{"id":825,"date":"2010-09-07T00:16:33","date_gmt":"2010-09-07T04:16:33","guid":{"rendered":"https:\/\/dandunn.org\/blog\/?p=825"},"modified":"2010-09-07T08:22:30","modified_gmt":"2010-09-07T12:22:30","slug":"the-deficit-in-the-arlington-school-budget","status":"publish","type":"post","link":"https:\/\/dandunn.org\/blog\/2010\/09\/the-deficit-in-the-arlington-school-budget\/","title":{"rendered":"The Deficit in the Arlington School Budget"},"content":{"rendered":"<p>Ten days ago, the Arlington School Department issued a <a href=\"http:\/\/www.arlington.k12.ma.us\/news\/FAQs_Regarding_FY_2010_Shortfall.pdf\">press release<\/a> saying that the 2010 fiscal year, which had closed on June 30, was $1.5 million in deficit. \u00c2\u00a0This deficit is illegal by state law, and the town has to resolve that. \u00c2\u00a0Otherwise the town can&#8217;t do things like set the tax rate or send out tax bills.<\/p>\n<p>I was absolutely shocked by this press release, and so was virtually everyone else. \u00c2\u00a0The Finance Committee had no idea there was a deficit. \u00c2\u00a0The Board of Selectmen didn&#8217;t know. \u00c2\u00a0Even the School Committee was surprised.<\/p>\n<p>The School Committee had a meeting that night (8\/26), and I attended so that I could learn more. \u00c2\u00a0There was a <a href=\"http:\/\/www.arlington.k12.ma.us\/news\/Factors_Contributing_to_FY_2010_Shortfall.pdf\">general presentation<\/a> by Superintendent Kathy Body and CFO Diane Johnson about the revenue shortfalls of FY10 and how to handle it, but there was essentially zero discussion about how there could be a hole this big, identified this late, and surprise so many people.<\/p>\n<p>Since that meeting I&#8217;ve been calling and emailing people, trying to put the story together. \u00c2\u00a0I think I&#8217;ve largely succeeded.<\/p>\n<p>I think there are at least four big-picture questions worth discussing. \u00c2\u00a0If you think I&#8217;m missing one, please let me know.<\/p>\n<ol>\n<li>What the heck happened?<\/li>\n<li>What errors were made?<\/li>\n<li>How can we avoid this in the future?<\/li>\n<li>How do we get out of this mess?<\/li>\n<\/ol>\n<h3>1. What the heck happened?<\/h3>\n<p>Here&#8217;s an abridged timeline, factually accurate, but\u00c2\u00a0omitting\u00c2\u00a0some details in the interest of clarity. \u00c2\u00a0Skip down to the Late June section if you&#8217;re bored already.<\/p>\n<ul>\n<li>Fall and Winter &#8217;09 &#8211; The school department learned of a number of things that negatively affected the budget. \u00c2\u00a0They&#8217;re <a href=\"http:\/\/www.arlington.k12.ma.us\/news\/Factors_Contributing_to_FY_2010_Shortfall.pdf\">loosely outlined<\/a> in the presentation given on 8\/26. \u00c2\u00a0We could explore the nitty-gritty of these for ages, but this discussion is best served by skipping that detail.<\/li>\n<li>April\/May &#8217;10 &#8211; The School Committee, Finance Committee, and Town Meeting debated and ultimately voted a school budget for FY11. \u00c2\u00a0Each of those debates included some discussion of the FY10 budget performance and the large gap that had opened between expected revenues and expected expenses and how to manage that. \u00c2\u00a0At none of those debates was it suggested that the FY10 budget would be in deficit. \u00c2\u00a0During this period (on 4\/30), the School CFO Diane Johnson requested a reserve fund transfer from the Finance Committee of $250,000. \u00c2\u00a0FinComm Chair Al Tosti said that kind of money wasn&#8217;t available, but the committee would consider the request.<\/li>\n<li>Early June &#8217;10 &#8211; This is where the paper trail gets thin. \u00c2\u00a0What is clear is that on June 11 the school department withdrew their request for the reserve fund transfer. \u00c2\u00a0What is also clear is that FinComm chair Al Tosti believed that to mean that the deficit had been managed through cost controls, grants, and transfers. \u00c2\u00a0Clearly other town financial officials, paid and volunteer, shared that understanding; they never would have permitted an illegal deficit to occur.<\/li>\n<li>Late June &#8217;10 &#8211; Some anticipated revenues did not appear before the budget deadline. \u00c2\u00a0Apparently the Superintendent and CFO both knew that there was a deficit coming, and they thought they had a plan. \u00c2\u00a0Every year, a large number of teachers elect to be paid their salaries over 12 months (rather than the 9.5 months of the school year). \u00c2\u00a0Every year, some money is rolled forward from the previous fiscal year to the new fiscal year to cover those salaries, i.e. the teachers&#8217; salaries for July and August &#8217;10 are paid from FY10 money that is rolled forward to FY11. \u00c2\u00a0What the Superintendant and the CFO planned was to roll forward as much money as they could (approximately $1.5 million) from FY10, and then pay the rest of July and August salaries (approximately another $1.5 million) from FY11 money.<\/li>\n<li>August &#8217;10 &#8211; the town&#8217;s independent auditor noticed that only $1.5 million was rolled forward and started asking questions. \u00c2\u00a0It was determined that it was <strong>not<\/strong> possible to pay those FY10 obligations with FY11 budget. \u00c2\u00a0Thus, the FY10 budget was in deficit.<\/li>\n<\/ul>\n<h3>2. What errors were made?<\/h3>\n<p>There&#8217;s a bunch.