Where have you led us, Keith and Bill?  

by Loren Martell

photo credit: Ted Heinonen
photo credit: Ted Heinonen

In my last article I described Superintendent Gronseth’s questions, in regard to the number of years since the Red Plan’s demographic study, as “feigning his subterfuge of ignorance.”  I should have written, “continuing his subterfuge of feigned ignorance.”  

Maybe that was just my reading of the moment though, and our Super wasn’t feigning.  After all, this is the same person who once gushed: “The Duluth school board deserves thanks for everything that has happened…They had a plan and they saw it through…May they keep up their good work.”   

I want to say those words were spoken 11 years ago, or maybe even more than that.  It was back when Mr. G. was angling to become Keith Dixon’s assistant.   
     
Clearly enamored of the Music Man’s skillful methods, Mr. G. also gushed to our paper of record: “(Keith) had some great leadership skills and he was a mentor to me.  We have similar philosophies…”
     
It’s been quite a while since Bill Gronseth said that as well.  I want to say about 7 years, 11 months, right after the protégé slid his toes into his mentor’s shoes and found them to be a perfect fit.  

Business Committee meeting, 12/10/19

The first thing to report about this meeting is the meager interest it engendered.  My apologies if I missed anyone hiding in a shadowy corner, but I believe the attendance, outside of district administration and Board members, amounted to the Duluth News Tribune's, reporter, myself, one of the watchdogs from the East/West Equity group--Betty Greene--and a couple of guys who carried on a private conversation in the back of the room the entire time.    

     
Five district administrators sat around the table of power and only 3 Board members.  No teachers were in the room, including the one on the Board or the one who is a Board member-elect.  Teachers never attend Business Committee meetings, one of the greatest ironies I’ve experienced hanging around an educational environment.  Educators seldom seem interested in educating themselves about the fiscal intricacies of a school district they clearly love and are drawing a paycheck from.  

Even more notable was the absence of so many of our representatives.  Only the Chair and vice-Chair of the committee--Sally Trnka and Alanna Oswald--and the Chair of the Board--Rosie Loeffler-Kemp--attended the meeting.  Assumingly, the other four Board members make up part of the group of 42 people (at last count) that viewed the meeting on YouTube.  

This meeting’s agenda included the auditor’s annual presentation, as well as an explanation of the tax levy by the district’s CFO.  (The school board certifies the levy annually during the regular December meeting.)  If I were on the school board, only a major emergency would have stopped me from being present and making certain my constituents’ voices were part of the conversation.  

School district 709 remains in a budget squeeze, as evidenced by these words from the CFO during the October Business Committee meeting: “Since July, we’ve had increases on the expense side of our budget.  We’ve had to add staff; we’ve had to add kindergarten teachers.  In our special ed. area, we’ve had some really high-need students come in…When we don’t expect them, (but) they have needs, we (still) have to provide those services--and it may not have been in our budget.  So, while we’re trying our best to (cover) those areas--this money--should we decide to (try to) adjust (our finances) on the revenue side, has likely already been spent along the way.”  

The Superintendent and his Board supporters want us to believe that this fiscal squeeze is endemic across the State and solely the result of inadequate funding, but there’s more to the story.  When former Governor Dayton proposed a $138 million emergency bailout in 2018, 59 out of 327 districts were experiencing serious financial problems.  26 were Twin Cities metro districts; only 33 were in greater Minnesota.  

ISD 709 shouldn’t have been one of the struggling districts, forced to cut $1.5 from operations midyear in 2108.  A large investment was supposed to solve all the district’s money problems and rocket it to the top of the pack.  Instead, built on a flimsy foundation of poor long-range planning, fancy buildings have been like blocks of concrete constantly pulling it down towards the bottom.  

  
The audit

The firm that audited district 709 is named “Wipfli.”  One positive thing I immediately noted about the audit presentation is that the person who gave it could speak coherently.  Last year--in a school district that had narrowly averted statutory operating debt status and had to hire an outside firm to put its budget together--the auditor showed up in January, a month late.  Then whimsical Wipfli assigned the presentation to someone who was definitely out of his depth when it came to public speaking.  

Besides being laid out in a reasonably lucid manner, this year’s audit report did provide some good news for the people (practically all of Duluth) hungering for good news.  Wipfli’s representative announced to the Board: “We have an unmodified opinion on the basic financial statements, which is a clean opinion.  We had no internal control findings over financial reporting and no non-compliance over the Federal programs that we tested.”  

During the upheaval and chaos of the long-range facilities plan and its immediate aftermath, “clean” findings were not a given.  Revenue and expenditure errors in the district’s ledger were commonly uncovered in the annual audits.  More than once the auditing firm reported “material weakness in internal control over financial reporting” in ISD 709’s financial statements. 

In ‘08, for example, the auditor discovered additional revenues of $658,439.  In fiscal year ‘09, nearly a million dollars ($914,296) more of additional revenue was uncovered by the audit.  In ‘10, the auditing firm stated: “As a result of audit procedures, we identified certain errors in calculations and estimates.  The district posted to its general ledger-accounts certain adjustments to correct these errors.  These adjustments resulted in an increase in revenues of $516,086 and a reduction of expenditures of $38,538.  The adjustments were material to the district’s financial statements.”  Nearly a million dollars of ledger errors were again uncovered in ‘13, resulting in a revenue increase of $707,291 and decreased expenditures of $225,973.  

