$286 million school district budget ‘not based on reality’
While the Indian River School District’s $286 million budget for the coming year was approved by a four-to-one vote last Thursday, the School Board member who voted against it said it was “not based on reality.”
School Board member Shawn Frost cited three major problems having to do with the deficit in the district’s healthcare costs, unknown legal fees, and the lack of budget transparency.
First, Frost said he “foretold the hole in the healthcare fund, but no one listened.”
The school district is “self-insured” and its insurance plan is $7 million in the hole. The budget shows a $2.33 million transfer out of the district general fund into the healthcare fund to begin paying down the deficit.
That figure is based on the hope that the School District will be allowed make up the deficit over a three-year period, but a three-year plan has yet to be accepted by the Florida Office of Insurance Regulation, which could order immediate repayment. This brings an element of uncertainty or unreality to the budget, in Frost’s estimation.
Second, Frost said, “We’re still in court. We’re spending more money fighting our friends, trying to keep high-performing charter schools out of the school district.”
During budget talks, Frost questioned staff’s assertion that this year there would be a $320,000 decrease in legal fees, pointing out there was no let-up in lawsuits. Frost noted the final budget does not reflect legal-fee savings, but just the opposite – about a $600,000 increase. Frost said he would rather money being spent in litigation go toward improving education.
Third, Frost said he wanted more transparency in the budget process by having funds tied to projects. Although five budget workshops were held, Frost said he still thinks budget approval is based on a “straight up-and-down vote,” with too little “granular” detail.
School board member Charles Searcy and Frost both asked that a “zero budget” approach be used in the future, in which department heads start from a blank sheet, rationalizing expenditures anew, instead of “just adding 5 percent over last year.”
The overall school tax rate will be lower in the coming year, $7.41 for every $1,000 of property value assessed, down from $7.95 last year, but more money will come in because of an increase in property values. The district’s 2016-2017 budget is nearly 7 percent, or $18.5 million, higher than last year’s.
During the public hearing held before the board voted, Indian River Shores resident Robert Auwaerter questioned another aspect of the budget, which includes money to pay for taking out an $8.2 million loan to tide the district over in the weeks before property tax revenue starts coming in later this fall.
The district faces a $1.2 million shortfall in late October, but the district financial advisor Ford & Associates recommends the board take out an $8.2 million bridge loan at a cost of nearly $70,000.
Auwaerter, who recently retired from the Vanguard Group, where he oversaw a financial analyst team of 125 and managed $750 billion in assets, said he looked at Ford’s cash-flow analysis and saw no reason for the district to borrow that much. He said that borrowing $3 million, more than double the expected deficit, would provide plenty of reserve. Borrowing $3 million instead of $8.2 million would save taxpayers about $22,000, he estimated.
“Just because you can borrow that much doesn’t mean you should,” Auwaerter said.
The school board made no comment on Auwaerter’s suggestions. There is a $100,000 placeholder in the budget for financial fees tied to the loan, suggesting the larger loan could cost more than the $70,000 estimated by Ford & Associates.