School budget in dire straits

Published 9:00 pm Saturday, November 29, 2003

MARYSVILLE — Three new Marysville School Board members will get a crash course in school financing the next two weeks.

Class will begin after they are sworn in on Monday.

Lesson 1: How not to manage finances. State auditors will explain Monday a scathing report on how the Marysville School District handled its money during the 2001-2002 school year.

Lesson 2: How do you climb out of a $2 million hole? The district’s $82.25 million budget, adopted in August, faces a $2 million shortfall. Most of that is caused by lost enrollment from the state-record, 49-day teachers strike and a sour economy. The board will get a briefing at a Dec. 8 workshop.

There will be financial tests as well. The 650-member teachers union still doesn’t have a contract. Nor do some other employee unions. The $4.1 million the district carried over into the school year already has taken a big hit, falling well below what financial consultants recommend.

There will be lessons on "categorical funds" that flow into the overall budget that can only be spent certain ways, providing an illusion that there is more money available than can really be spent, said Jim Baker, the district’s finance director.

"Obviously, there is going to be a steep learning curve," said Vicki Gates, one of the three new school board members who will take office Monday.

Money was the overriding issue during the strike, which began Sept. 1 and ended Oct. 20 after a judge ordered teachers back to the classroom.

Teachers and their supporters argued that it was a question of spending priorities. The board and administration said the district couldn’t afford giving the teachers raises while improving student achievement and maintaining a safe financial cushion.

The school district spent nearly $81 million in its last fiscal year, which began in September 2002 and concluded in August. Roughly 85 percent of that money went for salaries and benefits of district employees, from the superintendent to custodial staff.

The Herald used computers to scrutinize how the remaining money — close to $13.5 million — was spent in nearly 24,000 transactions.

The analysis found that the district’s biggest nonsalary expenses were for contractual services, $2.1 million; utilities, $1.4 million; food and groceries, $1.3 million; and teaching supplies, $1 million. The rest of the district’s expenses were spread across a host of areas, including fuel, postage, legal services, rent and computer equipment.

The analysis found that the district’s biggest business partner is Sodexho Management Services, a food services company that for two years has operated Marysville’s school lunch program under a $1.15 million annual contract.

The lunch program now pays for itself, Baker said, adding that before Sodexho took over, the district was spending $200,000 of local levy money to subsidize the program.

The district’s biggest contractual services expense was the $384,000 it spent with Ikon Office Solutions Inc. for copy machines and maintenance. Other top contracts covered data management with state and regional government agencies and health services.

Outward Bound USA Inc. had the district’s fifth-largest service contract last year, being paid $66,000 for Tulalip Elementary and Heritage School students on the Tulalip Reservation to learn team-building and outdoor recreation skills.

But that money was paid by a federal grant and donations from the Tulalip Tribes, money that had to be used for a specific purpose, Baker said.

Nearly $760,000 was spent last year through the school district’s revolving fund. That money is made available to school principals and others to cover the district’s day-to-day expenses. The nearly 5,000 transactions ranged from 61 cents spent for copies at a Kinko’s to $3,500 for computer components.

The revolving fund is important because it has the highest concentration of transactions by the greatest number of people, Baker said. The district relies on a dedicated credit card system, backed up by a review of paper documentation, to ensure that all purchases are appropriate, he said.

That hasn’t always been so. Baker said one of the first things he did after starting work at the district eight months ago was to eliminate two other revolving accounts, along with the district’s practice of using all three to keep track of a mix of purchases and payroll expenses.

"The cash management in this school district in the past has been very poor," Baker said. For years, the district didn’t enact strict cash controls and enforce those rules, he added.

Most travel expenses go through the revolving fund, including restaurant expenses for district employees and elected officials while they are on business trips.

The Herald’s analysis turned up more than $5,700 spent last year for meals at establishments throughout the United States and Canada. The meals ranged from about $13 at an International House of Pancakes to nearly $270 at a San Francisco waterfront eatery where the mesquite-grilled blue nose sea bass is served in Romanesco sauce and costs $20 a serving.

Meal expenses are carefully scrutinized to determine if they meet district-approved spending limits and don’t include alcohol, Baker said. It is rare, but when a disallowed expense is found, the district demands repayment, he added.

Some restaurant-related expenses are actually moneymakers for the district.

The analysis found that Marysville schools spent nearly $13,500 last year for Afly’s pizza. Some of that pizza was bought by principals to reward student achievement or service, Baker said. But the bulk of the business, nearly $11,000, was for pizzas sold by the slice as an alternate offering to the school lunch menu.

Selling pizza by the slice is one of the ways the school lunch program pays for itself, Baker said.

The district also paid settlements to families of children with special needs, in some cases covering transportation and tuition costs. The biggest bill was roughly $87,000 to a Marysville family that covered several years worth of costs they paid and a settlement for their child’s care.

The school board will also be getting frequent updates on enrollment and the financial importance of each child to the district’s bottom line.

Marysville had 11,816 full- and part-time students when official counts were taken in October 2002. When the counts were taken this fall, that number had dwindled to 11,180 as the economy took a toll and strike-weary families began transferring their children to other districts, private schools or home-schooling. That equates to a loss of more than 520 full-time students. Schools receive about $5,200 from the state per full-time student, according to 2002 statistics.

Teachers under contract can’t be let go in midyear, but some were moved around to other schools as a result of the budget problems, and hundreds of students faced changes in their schedules several weeks into the first term. Layoffs are possible next year if the situation doesn’t improve, district officials say.

State auditors will attend Monday night’s meeting to shed light on a series of financial management shortcomings found in an audit of the district’s books from September 2001 to August2002.

The audit shed light on some serious as well as technical problems the district has been working to fix. Basically, "the paper trail didn’t meet the audit standard," said Baker, who took over as finance director after the audit period.

Although there was a need to correct some financial practices, Baker said taxpayers’ money was not misused.

"There is no missing money," he said.

Reporter Eric Stevick: 425-339-3446 or stevick@heraldnet.com.