Year after year the auditor certified that “the district does not disagree with the findings” and stated district 709 would put a corrective plan in place and that “the school board will monitor the district’s compliance with the corrective action plan.”  In fiscal year ‘14, the annual audit found an understated figure in government funds of $734,507.  The audit report again repeated the same statements about material weakness in district’s financial records, advised a corrective action plan, and stated the school board would monitor compliance.  

The weakest link in this line of action was that, collectively, especially during the Wild West days of the Red Plan, the school board of ISD 709 would have had trouble monitoring the finances of a lemonade stand.  My guess is most members were unaware there was any kind of corrective action plan and they were supposed to monitor it.   

 
The most troublesome issue revealed by this year’s audit was the continued deficiency in the district’s reserve fund.  The unassigned reserve (not earmarked for particular use) rose a little, from $399,166 last year, to $688,512 this year.  In the past this figure has also been listed as the total unrestricted fund balance, but this year the auditor added in unrestricted assigned monies to come up a total unrestricted fund balance of $2,636,005.

Statutory operating debt status was avoided, but the fund balance remains about six million dollars less than it should be for a budget of $109,632,966.  For those inclined to weep about being led down a primrose path, the district’s total unrestricted fund balance was $18,120,370 at the end of fiscal 2005, when Keith Dixon came to town.  

On the last page of the 9-page document used for the Board presentation, the total outstanding debt at the end of fiscal year 2019 is listed by the auditor as $197,820,425.  This is all the bond debt, including Certificates of Participation--a unique form of bonding used for the Red Plan.  Buried on page 53 of the full 84-page financial report, long-term district financial liability, including pension costs, etc., is listed as $297,121,290.

The levy

To begin with the bottom line: the district passed a milestone, of sorts, with this year’s levy certification, crossing the $40 million mark for the first time, to $40,089,645.79.

If you want to learn something about the various calculations that go into the taxes you pay, watch the YouTube video of this meeting.  CFO Erickson is well versed in the nuances of finance.  Last August, she delivered a levy history lesson.  One point made during the lesson was that former governor Ventura’s administration moved a large portion of the burden for public education from the property tax rolls to the state aid formula.  

That change happened in 2002.  As CFO Erickson pointed out, statewide the shift was about 36%--but there was variance, and locally it was much larger.  In 2001, our district’s levy was $22,877,763.91.  In 2002, it dropped to $8,094,900.09, a 64.6% decrease.  The current levy is five times larger than it was in 2002.  To add further perspective, in 2002, the district’s debt service was $4,135,529.  The debt service now is $21,614,906, two and a half times larger than the entire levy in 2002.

An important fact disclosed during this meeting is that the school board would “convert” $300/per student of the district’s tax burden from public-approved to Board-approved during certification of the levy.  The CFO made it sound as though this maneuver was now mandatory under state statute, a claim I haven’t had time to verify.  Combined with the $424/per student Board-approved levy pushed through by the school board in 2014, the people paying the district’s expenses will no longer have any say on about six million dollars of annual tax collection, in the form of a vote.  

CFO Erickson downplayed the change on our tax statements (from “voter-approved” to “other”) as “just switching categories,” and “revenue neutral,” but voting is the essence of our democracy, as Elijah Cummings once said, and our school district has a history of stealing our vote.  None of our representatives seemed to even notice.  You can bet I would have brought it up and at least made it clear on the record that this was happening to the taxpayers of our town.   

What's coming?

The new school board will hold its annual organizational meeting in January.  Who will be chosen to lead, as Board Chair?  

Two camps will compete in the boardroom: one group, content with the status quo, will want to continue cheering and rubberstamping whatever Administration puts on the table; the other group, with a yen towards more assertiveness, will want to shepherd in some (at least) moderate changes--especially in regard to transparency and dealing with the district’s long-standing equity issue.  

The Cheerleader Squad will consist of David Kirby, Rosie Loeffler-Kemp and Jill Lofald.  From this group, Lofald will emerge as a candidate for Chair.  Board rules allow the current Chair to continue her reign, but Loeffler-Kemp took a pretty bad beating over her one-year tenure and is unlikely to have a taste for another term.  A sharp political operative, she seems more suited to tugging puppet strings in some back room.  

David Kirby has already served two back-to-back terms as Chair and is unlikely to want another stint.  That leaves Jill Lofald, who definitely WANTS it.  Lofald’s been very assertive since stepping into the boardroom and has all the chutzpah required to reach for the ring of power.   
 
(An important side note: Jill-Lo’s predecessor in the 4th district, Art Johnston, was boxed out of any Board officer position for 8 straight years.  Lofald--who comes from the “right” political crowd--has already, in 2 years, been a Standing Committee Chair, Vice-Chair of the Board and is now in line for the Chair position.)

The Proactive We-Too Squad will consist of Alanna Oswald, Kelly Eder and Sally Trnka.  Under normal circumstances, Oswald would emerge as this group’s candidate for Chair, but she has been struggling with some health issues.  Eder will only have a tenure of two months and Trnka’s poor attendance record for meetings suggests she may not be able to handle any more responsibility.  

Will Lofald, by default, win the top spot without contest?  This outcome would spare newly elected Board member, Paul Sandholm, from his first awkward dilemma as the swing vote.  Mr. Sandholm is likely to find himself often pinched between these two competing groups, all the while feeling the heat of union pressure.  

Stay tuned.  Our schoolhouse soap opera will continue delivering new twists to the plot line.