Stafford, CT – October 7, 2024
Quite often, the Board of Finance (BOF) and Board of Education (BOE) meetings happen simultaneously. However, this week, the stars aligned, and representatives of the district and the BOE were at the BOF to report on end-of-year finances. The meeting kicked off on a tense note as issues around the school district’s self-insurance surfaced again.
Background on Self-Insurance Fund
If you have not been following this issue, here are the basics. The Health Care Administrators Association describes Self-funded plans, like the one Stafford Public Schools employs:
“A Self Funded, or Self-Insured plan, is one in which the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, Self-Insured employers pay for claims out-of-pocket as they are presented instead of paying a pre-determined premium to an insurance carrier for a Fully Insured plan. Typically, a self-insured employer will set up a special trust fund to earmark money (corporate and employee contributions) to pay incurred claims.”
For this plan to function correctly, the schools must maintain a fund balance high enough to sustain any potential claims made by participants. However, because of budget constraints, the schools cut the amount allocated to that fund, and over the past few years, a problem has arisen. In the past, Stafford’s CFO, John Lund, told Stafford Free Press that, on average, a bi-weekly payroll contributes about $400,000 to the fund. The monthly claims are typically between $500,000 and $600,000. When the fund is short, the town is on the hook to pay those bills from the General Fund, which has led to the schools borrowing roughly $1.2 million from the General Fund.
The General Fund impacts bond ratings and, when it is healthy, can be drawn on to offset budget increases and prevent mill rate increases. Stafford’s General Fund is already smaller than the town's policies and auditors advise.
Over the past few months, as both the BOE and the town closed out last fiscal year’s books, it became clear that the school district would have a positive budget balance due in part to credits from the transportation company and higher-than-expected reimbursement rates from the state and other sources. Back in July, they projected a roughly $655,000 surplus, and there was an informal understanding that any excess funds at the end of the year would go back to the town to pay down the $1.2 million debt.
Things shook out a bit differently. The BOE ended up putting $625,000 into its insurance fund. Town CFO John Lund explained that padding the fund helps reduce the likelihood that the General Fund will need to advance more money to pay the claims. However, it does nothing to pay down the debt already owed to the town.
It was not the $625,000 the BOF was worried about. As it turned out, the school district had a final budget balance of $77,404.86 even after the $625,000 was sent to the self-insurance fund. According to a memo from Steven A. Moccio, the former superintendent of schools, “In light of the recent need to address the unexpected/unbudgeted costs in Fiscal Year 2025, such as interim leadership and escalating contracted services cost, the recommendation is to transfer the available balance to the Stafford Public Schools Non-Lapsing Account.”
Stafford hired Dr. Laura Norbut, the district’s chief academic officer, as the interim superintendent. Additionally, Director of Finance and Operations Charmaine Bradshaw-Hill left at the end of September. At the September 9, 2024, BOE meeting, the board voted to appoint William Hoff as the district’s Interim director of finance and operation, effective October 1, 2024. Then, at a special meeting on October 3, 2024, the BOE voted to appoint Vicki DeSantis as the director of finance and operations for the 2024-2025 school year, starting on October 7, 2024. At the same meeting, the board appointed Dr. Heather Jacobi as the interim chief academic officer through June 30, 2025. There will likely be some overlap between the interim and permanent CFO.
BOF Chair Steve Geryk, however, was not pleased with the decision to send the budget balance to the non-lapsing fund. He expressed concerns that the transfer, which was approved by the BOE, was made without letting the BOF know. Normally, this might not seem strange; however, Stafford’s BOF, BOE, and the BOS have instituted regular tri-board meetings to discuss budgetary issues, among other things. First Selectman Bill Morrison, Geryk, and BOE Chair Sara Kelley meet with Lund and the superintendent in these meetings. However, it does not appear that the BOE let the BOF or Morrison know about this decision. Geryk said he “thought we had a good working relationship.” He added, “I don’t think the BOE is taking that debt to the town seriously enough.”
