Warrant Articles – Oyster River Cooperative School District

In summary, there is $2,314,392 of reductions identified and the potential for another $900,000 or more of savings, pending confirmation, are available to taxpayers next Tuesday. These savings are achievable without eliminating existing teachers, their salaries or benefits, without changing class size policies, without changing curriculum and without changing food service. My recommendations for the Tuesday March 11 Oyster River Cooperative School District budget and warrants are:

School Warrant Article 3:  Yes

School Warrant Article 4:  No

School Warrant Article 6:  No

School Warrant Article 7:  No

Explanations:

The 2014 School Warrant signed 24 January by the School Board states:

“ARTICLE 4: Shall the district raise and appropriate as a supplemental appropriation in the current fiscal year, $1.00 for the purpose of constructing an addition and renovations to add a cafeteria to the Moharimet School. The cost of the addition is estimated at $500,000 with that amount to come from the unexpended appropriations in the district’s 2013-2014 budget as a result of an insurance premium holiday from the Local Government Center on the District;s health insurance premiums. The School Board recommends this appropriation. (Majority vote required) Explanation: The proposed twenty-foot addition on to the back of the Moharimet School provides the space to create a cafeteria separate from the gymnasium to become the new cafeteria. The section of the current gym directly in front of the stage is to be partitioned from the gym by a folding wall. ORCSD has received from a lawsuit filed against the Local Government Center $688,000 of which approximately $188,000 belongs to employees and $500,000 belongs to ORCSD. No new taxes are necessary to do this project.”

This is a project designed to spend $500,000 which results from over charges to the tax payers in prior periods and should belong to the tax payers. This project has never been brought forward before and appears to only surface as a way to spend $500,000. The overcharges are not the District nor the School Board’s fault but they should not treat the $500,000 as found money. They rightfully indicate that $188,000 of the refund “belongs to employees” and we all know who the balance rightfully belongs to. The true tax payer cost of Article 4 is $500,000.

If you are still not convinced then check out Footnote 17 to the Annual Financial Statements; as of 1 July 2011 the ORCSD had Unfunded Actuarial Accrued Liability resulting from employee’s retirement benefits in the amount of $3,426,456. These must be recognized in 2015 on the financial statements. Guess who gets to provide the funding for this unfunded liability – not Barrington. If the School Board can’t stomach refunding the $500,000 insurance premium refund then it would be better served to put it against a future bill that we will have to fund down the road.

Vote no for spending $500,000 ($286 per sq. ft.) for a 20 foot addition.

The 2014 School Warrant signed 24 January by the School Board states:

“ARTICLE 6: Shall the District vote to approve a tuition agreement between the Oyster River Cooperative School District and Barrington School District, as negotiated by the School Board which provides for an initial term beginning on July 1, 2015 and ending on June 30, 2025 and with the term to be extended from year to year provided that on June 30, 2021, and thereafter this contract may be terminated by either party after providing 4 years written prior notice of the date of termination, and further to authorize the School Board to submit the Agreement to the State Board of Education for approval pursuant to RSA 194:22, and to authorize the School Board to take such other and further acts necessary to give effect to this resolution, including the adoption of minor amendments to the Agreement, from time to time during its term, without further action by the School District Meeting. The School Board recommends this article. (Majority vote required) Explanation: The proposed tuition agreement with Barrington is for 10 years with a minimum of 125 students to grow incrementally up to a maximum of 200 students. The agreement allows for a gradual transition of Barrington students and provides us with guaranteed revenue. This revenue will be used to maintain and expand programs and lower tax impact.”

The Durham Friday Updates of 21 February 2014 stated that Barrington would pay “$14,000 per student with an automatic increase based upon the cost of operating the ORHS”. I exchanged a series of emails with a District Administration staff member trying to obtain an understanding of the economic impact on the member communities (Durham, Lee & Madbury). The actual agreement with Barrington is for a $13,000 Non-Special Needs Student rate and a $19,000 Special Needs Student rate; however:

“The $14,000 is a blended rate that includes special education student cost for case management and general education needs.  It does not include specific needs for special education students and puts a limit on the number of students we will accept before there are additional charges.”

I also asked for the projected Durham, Lee and Madbury cost per student:

“Our projected cost for high school students is approximately $16,800.”

For the school year ending this 30 June, the gross amount of revenues raised from the member communities totaled $35,120,811. After allocations the three communities average cost per student for 2013-2014 is:

Durham          $20,065

Lee                  $15,685

Madbury         $15,347

Average           $17,666

Breaking down the projected 2014-2015 average cost per student for the member communities yields the following results. However, this does not include the cost of any other Warrant Articles and I have been unable to determine the number of students projected for 2014-2015 by Town.

Warrant Article 3    CBA                                                $       160

Warrant Article 7     Debt Service                                  $      773

Warrant Article 7     Ongoing Operating Expenses     $ 16,964

                                                                             Total      $ 17,897

This presumes that it costs as much to educate a First Grader as it does a High School Student and if you believe that High School Students require more than a First Grader, the above average is understated when used as a comparison to the $13,000 rate offered to Barrington. I do plan to vote yes for Warrant Article 3. A 2% wage increase may be on the high side compared to what many of our neighbors have received but by all accounts the teachers are doing an excellent job on a challenging task.

