2009

Posted by Bob on September 25, 2009 under Daily Blogs | Read the First Comment

Our office has been asked whether the Borough has extra funds in reserve to cover the educational budget shortfall. Some have stated that the Borough maintains a significant fund well in excess of the amount necessary to prevent cuts to education during this fiscal year. This is not quite true.

All Connecticut municipalities maintain what is commonly referred to as a “rainy day fund”, which is more technically described as the fund balance. Financial advisers recommend that a municipality maintain approximately ten (10%) percent of its overall budget in a special fund balance in case of an emergency. Naugatuck maintains approximately seven and one half (7 1/2) to eight (8) million dollars as undesignated fund balance. This represents about seven and one (7 1/2%) percent of the Borough’s current budget.

A municipality’s fund balance effects its overall financial health. Failure to properly fund this account can reduce Naugatuck’s bond rating, which would increase debt service payments on existing and future obligations incurred by the Borough. Naugatuck’s bond rating can simplistically be compared to an individual’s credit score.

In the early 1990′s, Naugatuck had a negative fund balance. Former and current Controller Wayne McAllister traveled to Wall Street to consult with bond rating agencies to develop a plan to create a stable fund balance for Naugatuck. Within three (3) years, Naugatuck had a positive fund balance, and the Finance Board has worked in the years since to increase the fund balance to recommended levels and protect its use as operating revenue.

This has not always been easy. Funds are appropriated at budget time to fund balance or are accrued from surpluses available at the end of a fiscal year. It is always tempting for members of the Joints Boards of Finance and Mayor and Burgesses (“Joint Boards”) to use the fund balance as operating revenue and thereby reduce the level of taxation required to balance the budget. Although funds have been transferred from fund balance to revenue over the years, doing so has consequences and is almost always done through the regular budget process.

In addition to jeopardizing our bond rating, using dollars from fund balance represents a one-time revenue stream that will not be available in future years. If such monies are used to fund on-going expenses, a municipality will not have the resources to pay for the costs in future years.

Using dollars from fund balance in the middle of a fiscal year would send strong signals of instability to bond rating agencies. The Borough maintains an A+ bond rating, but has already been summoned to Wall Street to explain the reasons for the 2008-2009 educational budget deficit. A reduction to Naugatuck’s bond rating will increase the costs of debt service already incurred on capital projects and the portion of our pension obligations that was bonded in 2003.

In addition to general appropriations to the educational budget, the Joint Boards already allocates over FIVE MILLION and 00/100THS ($5,000,000.00) DOLLARS in bond and pension payments applicable to educational expenditures. Such costs are included as part of the approximately FORTY SEVEN MILLION and 00/100THS ($47,000,000.00) DOLLAR municipal budget.

While what constitutes an emergency can be debated, the financial world does not view it appropriate to cover operating budget deficits that can be addressed in other ways from a fund balance. Long-standing members of the Finance Board have instituted a culture of sound fiscal management to the Borough budget after years of questionable practices. As tempting as it might be to plug holes in particular budgets from the Borough’s fund balance, this is a bad business practice, puts the financial health of Naugatuck in jeopardy, and is not a solution to financial problems.

Chip Aldrich said,

So, let’s get the details out of the way first. I am an employee of the Naugatuck Board of Education, specifically a Special Education teacher. This is my 20th year of teaching in the district and my tenth year teaching @ Hillside MS. This affords me, I believe, an advantage of long term perspective regarding the district policies and operations. I do not hold senior status within the Teachers’ League, nor have I been extensively involved with any decision making or negotiating activities. I am a card carrying member because I was told, way back when; it’s required to teach in the district.
I have worked in both middle schools, as well as three of the elementary schools within the term of my district employment. I have enjoyed good relations with a number of administrators during my career. I have had the opportunity, at times, to work directly with a number of Central Office administrators including a past Superintendent. As far as I’m aware, I am respected by my colleagues and superiors for the way I do my job, and the knowledge that I am able to share for the benefit of my school and the school district. I have enjoyed both pleasurable and respectful relationships with the vast majority of my students and their parents or guardians. There have been educational accommodations and/or differing opinions that have needed compromise, last minute changes, and personal miscommunications that have been encountered as well. But all in all, it has been “a good ride”. I have not intended to be long–winded in listing my credentials; more likely trying to demonstrate my lack of exterior motivation for proceeding with this letter.
I feel that, based on my experience, I am quite representative of most teachers within the Naugatuck School District. We work hard, do what is requested of us, try to be creative and stimulating for our students, and in general seek to leave the world in a better place through our efforts. Yes, we have the summer off, but our “ summer vacation “ usually consists of July, as June is spent finishing up the previous school year’s details, and August is spent preparing for the coming school year’s student needs. We frequently bring home work to finish on personal time, since much of the paperwork / documentation /data-keeping required of us cannot be finished during the school day without a significant loss of instructional time.
Many of my colleagues have enjoyed the experience of watching as a second generation of students emerges from families of former students. Blackboards and chalk begat whiteboards and markers which have now begat “Smartboards” and computers. As educator rosters have thinned, due to retirement and relocation, we have been fortunate to enlist young teachers, who have infused our ranks with enthusiasm and innovative teaching strategies. Their novel approaches and technology-friendly attitude has helped keep students “plugged in” to the digital world they will need to compete in.
As most everyone who reads the news now knows, the Naugatuck School District currently faces an operating budget shortfall reported to be in the vicinity of $1.3 million. There has been a great deal of speculation regarding the cause of this. However, being a middle school teacher here pays off. As I’ve heard taught in Pre-Algebra, when you subtract a bigger number from a smaller number, it creates a negative answer.
There have been widespread reports, within faculty rooms, regarding impending layoffs and furlough days. There is much concern and tension in the schools these days for people who are worried about losing their jobs. This should not be surprising, as many in other careers have been facing these same threats for over a year now.
However, I find it ironic and tragic, that these layoffs will undoubtedly affect the very same innovative new hires that I have mentioned earlier. Along with these losses, the next most likely casualties will be instructional aides and non-certified support staff. This is traditionally the path chosen for budget slashes. Anyone recommending these types of cuts, while stating “we don’t want to impact the children”, lacks integrity, or intelligence, or maybe both.
These are precisely the people who do impact children the most. On top of which, their salaries are among the least expensive to the school district. In order to glean any significant savings from these lower scale salaries, more employees need to be cut. They also frequently have the least protection from “bumping” practices.
I’m not an accountant, and don’t pretend to be. I don’t even balance my checkbook, my wife does. However, I know that if I spend more money than we have, I’m in a lot of trouble. I don’t usually force the kids to cough up their allowance to pay for my mistake.
My point is … new teachers and instructional aides had nothing to do with making this financial mess. And the teachers salaries in general were not solely to blame for this either. Watch whose neck(s) are on the chopping block, though, when the axe falls.
I’m just saying.
Chip Aldrich
Hillside MS
Naugatuck, CT