Interim Superintendent Dr. Laura Norbut, who was not part of the discussions leading up to this decision, and BOE Chair Kelley were both in attendance at the BOF meeting. Norbut said that even though she was not part of this decision-making process, she is “very much committed to working collaboratively.” Later, she said, “We can work together to be part of the solution moving forward.” Kelley did not comment.
Morrison asked if it was too late to pull the money back out of the non-lapsing fund. Geryk said he did not know what the specific mechanism would be to get the money back, but the BOE would have to approve it. Lund also pointed out that the impacts to the General Fund go beyond the $1.2 million and has meant a loss of roughly $60,000 in interest.
The concern over the self-insurance fund continued as Geryk looked at the district’s current fiscal year budget. He pointed out that though the recommendation was to increase the insurance contributions by 10%-15%, $4.5 million was allocated for employee benefits, which was on par with last year. He asked the BOE to provide more detail on this line item. Dr. Norbut said, “When the district speaks, I want to be accurate,” and asked for time to gather more information.
Memorandum of Understanding
Another discussion concerning the school budget ensued as the BOF presented a plan to create a Memorandum of Understanding (MOU) that formally addressed cost-sharing between the town and the schools. Morrison pointed out that Stafford’s budget is roughly split one-third and two-thirds between the town and the schools, respectively. This is not unusual, as public education is the most significant expense for most towns, but in Stafford, there are some shared services that are being paid for almost entirely from the town’s side of the budget.
While the schools have recently taken on 100% of the cost of the School Resource Officer, the town used to pay part of his salary. This arrangement is formalized via a MOU. A draft version of a new MOU, which “formalizes the relationship between the Town and the School District (referred to collectively as the “Parties”) in order to foster an efficient and cohesive program that will build a positive relationship between and ensure parity as to the value of shared resources of which both the Town and District benefit,” seeks to share costs for a few more services. Specifically, the town would like the school to pay for part of the audit program, management of the post-retirement benefits plan, and human resources support.
Shelley H. West, BOF alternate, asked if the ambulance and WPCA would also be asked to share these expenses. Lund said they could look into that possibility with the WPCA, even though it's a much smaller portion of the overall budget picture. The ambulance, however, is not a likely candidate for cost sharing. Lund suggested speaking with the auditors to get advice on how it’s usually handled.
Dr. Norbut asked if Lund had consulted other towns that split costs this way. He said he had spoken with Ellington but also suggested the key vendors in question – such as the auditing and financial services firms – could provide insight into how other towns handle the split.
Commissioner Dave Walsh expressed concern that the MOU does not save the town any money, saying that finding creative ways to share services with neighboring towns is likely the only way to do so. “All we’re doing here is beggaring our fellow town volunteers,” he said, noting that it all comes from the same pot of money.
“What is supposed to happen to the quality of education?” Walsh asked.
Commissioner Matt McKenney suggested this change would increase transparency and “take the burden off Bill’s budget.” Providing more transparency into the actual costs associated with “doing business” emerged as a theme. Morrison stressed that this was not punitive but about “putting things where they belong.”
Walsh again expressed concern that it “encourages the thinking that nothing can change.” He stressed the need for new sources of revenue and cost-saving ideas as things like insurance costs continue to increase.
Commissioner Anthony Armelin said the BOF is “working hard to make it work for the people who pay the taxes.”
Dr. Norbut said she is “looking forward to open and honest conversation at the tri-board meeting.”
Kelley said she hoped the BOF would also look to other town entities to share costs.
The conversation will likely continue as the town explores expanding the MOU.
ADA compliant playgrounds
On a lighter note, Director of School Facilities Rob Butler was also on hand at the meeting to ask the BOF to release funds to pay for upgrades to school playgrounds to make them ADA-compliant. The upgrades cost $55,000, and the funds come from the sale of the Borough School, which was earmarked for specific capital improvements to elementary schools in the district. The BOF voted unanimously to approve the transfer.