Pension Cost Shift: a superintendent’s (retired) perspective by Roger Sanders

Governor Quinn’s position is that “the taxpayers of Illinois should not be just there to subsidize the retirement costs of every single school district.” House Speaker Madigan says, “You have a situation where local school districts get a free lunch. They make spending decisions that they don’t have to pay for.” According to Quinn, “the new data showed that 478 out of 864 school districts across the state carried cash reserves as of June 30, 2011 that would fund at least 180 days of operating expenses - the equivalent of a full school year.”

Perhaps Governor Quinn should be looking at these school districts to learn how to effectively manage a budget instead of vilifying their superior management capabilities. One-term Quinn just has no idea of how to lead or how to solve complex problems, and he clearly has no idea of the important role of cash reserves. He’s more interested in pushing his problems off on to others rather than finding real solutions to problems created by 60 years of mismanagement by the Illinois General Assembly and state governors.

As a superintendent of a school district that maintained cash reserves that could carry the district through dramatic swings in funding, I think it would be helpful to consider the many variables outside the control of district management that can negatively impact operating funds. Local tax assessment, collection, and distribution practices can have a dramatic impact on district finances.

A number of years ago, the county in which my school district received its primary property taxes experienced a series of significant changes including delayed property assessment, delayed tax bills, and delayed distribution of taxes to the district. This resulted in over one-third of the district’s local revenues reaching the district 60 days past their normal date of receipt. This sequence of events occurred over three consecutive tax years. The district did ultimately receive all the tax revenues due eventually.

Nonetheless, this series of events created substantial cash-flow issues and resulted in great swings in the year-end balance sheet. My district had sufficient cash reserves to deal with the change in cash flow, but several districts needed to borrow money to pay bills, thus costing taxpayers more in interest that was paid on borrowed funds. In this case, the cash reserve saved taxpayers money.

State funds in recent years have proven to be extremely volatile with some grant funds coming as late as six months, with categorical funds dramatically reduced in districts not receiving funds as promised, and with general state aid delays or skipped payments. For districts that rely heavily upon state funds, this type of income volatility can result in districts borrowing money to meet payrolls and to pay bills.

Further, volatility in energy costs, particularly diesel fuel for buses, has resulted in dramatic increases in transportation costs at the same time the state is cutting transportation funds to schools. Diesel fuel costs have increased 54% since 2009. Moreover, there are those unanticipated emergencies or planned initiatives to consider.

The State of Illinois could take a lesson from districts that have established cash reserves. They know how to prioritize expenditures and focus their resources on planned initiatives; they know how to manage resources and set aside funds to carry them through difficult financial times brought on by external factors; they know how to restrain spending with an eye toward responsible management of resources, and they know how to work with their communities to raise funds and address local priorities.

Not once did I ever ask the state for extra help. In fact, over the years, I saw my district’s general state aid drop due to changes in the school aid formula, the shrinking of grant funds, payments of promised funds delayed, and the outlandish demands on professional practice that were intensified through No Child Left Behind and Race to the Top. We took care of business, set priorities, and did what was needed to be done to ensure an excellent educational experience for students, a high degree of professional practice, and prudent fiscal management.

Frankly, the Illinois General Assembly and the Governor could learn a lot from well-managed districts. If the state had exercised prudent fiscal management over the years, we would not find ourselves with the economic difficulties that have become characteristic of Illinois. Because of the state’s inability to set proper priorities, manage resources, and solve the culture of corruption and collusion, Illinois state government is seeking to push more costs onto local taxpayers. This is with no guarantee that the state will meet its obligations to existing pension liabilities that have amassed due to the legislatures’ and governors’ failures over decades to make the necessary pension payments… My suggestion is that the state seeks the counsel of the school administrators that have been successful at resource management and put them in charge of the state resources for a few years…

from http://rogersanders.tumblr.com/