<\/p>\n<ul>\n<li>In an ideal world, the CFO and Superintendent should have know that their plan was not viable. \u00c2\u00a0They should have known that they can&#8217;t pay FY10 bills with FY11 money.<\/li>\n<li>The CFO and Superintendent should have shared their plan with a wider set of town leaders, who would have identified that the plan was not viable. \u00c2\u00a0This is the error that drives me crazy. \u00c2\u00a0The Superintendent and CFO had been to the Finance Committee twice in March and April, and it was clear that we all needed more communication. \u00c2\u00a0FinComm hadn&#8217;t heard about all of the budget problems that had accumulated in the previous 8 months. \u00c2\u00a0I even took the\u00c2\u00a0Superintendent\u00c2\u00a0aside and said as much at Town Meeting, asking her for more updates to FinComm in the coming year. \u00c2\u00a0She and the CFO should have been banging the drum in June about the bad news as it came in.<em> If the communication had been better, this could have been avoided.<\/em><\/li>\n<li>The School Committee should have been more aggressive in its supervision of the FY10 budget. \u00c2\u00a0They had asked for more frequent reporting, and were told that it was difficult\/impossible because of charts of accounts, accounting practices, and other technical challenges. \u00c2\u00a0They shouldn&#8217;t have taken no for an answer.<\/li>\n<li>I&#8217;m curious why the Comptroller didn&#8217;t notice this earlier. \u00c2\u00a0The $1.5 million roll-forward was much smaller than in the past, and it seems like that should have raised a flag.<\/li>\n<li>In retrospect, I wish I had asked harder questions about the FY10 school budget. \u00c2\u00a0By April we all knew there was a problem. \u00c2\u00a0In June, when I heard the problem was resolved, I should have asked harder questions about <strong>how<\/strong> it was resolved.<\/li>\n<\/ul>\n<h3>3. How can we avoid this in the future?<\/h3>\n<p>Most of these are pretty obvious once the errors are spelled out.<\/p>\n<ul>\n<li>When you know there is a problem,\u00c2\u00a0say something.\u00c2\u00a0Keep saying it until there&#8217;s a consensus and a plan.<\/li>\n<li>Improve budget reporting so that everyone &#8211; Super, CFO, School Committee, FinComm, Comptroller, Town Manager, everyone knows how the school budget is doing.<\/li>\n<li>The School Committee needs to learn to ask the hard questions, and keep asking them until they get the answers they need.<\/li>\n<li>Change our accounting procedures. \u00c2\u00a0Encumber the summer salary money earlier in the year, not at the end.<\/li>\n<\/ul>\n<h3><strong>4. How do we get out of this mess?<\/strong><\/h3>\n<p>There are a number of technical things that need to be done, but I don&#8217;t know what they are yet. Clearly we need a Special Town Meeting, and we need to appropriate some money to make FY10 no longer be in deficit. \u00c2\u00a0There are a lot more details to be worked out.<\/p>\n<p>Besides the actual financial mess, there&#8217;s a mess in terms of public trust. \u00c2\u00a0Anyone who reads a headline about a surprise $1.5 million deficit is going to have serious questions about the competency of the town&#8217;s management.<\/p>\n<p>It is easy to talk about the various factors that caused the budget to be out of balance. \u00c2\u00a0They are largely external and out of the control of the school department. \u00c2\u00a0<strong>The management of the financial problem, how we react to these challenges, \u00c2\u00a0are things that are entirely within the control of the school department. <\/strong>This is the part that was screwed up.<\/p>\n<p>My advice to the School Committee and the Superintendent and CFO is that they need to be transparent about the problem management. \u00c2\u00a0They need to write a narrative (not unlike the one I have), they need to talk about what went wrong, and they need to talk about how they&#8217;re going to avoid it in the future. \u00c2\u00a0No one can do this for them. \u00c2\u00a0They need to do it themselves.<\/p>\n<p>That is the first step towards rebuilding the trust that is required. \u00c2\u00a0We need to believe that we have the skills to manage the problem. \u00c2\u00a0Then, and only then, can we have a Special Town Meeting and unwind the financial problem.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ten days ago, the Arlington School Department issued a press release saying that the 2010 fiscal year, which had closed on June 30, was $1.5 million in deficit. \u00c2\u00a0This deficit is illegal by state law, and the town has to resolve that. \u00c2\u00a0Otherwise the town can&#8217;t do things like set the tax rate or send [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-825","post","type-post","status-publish","format-standard","hentry","category-arlington"],"_links":{"self":[{"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/posts\/825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/comments?post=825"}],"version-history":[{"count":5,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/posts\/825\/revisions"}],"predecessor-version":[{"id":828,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/posts\/825\/revisions\/828"}],"wp:attachment":[{"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/media?parent=825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/categories?post=825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dandunn.org\/blog\/wp-json\/wp\/v2\/tags?post=825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}