Back to basics

Loren Martell

The situation created by Covid-19 makes it easier for school board members and our superintendent to mug grins at each other over the internet and box bothersome citizens out. They met in a closed, virtual manner on 4/23/20. As the chair put it, the meeting was held: “to consider an offer, or develop a counter-offer for the sale of real property.” The “real” properties on the table for discussion: Old and New Central High Schools.

When I tried to access the special meeting on YouTube, a video of the U.S. Air Force Academy graduation kept appearing on my screen. General Gregory Martin, class of 1970, kept popping up with the ceremony’s opening remarks: “Fifty years ago, the class of 1970 sat in the exact same seats – figuratively, at least…” I felt like I was sitting in the exact same spot – psychologically, at least – from 9 years ago.  Our school district’s past actions automatically drives many citizens into suspicious mode. I couldn’t help but worry what kind of Red Plan coup de grace Keith Dixon’s protégé, Bill Gronseth, was scheming to dump on us as he leaves town, just the way his mentor did.

No vote was taken during the closed session, so the contents remain secret. But Bill is trying. He is trying really, really hard to follow his mentor’s exact same tracks out the door.

Retired banker and former school board member Richard Paulson sent me an email the next day. He was trying to understand what was going on in this process: “I see they are talking about this legislation in the Education Finance Division. I do not understand how this can be regarded as a necessary deferred maintenance project, based on estimated levy savings from Historic Old Central.”

Mr. Paulson – a citizen with good old-school sense – couldn’t see the underlying logic in this fiscal maneuver because there isn’t any. How could the school board even THINK about rebooting the Red Plan and dumping something like this on the new Superintendent, just as he steps into the job?

Our new Super’s super deal

The Duluth school board has approved a three-year contract for its new Superintendent. John Magas will make $187,500 his first year, $191,250 his second year and $195,750 his third year.

A superintendent position fetching this kind of salary is symptomatic of why so many school districts are fiscally struggling. In his first year, our new super will be making $59,871 a year more than the governor of Minnesota. The governor’s salary is $127,629. The differential between these salaries – $59,871 – would be a great salary for many people in Duluth.  

Our new superintendent in fact will make more money than all but four governors in the whole country, and he won’t be much below those four: California, $201,680, New York, $200,000, Pennsylvania, $194,850 and Tennessee, $194,112.
The contract given to Mr. Magas appears to be identical to the contract given to Bill Gronseth, except for higher numbers. (Bill’s first contract, in 2012, had a starting salary of $168,000.) The new super’s contract still includes a “golden parachute” clause, meaning termination of his contract “without cause, upon 30 days notice, (requires) payment of nine months salary and continuation of all benefits for twelve months…”

After experiencing Bill Gronseth’s unending attempts to breach the trust of his contract and escape the asylum, I would have insisted on a clause that protected the district. After procuring job security for himself with his last contract, Bill hit the road looking for a new gig, as though he hadn’t signed any contract at all. If he had gotten a job in the spring of 2017, ISD 709, reeling on the brink of fiscal collapse, would have found itself without a leader.

Such a near-disaster warranted some language inserted into the new superintendent’s contract that protected the school district’s (and taxpayers’) interest, in case the new guy got footloose after signing on the dotted line. I would have lobbied hard for a monetary penalty that locked the signee into a more binding agreement and reduced the risk of being jilted. I would not want to see another groom run off right after the wedding ceremony, holding a prenup that forces the crestfallen bride’s parents to pay him for 9 months and cover his insurance for a year, if the false-hearted lout didn’t find another girl to accept his proposal.

Some of the other perks of this deal include: $7,500 to cover relocation expenses from Green Bay to Duluth, a $6,000 Health care Reimbursement Plan and up to $5,000 a year to further the district’s top administrator’s education.
There are probably many people across Duluth’s hillside living on not much more than $7,500 a year.  (The school board makes $7,500 a year.) The super’s $6,000 HRA job benefit covers out-of-pocket medical expenses. As far as the five grand for educational expenses, one of my column’s readers emailed me a question she wanted to ask Bill Gronseth: “How much did ISD 709 pay towards his PhD, to make him more marketable to job hunt his way out of Duluth?”

I’ll answer that question, for Bill: $25,733.68. And, according to an information response I received from the district dated 3/16/20, Bill Gronseth still “does not have his doctorate.” Even if Bill did manage to finish his doctoral thesis in the next few months, is Duluth getting a good return on its $25,733.68, if our super becomes Dr. Bill just as he’s leaving town?

And I have to ask: Given the tough challenge so many people face trying to pay for higher education, can’t the fortunate person making $187,500 a year (a governor’s, if not a king’s ransom, destined to climb to nearly $200,000) pay his own college tuition?  I think this contract is over-the-top, way too generous, especially when so many others are struggling.

HR/Finance meeting, 4/14/20

Like nearly every conversation these days, this meeting (conducted virtually) began with an evaluation of the new normal that has befallen our world because of an invisible little microbe.  

Only three board members now attend these meetings. Two of the 3 asked what effect the Covid-19 facility shutdown, and switch to distant learning, was having on the budget. Committee Chair Trnka queried CFO Erickson if the State legislature is considering a “different kind of formulary” other than student count to determine funding, “because, numbers this year are frankly unreliable to a certain extent.”