Further questioning about the Barrington rate lead to:

“The $13,000 is based on the “market rate” since Barrington parents currently pay the additional amount over that charged by the Dover school district.  This is the current arrangement Barrington has with Dover and is expiring.  I believe the Dover rate is around $11,000.  We charge the $13,000 to be close to the Coe Brown rate. Barrington students also have the option to apply to Coe Brown and their rate is a little over the $13,000.  “

But I was still uneasy that the member communities were subsidizing Barrington and all the other Tuition Students and I wanted to know what financial analysis had been performed, what the business case looked like, why we were using Coe Brown’s rate as a proxy; I asked for the detail and received:

“. . . we arrived at the $14,000 it is true that this is a market rate. I do not feel like we did not analysis this throughly from a business perspective. Our tuition offer to Barrington, Deerfield and Newmarket started at our projected cost. If we were to insist on this rate we would not have an agreement with Barrington.”

The following rationale for charging below projected costs, effectively having Durham, Lee and Madbury subsidizing Barrington and other Tuition students, is:

“If we continue to reduce staff it may mean that we will offer some classes every other year. This can make it difficult for students to access the courses they need. This year we are cutting a part time language teacher because the numbers are low.”

The Barrington agreement doesn’t start until 1 July 2015 and we have around 70 Tuition Students currently enrolled today, well over 10% of the high school student population. I fail to see how the elimination of a part-time language teacher has anything to do with the Barrington agreement which doesn’t begin until the year after. I am sure that the School Board is making every effort to provide for the student needs before addressing what people would like. In the interim, attendance appears quite steady, in the Oyster River School District Budget Overview you will find the last 2 years plus the projected next year’s High School Student enrollment:

2012-2013    673

2013-2014    683

2014-2015    687

If you make a few assumptions, read all of the presentations, it appears that you could argue that in 2014-2015 (before the Barrington Agreement is in force) that there is a $137,943 contribution margin from Tuition students that could be used to reduce the tax burden to the member communities. I am unable to confirm nor dispute this number, it is unsupported by any audited financials and it doesn’t appear any incremental analysis has been prepared.

What is more troubling is found on page 18 of the Proposed 2014-15 School District Budget with flat student enrollment projected and the argument that we would have to reduce classes and offerings without the Barrington agreement that arguably only brings in 45 new Tuition students on 1 July 2015 we are being asked to approve $735,396 in New Position Requests!

The math seems obvious ($137,943 from Tuition Student Contribution Margin less $735,396 in New Position Requests equals  -$597,453 Net Loss), vote no on Article 6, allow normal attrition, retirement, voluntary terminations, etc. to occur and re-purpose the remaining teachers to care for all the Durham, Lee and Madbury students’ needs and even some of their wants.

Additionally, the Barrington Agreement runs through 2025. We will have a binding commitment to educate up to 200 additional students. What are the facilities implications? Will we be forced into building additions or maintenance that would otherwise be unneeded? Before approving an economic decision of this magnitude a thorough financial analysis and assessment for the 10 year cycle should be prepared, audited and fully discussed. Incremental pricing is useful but each expense category has different cost drivers, different inflation factors and at some point even incremental costs behave in a step function. The devil is in the detail, which doesn’t appear available, and all I really know is the member communities pay for everything that the Tuition Students don’t and if priced below or even near cost the risk over a 10 year period is too high to justify by social commentary alone.

The 2014 School Warrant signed 24 January by the School Board states:

“ARTICLE 7: Shall the District raise and appropriate as an operating budget, not including appropriations by special warrant article and other appropriations voted separately, the amount set forth on the budget posted with the warrant or as amended by vote of the first session, for the purposes set forth therein, totaling $ 39,325,985 distributed as follows: Fund 10 = $ 38,061,624 (regular operating budget); Fund 21 = $603,361 (expenditures from food service revenues);  Fund 22 = $655,000 (expenditures from federal/special revenues); Fund 23 = $6,000 (expenditures from pass through funds)? Should this article be defeated, the operating budget shall be $ 37,511,593 (Default Budget) which is the same as last year with certain adjustments required by previous action of the district or by law; or the district may hold one special meeting in accordance with RSA 40:13, X, and XVI to take up the issue of the revised operating budget only. The School Board recommends this appropriation. (Majority vote required)”

Vote no, this reduces the gross budget authorization by $1,814,392. 40% of the increase is the New Positions Requested ($735,396) which we won’t require if we eliminate the Tuition students and refunding the Insurance Premium Holiday saves another 28% ($500,000). Send a message to the School Board that we care more about right sizing to serve the member communities then we do subsidizing other Towns. If other Towns believe as we do that the education here is superior, that the teachers are superior then let them pay the full projected cost. If that cost is good enough for Durham, Lee and Madbury then it should be good enough.

Why do we need $735,396 in New Positions when our projected attendance grows by only 4? Is this an admission that the community members’ students were under served or poorly educated in 2013-2014?

Voting for Articles 4, 6, and 7 is akin to showing you support for the 2nd Amendment by shooting yourself in the foot.

Footnote: At this point I have been unable to reconcile the Audited Annual Financial Statements with the School Budget Form. My analysis shows the School Budget Form, which is the basis for requesting Taxpayer funds, is more than $900,000 higher than the Audited financials. I am waiting on a reconciliation report from the District and will create an additional post with my findings. Absent the District’s reconciliation report, I will post my findings and conclusions Thursday.

 

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