Sean C. Morgan
Retirement payments will be one of the biggest issues School District 55 staff prepare the 2013-14 budget this year, while the board is also considering the impact of the four-day school week on savings and what its two closed schools are costing.
The board met in a work session on Jan. 9 to receive information in each of these areas.
PERS
In the 2002-03 school year, the district borrowed $17.2 million and gave the proceeds to the Public Employees Retirement System to cover unfunded retirement compensation. The bond sale came with a repayment period of 25 years on an average interest rate of 5.4 percent. The district will pay a total of $37.6 million.
After 25 years, if PERS earns an average return higher than the interest rate, the district will be ahead on the transaction, said Business Manager Kevin Strong.
The annual payment increases 4 to 6 percent per year, Strong said. The district started setting aside money in the early part of the repayment term to spend down in the later years. It prepaid the only bonds that could be paid early, some of the bonds for 2020-21. Right now, the district has $2.86 million set aside to make bond payments.
With payroll costs increasing in the neighborhood of 2 percent per year and debt service increases by around 5 percent per year, the retirement contribution rate in the district increases. Payroll increases come from staff increases and raises.
Since 2003, the PERS shortfall has grown further, Strong said. As of Dec. 31, 2011, the district faces an additional unfunded liability of $6.7 million.
When PERS earns less than 8 percent growth in investments, then unfunded liabilities increase, Strong said. “We’re actually not that bad when compared to others.”
Strong uses the analogy of a bucket with two leaks in it to explain the PERS issue.
One hole is debt service, and the other is unfunded liability, he said. “How do you minimize the leaks?”
PERS should see a double digit gain for 2012, Strong said, but the average annual rate from 2000 to 2011 is 5.6 percent, largely caused by a 27.2 percent loss in 2007-08, with the recession.
“We could take the money set aside for debt service and pay down our unfunded liability,” Strong said. The district could retain that money to pay for future debt service or a combination of the two concepts. It also could kick the can down the road and spend the funds on current needs.
Gov. John Kitzhaber is proposing two PERS reforms that could help, Strong said, if the legislature supports and the courts don’t overturn them. One would limit cost-of-living increases to $480 per year for PERS retirees and cut a tax break for out-of-state retirees.
With those reforms, “everyone, including those that have already retired, is helping contribute to the solution,” Strong said.
Four-Day School Week
The four-day school week, which started this school year in Sweet Home, was originally estimated to save about $400,097. An updated estimate in October set the savings at about $431,520.
But board members were asking how much it would cost to go back to a five-day school week.
Strong is estimating the cost at about $332,710.
The cost of utilities would increase by $28,660, Strong said.
The cost of substitutes would increase by an estimated $77,500, he said. The district anticipated a decline of 15 percent in sub costs, but sub usage among licensed staff decreased by about 25 percent. The savings among classified didn’t materialize largely due to extended absences by several custodians for reasons unrelated to the four-day week.
Food services would generate about $25,000 in revenue, Strong said, while transportation would cost about $47,400.
School secretaries would increase costs by about $29,782, he said. Media assistants would increase it another $20,160; assistants, $79,208; maintenance and courier services, $15,000; custodial services, $40,000; and savings to other funds, $20,000.
The district cut $40,000 at the Central Office this year, Strong said, and those savings would continue regardless of whether the week was four or five days long.
District officials are planning a survey to determine reactions to the four-day school week.
Crawfordsville and
Pleasant Valley
The district is spending about $5,000 on Pleasant Valley and Crawfordsville schools upkeep after including rent and utility reimbursements, Strong said. But that doesn’t take into account staff maintenance time at Crawfordsville and major maintenance at either school.
Little Promises Daycare handles routine maintenance in exchange for rent. Head Start and the Linn-Benton-Lincoln Education Service District Early Intervention program are housed at Crawfordsville.
Every decade, Strong estimates the district must spend $75,000 to $100,000 in major maintenance projects at Crawfordsville and $50,000 to $100,000 at Pleasant Valley.
The district completed a roofing project at Pleasant Valley in 2011 and has a roofing project scheduled this year at Crawfordsville.
“It’s good to see both buildings put to positive use and at the same time generating some revenue toward the cost of maintaining the buildings,” Strong said.