Erickson responded that state officials are “looking at some language to provide more flexibility and more opportunity,” but she did not indicate any more money would be forthcoming to address this specific issue.  The district’s budget guru added that she still didn’t know yet “the impact all of this (will have) on this year’s budget and how that rolls into our fiscal ‘21 budget.”

Member Sandholme followed up with some questions about possible savings associated with closing buildings, pointing out that there should be transportation savings from the children no longer attending schools. “There’s got to be some savings in other areas, as well,” he added. “How is that getting consumed? You know: savings from not using substitute teachers, or savings we’re realizing in food service and other areas. How does that all work out?”

Erickson pretty well dashed any “savings” hope. “We are maintaining a full food service staff right now. We’re actually losing money in our food service dept…We do have some fund balance reserves we plan to utilize to provide the almost – I think we’re (still) close to – 2000 students being served.” She added that a previous “revenue generator” for district operations – pre-school child care – was being provided for free during these pandemic times.  She told the board the district was going “above and beyond” the governor’s executive order, which requires free child care during the school day.  Now providing child care for 11½ hours a day, from 6:30 in the morning until 6 in the evening, but not charging any money, ISD 709 is going to tap into its meager reserve funds to cover this unexpected expense, as well.

As far as any transportation savings, the CFO launched into one of her trademark verbose explanations, which I’m going to write out in full: “Keeping in mind that, while we might be saving some mileage and some fuel costs, we are required – and we are continuing –to utilize our transportation staff. And because this has only been so many days, and we had a (spring) break, the utilization of the daily savings is not as high as we would have expected to see in terms of accumulated savings in that area. So, again – and in our transportation budget – we had some unexpected repairs and maintenance that we’re doing on some of our bus fleet. So, the potential savings that we might be seeing now is really being absorbed by some of our overrun costs that we might be having in our transportation dept., so it would be – right now –without getting into a lot of detail, we’re not necessarily seeing any material savings from a dollar amount perspective, but we are grateful that there’s some limitations that we can have that can help kind of subsidize where we could go, and the intention of the legislature is also so that some of those projected savings could be transferred to food service and community service, to help offset the losses that we’re gonna do. But, right now, we’re committing to the (reserve) fund balance investments to make those things whole through our process.  Does that help, Member Sandholme?”

Another version of this explanation, verbosity trimmed away: For some reason we are required to use all transportation staff instead of laying some off. We were on break for a while, so the buses were idle anyway. Our fleet is wearing out because of years of fiscal mismanagement, so the savings are actually a blessing to save us from going in the hole for repairs. The legislature is letting us use any leftover savings to plug holes elsewhere in the budget, but we still plan to raid our meager reserves.

How about you, readers?   Does that help?

In the red again

The biggest story from this meeting was the preliminary budget for the next fiscal year, which shows a projected $1,159,526.65 deficit. According to the document administration provided, the biggest drivers of this deficit are two expense increases: a $1.59 million increase in special education and a $1.1 million increase in the aforementioned Healthcare Reimbursement Accounts.

As already stated, these HRA accounts cover out-of-pocket medical expenses for district employees. The plan is based on Cost-Level 2 health clinics, which comprise about 66% of Duluth area clinics. Out-of-pocket expense for basic health care and prescription drugs is reimbursed for district employees in these clinics. The maximum out-of-pocket reimbursable expense (until recently,) was $2,000 for single payers and $4,000 for families.  Only one exclusion is listed in the PEIP (Public Employees Insurance Program) schedule – for two drugs: a therapeutic drug used in the treatment of PKU (a rare, inherited disorder called Phenylketonuria) and infertility.

The annual cost for HRA accounts went up $100 for single payers and $200 for families in 2016, and was bound to climb again. This money is not use or lose. The annual deposit (again, currently, $2,000 for singles, $4,000 for families) made by the district into these accounts keeps accumulating if not used. “Employee HRA accounts are fully vested when the money passes to the employee,” the district’s former Director of Business Services confirmed to me in a response to questions on the issue, “so, yes, the employee owns the account and takes it with them when they leave the district. There can be earnings on the account, subject to the options and performance of the investments chosen by the employee.”

Starting in July, the cost of this benefit will jump again, in a big way: from $2,000 to $2,750 for single district employees, and from $4,000 to $5,500 for families. The superintendent will get $6,000. The Duluth News Tribune quoted HR/Finance Committee Chair Sally Trnka this way, in response to this increase: “If this isn’t a call to arms for legislators that we need to fund public education, I don’t know what is.”  The newspaper added that Trnka declared that “this deficit isn’t due to fiscal mismanagement.”

Under the Insurance heading (Article XVIII,) of the teachers’ contract, the language covering HRA accounts states the district will pay $2,000/$4,000 “or 95% (whichever is greater)” into these accounts. 
In other words, when the HRA cost went up (and everyone knew it was just a matter of time before it did again,) the district (i.e., taxpayers) were on the hook for nearly all of it.

I’ve heard so much scapegoating from the people who control the boardroom of our school district.  Committee Chair Trnka’s assertion is just flat-out wrong in relation to this HRA expense. The cost did rise for this sugary benefit, but the primary reason ISD 709 slipped into another fiscal pitfall is not inadequate State funding.  To write a contract that way – effectively putting the district’s operational budget at risk for 95% of any increase – IS mismanagement of the public’s business.