds in an irrevocable trust (this may reduce the accrued liability by allowing a better discount rate in the actuarial valuation process); • investing the trust funds in higher yielding investments (e.g., stocks, mutual funds, or corporate-owned life insurance) that are not currently allowed for government funds; and • issuing taxable OPEB bonds to fund long-term liabilities"

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Mark B.
03/12/2010 5:36 AM

Next, let’s address nearly $8 million in Other Post Retirement Employee Benefits (OPEB) which new government accounting principles required be funded after an audit to determine school district liabilities in 2008. The district quietly sold taxable bonds to the public to cover this liability, and then began levying for the payments, INCLUDING INTEREST, against property tax payers in 2009. The 2008 Minnesota Omnibus Tax Bill allowed the district to levy without voter approval, and essentially without proactive voter notification. $622,488 was added to 2009 payable property tax bills as part of your school levy for that year. For taxes payable in 2010, the next payment of $829,668 will be added to property tax bills, increasing the total levied school portion of property tax amounts over last year by more than 25%. Although discussed at the 2010 “Truth In Taxation” Meeting for the district, I was the only non-district person attending that meeting, besides a video operator and reporter from the Chronicle. The reporter did not mention the OPEB levy discussion in his article. Any referendum amounts, if approved, will be added on top of these OPEB amounts for at least the next ten years. Although I asked days ago for information regarding the term and interest rate on these OPEB bonds, I have not yet been given the courtesy of a reply. This could probably be an item arguable when the assertion is made the school budgets were in balance the last few years.

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Mark B.
03/12/2010 4:59 AM

“Minkkinen said if the district would have continued along at the normal inflationary rates, it would have been fine – pointing a finger to a bad economy as the main culprit.” (3) This one won’t take up much space. From FY 2005 to FY 2009, per student General Funding for the district has increased over 20%, while the student population has dropped by over 14%. I would say the funding beat inflation, but losing all those students was a big problem. Currently, more than 400 resident students attend school outside the district, costing us more than $4 million per year. And as bad as the economy has been, the education funding hasn’t apparently been that bad.

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Mark B.
03/12/2010 4:55 AM

“Minkkinen said the district has saved a lot of money because of a much more energy-efficient building. The school received an Environmental Protection Agency award, which ranked it in the top five percent for efficiency in the country.” (2) I’ll just post the information form the state awards announcement web site detailing the savings: “These reductions save the school district approximately $85,700 per year, all while keeping the cost to build the school lower than the state and national averages.” Simply put, we built a $24.5 million 190,000 sq. ft. building, to save .38% of the 2010 school district expenditure budget. Don’t get me wrong, saving the money is great, but it is hardly a large enough amount to crow about when discussing the current budget issues (although it is 1/3 of what we need to keep a five-day week). The interest cost on the $24.5 million building is probably around $1 million per year, plus another $2 million or so annually just to maintain the facility. It is a beautiful school, but let’s keep things in perspective. Then, realize student population has dropped from 1,967 in FY 2002 to a projected 1,380 in FY 2011, as has the general fund dollars for each of those students ($10,328 in 2008-2009).

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Mark B.
03/12/2010 4:54 AM

Superintendent Minkkinen said, “If you’re overspending your budget, you don’t have a fund balance.” (1) The school District has historically had a varying fund balance (or unspent funds) at the end of each school year. There is nothing magic about this balance…it just represents the amount left over from revenues after all expenditures have been paid. The annual school budget is determined by what it expects to spend, and what revenues it will use to pay for that spending. Typically, the school will try to raise more money than it thinks it will need to pay all its bills…just in case something unplanned happens. Other than sources fixed by federal and state formulas, if the school district decides it wants more money to fund itself, the school generally gets that additional money from fees it charges for services and programs, and from property tax levies. Voters approve most of those levies by referendums, but in a few circumstances the school can levy without voter approval. Basically, “operating within the budget” means the school decides what it wants to spend, and then figures out if it can legally levy any extras against your property values without your approval, or get you to approve being charged extra for what they can’t raise from other sources. If you don’t approve any new levy money, they have to adjust their operations to live within their current means, or draw from the fund balances (essentially, previously overpaid taxes) to augment their needs. Now, supposedly, the formula money is enough to give kids a good education with appropriate services, and handle any mandates. Some districts want, or think they need more. Exigencies happen, some districts want expanded program offerings, have to pay more for teachers, others want pools, bigger libraries or stadiums or the like. They can vote to pay more for those things if enough people agree it is OK. However, it is really hard for the average person to figure out if all this stuff they are paying for is appropriate, so the State makes all the schools accountable using certain standard ways of reporting what they are doing. You can see if your school district is being reasonable by comparing it to other districts like yours, or to the overall state averages. So, when the superintendent says “…some have said the district is overspending…”, that’s not really it at all. “Some” are really saying the district seems to be spending enough more than the averages (in certain areas), to raise a question if its financial problems couldn’t be resolved without asking for more money. And “some” just can’t get a straight answer, supported by any facts. Its been very frustrating trying figure this whole thing out, and gain some level of comfort that what we are being asked for really makes sense.

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Mark B.
03/12/2010 4:51 AM

Superintendent Minkkinen, according to this article, in a Tuesday workshop responded to a number of questions regarding criticism of the district’s proposed referendum. (1) Apparently, there is an assertion the school district is overspending its budget. The answer was: “’If you’re overspending your budget, you don’t have a fund balance’. He said a fund balance basically serves as a savings account.” (2) “Minkkinen said the district has saved a lot of money because of a much more energy-efficient building. The school received an Environmental Protection Agency award, which ranked it in the top five percent for efficiency in the country.” (3) “Minkkinen said if the district would have continued along at the normal inflationary rates, it would have been fine – pointing a finger to a bad economy as the main culprit.”------Now, I would have attended that workshop, but was told in an e-mail by a school board member it was cancelled because of a statutory conflict with another public meeting. Quote: “The Board's levy workshop listed in newspaper for March 9th is cancelled, as no public meetings may be held on MN Annual Township meeting night.” Had I been at that meeting, I would have been glad to offer the superintendent some information around which to more clearly expand his discussion of the above points. I also had some other questions I would have liked answered, in order to help me better understand the school district’s financial position. I’ll cover each of the above numbered points with separate sets of information.

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