Susan Handelsman, who regularly attends the Valley Hi Nursing Home’s Operating Board meetings, left the following long comment under my story about the consultant’s report last week.
I think it will add to the discussion of what to do with the over $41 million of reserves sitting in bank accounts.
Susan Handelsman’s observations on Valley Hi
These are arguments I’ve heard presented by the op board:
Medicaid reimbursement from Illinois is problematic and may be cut.
(This rationale is used to justify keeping a reserve of one year operating expenses).
They believe their mission is to serve the most indigent and needy elderly.
This operating board seems sincere and diligent, and the director is extremely intelligent.
VH is a wonderfully run home, and residents seem genuinely content.
There seems to be humane motivation, but there does seem to be sense of entitlement to the $43 million excess accumulation surplus.
Any levy based on a break-even operating budget history is subject to lawsuit (excess accumulation) and claw back by tax objector citizens.
But if VH can record an annual operating loss of a little over a million, they can keep legal levy at $3 million.
In the past years VH has placed the entire levy in a bank account.
The amount has built up rapidly to $43 million dollars.
Interest earnings indicate less than two tenths of one percent.
Furthermore, money in a non insured bank account is subject to total loss above FDIC insured limits.
When I asked former op board member Ken Koehler why vh holds that amount of money in short term at risk account, he said they may need rapid access to funds.
I asked for what would they need rapid access to $36 million?
He said a new roof (building was six years old at the time).
When I said a new roof might only cost a million or less, he said he wasn’t going to argue with me.
VH had a report prepared by a County Finance officer.
The report included an anticipated spike in operating losses.
This report indicates rapidly growing operating losses based upon higher salaries and ops & maintenance costs, and more aggressive capital expenditure.
By the projections of this report (including holding an $8 million capital needs reserve, and an $11 million and rising annually operating cost reserve) all excess reserves will be gone in 7 years and the total reserves gone in 3-4 more years.
At that time the (extrapolated) levy is projected to be $7 million for annual operation.
0.10% is the max rate by law [10 cents per $100 of assessed valuation] which can be levied for a county nursing home.
County EAV is $7 billion.
So $7 million hits the max.
The Illinois Medicaid threat of non-reimbursement has been raised for years.
Illinois is threatening cuts of 20% which would devastate all nursing homes.
Federal government reimburses States a minimum of $1 for every qualifying Medicaid dollar spent.
But VH has all the rights of any taxing body, and bailout likelihood from County budget in times of emergency if needed.
By the logic of keeping a $43 million excess accumulation because someday they may need to build a new building, every taxing body could do the same.
Imagine Woodstock D200 (already $140 million in debt from their 2007 building spending spree, Woodstock property tax rate is 4.6%) adding to their levy in the name of saving up for their next new school building.
Imagine every taxing body empowered to tax ever more so they could all save up for new future facilities.
Just because citizens are asking specific questions about use of funds does not imply a criticism of VH, its wonderful employees, or its diligent good-hearted operating board.
An intelligent and productive discourse could ensue if other politicians would cease to generalize and divert the issue with implications that anyone who doesn’t agree to disregard all the financial details must be contemptible monsters.