By Dan Hust
LAKE HUNTINGTON — September 29, 2006 — Twelve months and $25,000 later, the Sullivan West Central School District has a five-year financial plan.
Actually, it’s more of a proposal – a series of proposals, in fact – which the board can adopt or reject in part or in whole.
Consultant Robert Pierce pored over reams of financial forms, correspondence and newspapers to produce what SW and the State Education Department (SED) agreed was sorely needed: a financial long-range plan.
Indeed, according to Pierce (who was recommended by the state), SED is just as anxious as anyone else to make SW the success story the community has long wanted it to be.
“Privately, some of the rank-and-file people I spoke with [at SED in Albany] indicated that they had heard talk in the halls that this particular merger (and I believe one other one) and its problems have actually caused a substantial rethinking of what the department needs to do in the future to avoid similar situations,” Pierce wrote in the report, which is available for public review at the district clerk’s office in Jeffersonville.
So what went wrong at SW?
“The newly formed Sullivan West school district neglected to require the administration to formulate and maintain a detailed, accurate, multi-year financial plan which could show the impact of decisions being considered,” said Pierce.
He identified nine specific areas of concern:
• The “disconnect issue” – saying SED, the board, administrators and the public fell away from offering the needed support and guidance of the merger during and after the merger and construction votes in 1999 and 2000.
Pierce believes the SED stepped back from its supervisory responsibility, leaving inexperienced administrators and board members to deal with complex issues. When those people ran into SW’s now-infamous difficulties, the public, said Pierce, lost confidence and understanding.
“A professional title does not guarantee a level of expertise,” he wrote, “nor does the appearance of a State Education bureaucrat mean that they are going to be engaged in your process for the long haul.”
• Timing issues – saying the physical merger was rushed, being squeezed into just three months during the summer of 1999.
• School closings and financial stability – saying that while the closings of the Delaware Valley and Narrowsburg campuses helped stabilize finances, debate remains on whether or not that was the best decision and if the schools should be reopened.
• Program enhancements – saying that promises for new and better classes have only been partially kept, and continuing financial pressures will make it difficult to add programs without cutting somewhere else or raising taxes.
“Without significant increases in state aid and/or reductions in appropriations in other areas of the budget, the tax levy could continue returning to double-digit increases,” he wrote.
• True value rates – saying the true (market) value of the district’s taxable properties has increased about 8 percent for the past several years, which could help keep the true value tax rate (as opposed to the assessed value) flat for the next few years. He advised that the district learn how to effectively explain this to the public.
Regardless, he said the tax levy could continue to rise by 5-10 percent in future years.
• Debt burden – saying that few in the public or the district understood that the building of the high school would only be 68 percent aided by the state, with the local tax share coming in at 32 percent.
Overall, Pierce felt that the explanation of the state aid percentage was accurate back in the days before the high school project was authorized, but obviously it did not come in at what a majority of people erroneously thought it would: 95 percent.
• Demographics – saying that enrollment is projected to drop by up to 24 percent in the next decade, a significant impact on the current population of slightly over 1,400 students. And Pierce feels that the promise of casinos and other sources of employment to attract families is extremely uncertain.
• Available student capacities – saying that the district has an estimated capacity for more than 3,000 students in all four campuses, but of course, enrollment is likely to drop.
• Long-range financial plan – saying that the district never had one, “in part due to the rapid turnover in its business management position.” Pierce feels that such a plan is critical to the future financial success of SW.
Toward that end, he offered a model that can be incorporated into the district’s financial projections to more accurately predict finances up to five years out.
Indeed, that was his first of seven remedies recommended to the board, which received the report earlier this month.
The other remedies included:
• Aggressively resolving design and construction issues of the capital project – advising that the district focus on completing its legal affairs in this arena (lawsuits over the high school are wending their way through the court and arbitration systems).
“However, there appears to be a developing need to spend some additional money in safety and structural issues on some of the buildings,” he wrote. “In order to receive additional state building aid, the district will have to clearly show that the costs are for safety/health reasons and were not created because of current project design and/or contractor failures.”
• Maximizing the building aid via proper reporting – advising that the district carefully analyze and allocate costs to seek an improved bond percent.
• Seeking legislative action – advising that the district gain Albany’s help in reinstating all or a portion of the incentive operating aid to pay the high local debt costs.
• Establishing a rational, legal and conservative plan for future fund balance management – advising that administrators and the board seek to avoid the extreme fluctuations in the district’s past fund balances (the part of the budget which remains unspent and undesignated at the end of the fiscal year). Such fluctuations can have the same effect on tax levies and rates, he warned.
• Restructuring the debt and offsetting building aid – advising that the district enlist state legislators to petition SED and the governor to help cut SW a special deal on financing and current bonds.
• Better utilization of excess building capacity – advising the district that a community panel should be created to discuss the matter (which the new board has done).
What About the Financial Plan?
Pierce created four scenarios in his report which estimated the district’s financial future from now through the 2010-2011 school year.
In two of those scenarios, he modified the fund balance immediately and also gradually, dropping it from $1.6 million to $800,000. In another scenario, he maintained the status quo, and in the fourth one, he offered a scenario where programs, supplies and benefits were increased, along with revenues.
Using the status quo scenario (leaving things as they are currently), he predicted that the 2007-2008 tax levy would be around 5.1 percent, while the following year it would jump to 10.4 percent (due to debt service costs).
The other scenarios projected tax rate increases of between approximately 5 and 10 percent.
While he repeatedly stressed that all figures were estimates and needed to be revised by the board and administration, Pierce added that the plan “is superior to blindly making a decision with no clue to its future impact.”
Pierce concluded, “The board of education, administration and the public all needed to be more connected to and interact with the financial issues and projections beyond the immediate budget year. But that was then. It is my belief that a corner has been turned.”